GIC’s Cosgrave takes the hot seat

The new head of European real estate at GIC – Singapore’s $350bn sovereign wealth fund – has engineered mega-deals, reformed its property arm into teams of local experts and has Logicor in her crosshairs. Madeleine Cosgrave talks to David Hatcher about the logistics market, depressed UK stocks and women in property. Portraits by Louise Haywood-Schiefer Singapore has a reputation for being a conservative and secretive place. An island so pristine, it is illegal even to chew gum. It has one of Asia’s strongest militaries and, with a population of just 5.6m, boasts mind-boggling affluence.The island’s sovereign wealth fund, GIC, has an estimated $350bn (£285bn) of assets under management and is one of the most powerful and sophisticated in the world. So it might be reasonable to expect a meeting with its new head of real estate for Europe to be clinical, hard-nosed and perhaps even unengaging. But you would be wrong. Introducing Madeleine Cosgrave, the most powerful woman in European property. New to the job but a veteran of GIC, the former JLL West End agent took over from the retiring Chris Morrish in June last year after a 17-year apprenticeship. “There is only so much green tea you can drink,” Cosgrave laughs in GIC’s Seymour Street, W1, office, a box of peppermint and nettle teabags in hand. She is warm, open and likeable – but it would be a mistake to underestimate her. Responsible for around 20% of the fund’s real estate globally, Cosgrave led the largest investment deal the City of London has seen so far – GIC’s £1.7bn purchase of a 50% stake in Broadgate, EC2, from Blackstone in 2013. Her tenure has also started with a bang. The EU referendum and an office refurbishment aside, in September GIC completed one of the largest deals of 2016 in the UK student accommodation sector, buying a £344m portfolio from Oaktree alongside partner GSA, with which it also announced an assault on the German market. The deal that stole the show though, came in November when the fund agreed to buy European logistics business P3 for €2.4bn (£2bn). And even that could turn out to be just a starter course, with GIC competing to buy Blackstone’s €13bn Logicor business. Restructuring engineer With almost unrivalled access to funds to invest, Cosgrave is a must-know for those playing at the top table of European real estate. Under her watch, GIC’s European property team has been restructured. It is buying up the stock of hampered listed companies and moving away from core  real estate in a bid to find  value. She has divided her team of just over 30, all of whom work in London, into five – a UK team, a France and Germany team, a lending team, a listed team and a tactical markets team which invests in third-party funds and targets other geographies. This is a change from a structure that broadly separated the teams into asset management and investment. “The idea is that we can share information more readily and that each of the country teams has a portfolio management mindset, looking after existing assets using that information to help expand the portfolio and recycle capital,” she says. “To underwrite best-in-class partners, you’ve got to spend time with them. I’m trying to encourage the teams to do that and maybe cover a bit less ground.” Unlike Norwegian pension fund Norges, for example, which aims to enter into joint ventures only with those with a comparative ability to dedicate capital, GIC is more willing to deal with smaller partners. “We think real estate is a local business, so we need to have local expertise because we are not the experts in all occupational trends like the best-in-class operators we bring in are,” says Cosgrave. “We always try to bring something to the partnership, though, whether it’s our knowledge of what’s going on in other countries, or our relationships with lenders or occupiers in other parts of the world.” The listed and debt teams are designed to give GIC greater flexibility when considering opportunities, aside from direct investment. GIC’s European property leaders Overall head: Madeleine Cosgrave Tactical opportunities, Europe and funds: Tracy Stroh UK: Iain Cahoon (joins from UBS in February) Germany and France: Sebastien Abascal Lending: Nick Hill Listed equity: Tom Lee Research and strategic planning: Asli Ball In a low-interest-rate environment, the debt team has faced strong competition in recent years. But with a more cautious mood prevailing, the tide may be starting to change. Last month, alongside Starwood Capital, the team funded Davidson Kempner’s £500m purchase of a portfolio of NCP car parks, after many lenders were unable to come to grips with the complexity of the deal. “Owing partly to regulations coming through, traditional lenders are taking a bit longer to underwrite and are focusing on the very core senior piece, so we think there’s opportunity in niche areas,” says Cosgrave. Unlike most equities investors, GIC’s real estate equities team does not sit behind a Chinese wall and instead works in collaboration with the other groups. Although this restricts its trading activity when it has inside information, Cosgrave believes that it is the best way to deliver performance. “When we look at companies such as British Land and underwrite our position, the UK team will work with the listed team to do that. It gives us a better grasp on companies because we think of things from the bottom up.” While making a play for a listed UK company is not a “key target” for GIC at present, Cosgrave does not rule it out for the future. The company has been purchasing shares in the likes of Hammerson, Derwent London and British Land in the UK and owns stakes of around 13% in German firms Alstria and TLG. “What we’re looking at currently is which of the listed companies we think are best in class and which we think have