The Government of Singapore Investment Corporation (GIC) rarely publicises its deals. This is a sovereign wealth fund, incidentally, that still prefers not divulge its gross assets under management. Yet, sometimes rare examples of deals by the Asian sovereign wealth fund do find their way into the public domain.
Last month, Orchard Street Investment Management announced that it, on behalf of GIC, had created a second special situations fund targeting commercial real estate assets in the UK. The London-based real estate investment management firm, with £2.6 billion (€3.1 billion; $4.1 billion) in assets under management, said its second Special Situations Commercial Property Fund would seek to invest across all the main sectors of the commercial property market and that, with debt, it will have an investment capacity of more than £200 million – implying a minimum commitment of £75 million by GIC.
The object of Orchard Street’s new fund is the same as that of its first, which is to buy assets with active management potential for improvement. The fund will have a six-year lifespan and will seek to make up to 15 individual investments of between £15 million and £50 million over the next two years.
Orchard Street is a firm that does not often capture the real estate headlines either, but its history and progress is worth noting. It was started by Chris Bartram, the former chief executive officer of public property company Haslemere, which GE Capital Real Estate took private in 2004 for £202 million. Soon after the sale of Haslemere, GE announced a contract to hand over some investment management functions to Orchard Street. One year after GE’s acquisition, Bartram and his Orchard team sold a £300 million portfolio of five shopping centres on GE’s behalf.
Orchard Street next reached another milestone in 2008 when it formed a £300 million Special Situations Property Fund with GIC to invest in all the main sectors of the UK commercial property market. The object was to buy assets with active management potential for improvement in the belief this could generate ‘higher than normal’ market returns.
Another important move was the appointment of John Humberstone, who formerly worked at GE Capital Real Estate as well as the Haslemere acquisition, as a partner. At the time of his appointment in 2010, the firm had £1.5 billion in assets under management, but this has increased to more than £2.6 billion. The reason for that expansion was last year’s takeover of the property management of St James’ Place Wealth Management’s funds after Invista Real Estate Investment Management lost the contract. The portfolio was worth around £800 million, adding to a long-standing investment mandate Orchard Street won early on from the UK Railways Pension Scheme.
The recent re-up by GIC with Orchard Street for its second UK special situations fund is obviously a vote of confidence. It also fits with the message GIC recently provided during a panel discussion hosted by PERE at this year’s MIPIM conference. There, Bernard Phang, head of GIC’s European real estate investment programme, said the state fund was being very cautious overall, but it has been investing through funds and separate arrangement with smaller niche operators who manoeuvre under the radar. Orchard Street seems to fit the bill.
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