GIC Leads $14 Billion Buyout of Warren Buffett’s Only Real Estate Investment Trust GIC-Oak Street JV Buying Out Store Capital REIT

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Warren Buffett seems happy with the 20% bonus for his store stock (Getty Images)

Singapore’s GIC is making its second mega-bet in the US property market in the past month, as the sovereign wealth fund teamed up with a US partner to buy Warren Buffett’s favorite REIT for $14 billion.

GIC has partnered with Oak Street, a real estate private equity arm of New York-based asset manager Blue Owl Capital, to sign a definitive agreement to acquire all shares of NYSE-listed Store Capital, the only REIT which Berkshire Hathaway boss Buffett has invested in.

“We are delighted to lead this investment in Store Capital given its impressive cash flow profile, long weighted average lease term and highly diversified portfolio with strong rental coverage,” said Lee Kok Sun, director of investments of the real estate division of GIC.

The buyout, which remains subject to shareholder approval, will give GIC and Oak Street ownership of Store Capital’s portfolio of 3,012 single-tenant commercial and industrial properties across the United States, according to a joint statement Thursday.

Sale-Leaseback Bonanza

The joint venture is buying Store at $32.25 per share in cash, representing a 20.4% increase over the share price of $26.79 on Sept. 14 and a premium of 17.8% over at the 90-day average share price. On the day of the announcement, shares of the trust rose 20%.

GIC Adam Gallistel

GIC US boss Adam Gallistel has had a busy week

“As one of the largest U.S. real estate companies dedicated to net letting in a nearly $4 trillion market, Store Capital is an important addition to GIC’s diversified U.S. real estate investment portfolio,” said Adam Gallistel, head of US real estate at GIC. “We are confident that the company will continue its accretive growth trajectory by meeting the demand for long-term financing solutions from middle-market US companies.”

The Arizona-based REIT focuses on sale-leaseback transactions through which it buys properties from operating companies occupying the facilities and then leases them back to the seller. It’s also one of America’s largest net rental real estate platforms – where rental agreements require tenants to pay additional expenses such as utilities and taxes.

Excluding 16 vacant properties, the store portfolio was 99.5% occupied with an average lease term of 13 years as of June 30. The trust is dumping its assets after posting a 19% year-over-year increase in first-half revenue worth $445.9 million, as reported in its latest operating results.

GIC announced its investment in Store just over two weeks after the sovereign wealth fund emerged as the backer of a $1.13 billion takeover of retail property investor and operator Workspace Property Trust.

Store’s properties are scattered across every US state except Hawaii, Texas, Illinois, California, Georgia, Florida and Ohio accounting for one-third of its 2,886 assets at the end of last year, according to its latest annual report.

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As of December 31, this portfolio measured 100,145 square feet (9,304 square meters) of combined built space, occupied by service, retail and manufacturing tenants. Based on last year’s revenue share, the majority or 65% came from facilities leased to the service sector, 20% to the manufacturing sector and 15% from retail tenants.

GIC’s Chicago-based partner, Oak Street, also follows a net-lease strategy and is primarily involved in structuring sale-leasebacks, as well as providing seed and strategic capital. Oak Street was acquired by Blue Owl last December in a $1.6 billion deal.

The Store Capital takeover, which is subject to approval by Buffett (Berkshire Hathway held 6,928,413 shares as of June 30) and other shareholders, is expected to be completed in the first quarter of next year. Store was also given a 30-day period to solicit and consider other acquisition proposals.

GIC and Oak Street did not disclose their individual interests in the joint venture.

monster affair

“We believe the Store Capital platform complements Oak Street’s exposure to the triple net industry and our focus on sale and leaseback,” said Oak Street Chairman Marc Zahr. “The potential scale of this combination and partnership can provide one of the most diverse, unique and long-term net rental platforms anywhere in the world.”

The buyout deal, if completed, would become a “monstrous” transaction since Store is the third-largest publicly traded net-lease REIT, said Scott Merkle, managing partner at SLB Capital Advisors, who was not involved in the transaction.

GIC lee-kok-sun

GIC’s Lee Kok Sun

“GIC and Oak Street are acquiring one of the most prolific sale-leaseback investors that routinely deploys well over $1 billion a year,” Merkle said in an emailed statement Friday.

The acquisition would also mark GIC’s second investment in the U.S. net rental sector following a $1.2 billion retail joint venture it established alongside New York-listed RPT Realty and two other American partners in March 2021.

Eastdil Secured Advisors and Citigroup Global Markets served as financial advisors to GIC and Oak Street in the transaction, while Store was assisted by Evercore and Goldman Sachs.

U.S. sale and leaseback deal closings hit a record 236 deals worth $10.2 billion in the second quarter, according to a report by SLB.

GIC continues to buy

GIC, which last year ranked as the world’s most active public sovereign wealth fund, is increasing its overseas exposure, having signed three deals worth more than $15.6 billion since August .

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Late last month, the Singaporean investor reportedly backed Florida-based property investor and operator Workspace Property Trust in buying a majority stake in 41 suburban office assets with a combined eight million sq.ft. square (743,224 square meters).

The $1.13 billion acquisition was completed with debt financing from JP Morgan and Canada’s Bank of Montreal.

Earlier in August, GIC made a bet Down Under with the purchase of a half stake in an A$800 million ($568 million) office project in Melbourne from Australian property giant Charter Hall.

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