GIC invests in US retail real estate platform

Sovereign wealth fund and three partners form net lease platform targeting over $1.6b of strategic assets

Hunter's Square (left) at Farmington Hills and The Shops at Old Orchard at West Bloomfield, both in Michigan, are part of RPT Realty's portfolio of open-air shopping destinations, principally located in top US markets. RPT will own 6 per cent of net
Hunter's Square (above) at Farmington Hills and The Shops at Old Orchard at West Bloomfield, both in Michigan, are part of RPT Realty's portfolio of open-air shopping destinations, principally located in top US markets. RPT will own 6 per cent of net lease retail real estate platform RGMZ, participate in new investments and earn fees as the manager of the platform. GIC, Zimmer and Monarch will hold the remaining 94 per cent.PHOTO: RPT REALTY
Hunter's Square (left) at Farmington Hills and The Shops at Old Orchard at West Bloomfield, both in Michigan, are part of RPT Realty's portfolio of open-air shopping destinations, principally located in top US markets. RPT will own 6 per cent of net
Hunter's Square at Farmington Hills and The Shops at Old Orchard at West Bloomfield, both in Michigan, are part of RPT Realty's portfolio of open-air shopping destinations, principally located in top US markets. RPT will own 6 per cent of net lease retail real estate platform RGMZ, participate in new investments and earn fees as the manager of the platform. GIC, Zimmer and Monarch will hold the remaining 94 per cent.PHOTO: RPT REALTY

Singapore's GIC is doubling down on its investment in United States retail real estate by teaming up with RPT Realty, Zimmer Partners and Monarch Alternative Capital to form a net lease retail real estate platform targeting over US$1.2 billion (S$1.6 billion) of strategic assets.

GIC, Zimmer, Monarch and RPT have committed to fund US$470 million in the platform, called RGMZ, over the next three years, including the initial investment portfolio that is to be seeded by RPT.

The platform will target the acquisition of more than US$1.2 billion of strategic assets, creating a scalable, stable-growth investment platform, RPT said in a statement.

RPT, a Reit (real estate investment trust) traded on the New York Stock Exchange, owns and operates a portfolio of open-air shopping destinations, principally located in top US markets.

As at the end of last year, its property portfolio consisted of 49 shopping centres (including five shopping centres owned through a joint venture) representing 11.9 million sq ft of gross leasable area.

The RGMZ platform is GIC's second joint venture with RPT.

In October 2019, the Singapore sovereign wealth fund took a 48.5 per cent stake in a grocery-anchored US$412.4 million shopping centre joint venture, known as R2G.

RGMZ is to be seeded with 42 single-tenant, net lease retail assets that have been or will be created by RPT upon the subdivision of certain parcels from its existing open-air shopping centres located in the top 40 metropolitan areas.

The initial seed was valued at US$151 million and represents only 6 per cent of RPT's fourth-quarter 2020 annualised base rent.

In an investor presentation, RPT showed initial tenants like Starbucks, Whole Foods Market and Walgreens.

RPT said it has a net lease strategy. A net lease refers to a contractual agreement where a lessee pays a portion or all of the taxes, insurance fees and maintenance costs for a property, in addition to rent.

To date, the platform has received commitments for a US$175 million secured credit facility, subject to final loan documentation.

It expects to close on the syndication of the facility this month.

The facility will include an accordion feature that allows the platform to increase future potential commitments, up to a total capacity of US$500 million.

RPT will own 6 per cent of RGMZ, participate in new investments and earn fees as the manager of the platform. GIC, Zimmer and Monarch will hold the remaining 94 per cent.

RPT president and chief executive Brian Harper said: "We believe the current dislocation in the open-air retail sector compared with the triple-net lease sector has created unique investment opportunities based on our extensive analysis.

"Retail is a prime driver of the US economy, whether delivered through 'brick and mortar' or online, and both require a strong infrastructure to drive results."

GIC real estate chief investment officer Lee Kok Sun said: "As a long-term investor, we believe there are opportunities in the retail net lease sector to acquire high-quality assets with strong tenant credit at attractive pricing.

"We expect to create value in identifying pricing inefficiencies between different tenant and property types within the retail sector.

"We are pleased to grow our strategic partnership with RPT, and look forward to scaling the joint venture together."

As at March 31 last year, the US accounted for 34 per cent of GIC's portfolio; the euro zone, 13 per cent; Britain, 6 per cent; Asia ex-Japan, 19 per cent; and Japan 13 per cent.

THE BUSINESS TIMES

A version of this article appeared in the print edition of The Straits Times on March 10, 2021, with the headline 'GIC invests in US retail real estate platform'. Subscribe