GIC buys majority stake in A$450m logistics JV

The Government of Singapore Investment Corporation has purchased an 80.1% position in an Australian logistics joint venture with ASX-listed Australand, the developer part-owned by Singapore’s CapitaLand.

The Government of Singapore Investment Corporation (GIC) has acquired the majority of a newly-formed joint venture with Australand that will buy A$450 million of logistics properties developed by the Australian Securities Exchange-listed developer.

According to an ASX announcement today GIC will purchase an 80.1 percent stake in the JV with the remainder to be owned by AustraLand which will also serve as the venture’s manager.

In addition, Australand, which is partly owned by Singapore real estate and financial service giant CapitaLand, will initially seed the joint venture with eight properties, six completed properties and two developments, valued at A$220 million. Australand said the agreed prices for these assets were agreed at or slightly higher than its December valuations.

The venture will run for five years and investments will be made on an un-geared basis.

Dr Seek Ngee Huat, president of GIC Real Estate, the sovereign wealth fund’s real estate division, said the fund was attracted to the transaction by Australand’s ‘strong track record’ and by the prospect of increasing its exposure to Australian logistics real estate. The investment sees GIC add to its already sizeable exposure to industrial real estate in the Asia Pacific region. In 2008, the sovereign wealth fund purchased the China and large parts of the Japan businesses of global logistics giant ProLogis in a deal valued at $1.35 billion. The businesses have since been renamed Global Logistics Properties.

Australand said it would use the proceeds from its sale to fund its development pipeline and operational activities. Bob Johnston, the company’s managing director said: “The joint venture provides the group with an aligned investment partner that has capacity to acquire completed assets from the group’s industrial development pipeline.”

Australian industrial real estate values have been on an upward trajectory since June 2010 before when they fell 23 percent from the market peak, according to recent research by Richard Ellis. Australian industrial yields, CBRE said, reached their lowest in December 2007 at a weighted average of 6.91 percent before the global financial crisis saw them soften to a high of 8.83 percent in September 2009. Towards the end of last year, grade A warehouses, like those developed by Australand, were trading at yields of 8.73 percent.

CBRE said in its research: “The gloom is slowly lifting from the [Australian] industrial market, fuelled by excitement in the resource sector. As interest begins to increase, so to will the underlying indicators of the industrial market improve. This could see liquidity return to the investment market.”