a share price that is attractive. Arguably today is a better time to be investing in head stock than going out and buying more assets.” Cautious on London The result of the EU referendum has helped subdue these share prices and widen lending margins to GIC’s advantage. But the result has also made the fund more cautious on London and increased its return requirements, even though it is pushing on with development with British Land at Broadgate, EC2, most notably in the form of 550,000 sq ft, 32-storey tower 2-3 Finsbury Avenue Square and the 530,000 sq ft refurbishment of 100 Liverpool Street. [caption id="attachment_870307" align="aligncenter" width="570"] British Land and GIC’s 32-storey tower at 2-3 Finsbury Avenue Square, EC2[/caption] “More uncertainty makes it difficult for occupiers to make investment decisions and that will have a knock-on effect on tenant demand. It doesn’t mean you wouldn’t undertake a refurbishment, say, but you’ve got to feel that you’re going to be adequately compensated for it. You’re still going to have occupiers that have lease expiries or are in suboptimal space looking to drive efficiencies,” Cosgrave says. The fund’s long-term target is simply to, at minimum, beat global inflation and preserve the international purchasing power of the reserves placed under its management. Cosgrave insists that UK and European real estate is not particularly in or out of vogue in the eyes of her paymasters in Singapore, regardless of political uncertainty, and each individual investment is considered on its merits. But the fund is taking some chips off the table. GIC does not feel it is getting its just deserts on prime, dry assets across Europe, leading it to sell some core properties in the past year such as the Westin hotel and the headquarters of law firm Clifford Chance in Paris. “Recently we have found it difficult to invest in core product, because with low interest rates, low bond yields and low cap rates we found that other investors have often been prepared to pay more,” says Cosgrave. “We’re finding better value for risk in either value-add, core-plus or opportunistic deals and, consequently, we’ve sold some of our core assets,” she adds. This, combined with GIC’s historic knowledge of the sector through investing with the likes of Prologis and Goodman and its existing value-add joint venture with Exeter Property Group, has driven its purchase of P3. It is expected that following the deal and fuelled by GIC’s funds, P3 will look to rebalance its eastern Europe-focused portfolio more towards western Europe, and it has been bidding on assets in the UK. “Having the ability to provide tenants with space in different countries and being their solution throughout is important for P3. One of the reasons we liked it is because it’s got a land bank and there’ll be some organic growth as well as opportunities to acquire other portfolios, platforms and companies.” There is a gigantic elephant in the room. The most obvious way to expand P3 would be to buy Logicor, Blackstone’s €13bn logistics platform that is currently up for sale. Rather than duck the question, Cosgrave tackles it straight on: she wants to buy it. “It’s a natural deal for us to look at because we like the sector and we think that Blackstone has done a good job in building up a portfolio. The devil will be in the detail and pricing. We’ll look at it in the same way that we looked at P3, try to prepare, try to get advance information and understand what the portfolio is. “It’s been growing a lot, so it’s quite hard to do that, but it’s something we’ll look at.” Equal opportunities When she started out on JLL’s graduate scheme and then as an office leasing agent, pulling off the biggest investment deal ever in Europe might have seemed a long way off. But for Cosgrave, now in one of the sector’s most influential roles, it is a real possibility. Few women in real estate make it to the very top and it is something she is desperate to see change. Cosgrave has put a team in place that is led almost equally by men and women and is attempting to deal with unconscious bias head on. “We’re in a fortunate position here but there are so many examples where that’s not the case. I think that organisations need to be more flexible and have a talent strategy that deals with unconscious bias because I don’t think it’s conscious bias. It may have been 20 years ago but it’s not today.” Cosgrave’s ascent in a testosterone-fuelled industry is inspirational and regardless of gender she has a glittering track record. With GIC’s firepower she is set to shape the market this year and if the Logicor deal comes off, it will surely be her defining legacy. Cosgrave on diversity in the property sector “When I started at JLL on the graduate scheme and you went to a cocktail party for a launch of an office building or something, I think there’d be no more than 3% to 5% women in the room or maybe one other. “It’s something you were always aware of, but I was fortunate because I’ve always worked in a team that has a very collegiate feel and had team mates to look out for me if I ever felt nervous or self-conscious. “I always had somebody who said, ‘Hey, come over here, let me introduce you to so and so’. That nurturing and mentoring is really important. “Unfortunately there’s a lack of women in real estate at all levels. Even if you look at the graduate entry level, we find it hard to recruit females and it’s important there are role models. I sit on the ICSC diversity committee and with the panels that are put on, for example, you have to make a conscious decision to have women on them because the easy thing to do is pick the guys. If you don’t, then the younger women in the room don’t get that ‘I can do that’ feeling.” • To send feedback, e-mail david.hatcher@estatesgazette.com or tweet @hatcherdavid or @estatesgazette