GIC Real Estate incurs estimated S$637 million loss on WestQuay stake sale to Hammerson

GIC Real Estate, the property investment arm of Singapore’s Government Investment Corporation (GIC), is estimated to have incurred a loss of around S$637 million from the sale of its 50% leasehold stake in Southampton’s WestQuay shopping centre. The transaction, completed on 7 November, involved Hammerson, a prominent London-based real estate investment trust (REIT), repurchasing GIC’s stake for £135 million. Opened in 2000, the WestQuay shopping centre was initially developed as a joint venture between Hammerson and Barclays. Hammerson acquired full leasehold control in 2004 by purchasing Barclays’ 50% stake. Rita-Rose Gagne, CEO of Hammerson, commented on the acquisition, stating: “This transaction is in line with our stated strategy. Combined with our recently enhanced funding position and disciplined approach to capital allocation, we are well placed to deliver growth and value creation.” GIC did not comment on the sale. In contrast, during GIC’s initial 2007 purchase, then-President of GIC Real Estate, Dr Seek Ngee Huat, expressed enthusiasm for the investment, saying: “This joint venture represents an excellent opportunity to acquire a premier shopping destination in the heart of Southampton. We look forward to partnering with Hammerson, a leading European real estate company, on this investment.” In 2007, Hammerson sold a 50% interest to GIC for £299 million, retaining asset management responsibilities. At the time, WestQuay’s valuation stood at approximately £588 million, supported by annual rental income of about £25 million and its prime location with anchor tenants, including John Lewis and Marks & Spencer. The recent sale represents a stark revaluation, with the estimated S$637 million loss highlighting the impact of market challenges on retail property. Key factors contributing to this decline include the UK retail sector’s struggle with changing consumer habits, an accelerated shift toward e-commerce, and economic challenges worsened by the COVID-19 pandemic.

Financial Analysis of GIC’s Estimated Loss

The sale underscores a significant drop in WestQuay’s valuation:

• 2007 purchase price: £299 million, equivalent to approximately S$867.1 million at the 2007 exchange rate of S$2.9 per £1.
• 2024 sale price: £135 million, equivalent to S$229.5 million at the current rate of S$1.7 per £1.
• Estimated loss: S$637.6 million in currency-adjusted terms, showing substantial depreciation over the 17-year holding period.

This follows GIC’s earlier exit from another major UK retail investment in June. According to a report by MingTianDi, GIC sold its 17.5% stake in the Bluewater shopping centre, the UK’s fifth-largest mall, to London-based developer Land Securities Group (Landsec) for £120 million (US$152 million), representing a 62% loss from GIC’s initial acquisition price. GIC originally acquired its Bluewater stake in 2005 from Prudential’s property investment unit, now known as M&G Real Estate, for £318 million, valuing the mall near London at £1.8 billion. The recent transaction valued Bluewater at £686 million, marking a 62% decrease in British pounds and a 74% drop in US dollars over nearly two decades. GIC declined to comment on this sale. In Singapore dollar terms, GIC’s sale of its Bluewater stake translates to an estimated loss of S$718.2 million, with the 2005 purchase valued at around S$922.2 million (at S$2.9 per £1) and the 2024 sale price equivalent to approximately S$204 million (at S$1.7 per £1). Despite the notable losses, GIC has continued to report gains in its overall real estate portfolio. In July 2024, GIC disclosed a 5.8% annualised nominal return in USD across its portfolio over the 20-year period ending 31 March 2024, with an annualised real return of 3.9% after accounting for inflation. It said, "Over the past years, GIC has been diversifying on a far more granular level to enhance the resilience of the total portfolio. This includes stepping up its investments in infrastructure and real estate. In addition, investment teams across all asset classes continue to maintain strict price discipline, carefully weighing risk-reward prospects of potential investments to ensure adequate compensation for assuming the risks."