GIC launches £1bn investment in UK commercial property

Government of Singapore Investment Corp (GIC), the sovereign wealth fund of the Southeast Asian city-state, has teamed up with commercial investment managers Laxfield Capital to initiate a £1bn mortgage lending programme for UK commercial property.

A statement from Laxfield released this morning revealed that the investment – which equates to $1.6bn - will be ploughed into commercial property development projects across the country over the next 24 months.

The agreement was confirmed in an email, although representatives of GIC, who manage over $100bn of Singapore’s reserve funds, declined to comment on the exact amount of the funds allocated.

According to the statement: “The Laxfield Capital programme will provide individual loans of between £40-£185m, 5-7 years duration and up to 75% loan-to-value (LTV) to a wide variety of commercial property sectors, including office, retail, industrial, residential and leisure across the UK.”

Whole loans will be offered as part of the programme, which will then be syndicated up to 75% to other preferable investors, while GIC will stick to their recent strategy of retaining a substantial junior investment in every loan issued.

Between March 2011 and the same period in 2012, real estate investments have accounted for approximately 10% of the GIC portfolio, according to the latest annual review from July 2012.

Chris Morrish, regional head of Europe, GIC Real Estate, said: “We look forward to our partnership with Laxfield Capital, which has demonstrated strong capabilities in loan origination and has generated value for commercial mortgage investors. The programme complements our existing direct junior debt investment strategy which we will continue to pursue.”

Laxfield Capital believe the investment is a shrewd manoeuvre which can help to fill the void left by the banking sectors reluctance to lend since the start of the financial crisis in 2007.

Adam Slater, managing director of Laxfield Capital, said: “The Laxfield Capital programme will fill a gap in the large-ticket commercial mortgage sector as few lenders are currently able to provide whole loans in excess of £100m at up to 75% LTV, particularly outside core locations or prime assets.

“I believe the programme will have a considerable impact on the UK property market with a significant injection of liquidity at a time when traditional sources of funding are contracting.

This is a good example of how alternative sources of capital are successfully entering the space traditionally dominated by banks.

“The investment from GIC is a strong vote of confidence in our programme and in UK commercial mortgages, and provides an ideal market entry point for other investors seeking access to quality mortgage investments.”

GIC - who manage all Singapore’s foreign reserves - are one of the largest fund management organisations in the world, managing well over $100bn of offices, equities, fixed income, natural resources, real estate, private equity and infrastructure worldwide.

Laxfield currently manages commercial mortgage assets of institutional investors - such as banks, sovereign wealth funds and life insurance companies – with a total value thought to be in the region of £1.1bn.