GIC to Pay $883M for 75% Stake in London JV With British Land

The flow of Singaporean investment into London’s real estate market continues, with sovereign wealth fund GIC on Monday announcing a deal to acquire ownership in a set of commercial projects in the Paddington area for £694 million ($883 million).

The transaction sets up a joint venture under which GIC will hold a 75 percent stake in four existing buildings and a development site at British Land’s Paddington Central complex, with the London Stock Exchange-listed REIT retaining a 25 percent interest, the partners said in a release.

“We are seeing returning demand in the take-up of new office spaces that are of high quality and in prime locations,” said Tracy Stroh, head of European real estate at GIC. “We are pleased to partner with British Land again and look forward to leveraging their best-in-class capabilities to drive value across Paddington Central. We believe this investment will be a good addition to our Europe portfolio.”

The JV comprises office buildings at 2 and 4 Kingdom Street and 1 and 3 Sheldon Square (including the retail and leisure element), as well as the Gateway hotel/leisure development site. The new venture is the second partnership for the two players, after the Singaporean fund had purchased a half-stake in British Land’s Broadgate office and retail complex in the City of London in a £1.7 billion deal in 2013.

Optional Add-Ons

GIC’s consideration of £694 million for the Paddington Central assets represents a 1 percent discount to book value and a 4.5 percent net initial yield, the partners said.

Not included in the joint venture are British Land’s Novotel Hotel at 3 Kingdom Street and a development site at 5 Kingdom Street with 438,000 square feet (40,692 square metres) of potential built area. Upon completion of the deal, expected within three months, GIC will be granted an unconditional option (via a separate JV) for a period of six months to acquire 50 percent of 5 Kingdom Street for £68.5 million (plus a share of capital expenditure).

The sovereign fund will also be granted an unconditional option (via the original joint venture) to acquire the Novotel at 3 Kingdom Street at prevailing market value within five years of the deal’s completion. British Land will continue to act as asset manager for the complex and development manager for 5 Kingdom Street.

“We are pleased to invest in Paddington Central, a high-quality office-led mixed-use campus with retail and leisure uses,” said Lee Kok Sun, chief investment officer for real estate at GIC. “It is very well-located with connectivity to national rail services and key transport links to Heathrow, West London and Oxford. Our earlier investment in Broadgate has demonstrated the high value of acquiring central London campuses and we are confident that this asset will generate resilient long-term returns.”

GIC had held a 50 percent interest in 5 Broadgate after purchasing its stake from Blackstone in 2013. The asset remained under 50:50 ownership by GIC and British Land until they sold the office building to Li Ka-shing’s CK Asset for £1 billion in mid-2018. The Hong Kong firm sold the property to Korea’s NPS for £1.21 billion last month.

English Feast

Singaporean firms have been well represented among the Asian investors scooping up London property assets in recent months.

In December, Fragrance Group bought a Holiday Inn hotel in west London from British real estate fund manager Queensgate Investments for an undisclosed sum. The property developer controlled by tycoon Koh Wee Meng picked up the 906-room Holiday Inn London Kensington Forum at 97 Cromwell Road near Kensington Garden in one of 2021’s biggest hotel deals in the city, according to Savills.

That same month, Sun Venture completed its acquisition of a freehold office building in central London, 120 Moorgate, from WeWork Capital Advisors for £148 million ($201 million).

In February, Ho Bee Land announced that it had agreed to purchase the Scalpel office tower in the City of London from US-based insurer W.R. Berkley for £718 million ($972 million).