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One of the world’s biggest sovereign wealth funds is planning to increase its allocation to real estate, even as the sector braces itself for a period of uncertainty.
GIC said this week it was increasing its allocation to real estate from 8% to 10%. With $799B of assets, that is an extra $16B to spend in the sector. If it manages to spend that extra allocation, it would take its real estate portfolio to about $80B.
Singapore’s sovereign wealth fund is attracted to real estate because it sees the sector as a way of hedging against high levels of inflation, which are expected to be around for some time.
"Many of the real estate and infrastructure-type investments actually have either automatic consumer price index riders or an ability to raise rents once the lease ends,” GIC Group Chief Investment Officer Jeffrey Jaensubhakij told Reuters.
GIC said it was also increasing its allocation to other alternative asset classes like private equity and infrastructure.
GIC struck several huge real estate deals around the world in the first half of the year. Reuters reported the investor raised its headcount in real estate and infrastructure by 35% in the past three years.
In the UK, it teamed up with Greystar to buy Student Roost from Brookfield for about £3B earlier this year. The company has about 23,000 existing student beds and a pipeline of 3,000 more.
It also bought a 75% stake in the Paddington Central office complex in west London for £675M.
Last month, it partnered with Dutch pension fund APG to buy a major stake in pan-European student housing investor and developer The Student Hotel in a deal that valued the company at $2.2B.
Elsewhere in Europe, it put as much as €4.2B into the €21B recapitalisation of Mileway, Blackstone’s last-mile logistics platform.
In 2021, it formed a $1B JV to buy U.S. office assets with Boston Properties and CPP Investments.
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