ARA Teams Up with Korea’s NH to Buy Office Block in London’s West End for $373M

ARA Asset Management has added to its list of European acquisitions with the Singapore-based firm informing Mingtiandi today that it has teamed up with Korea’s NH Investment & Securities to complete the acquisition of a newly constructed commercial project in London’s West End for £280 million ($373.1 million).

In a joint investment with NH, which is one of Korea’s largest investment banks, ARA’s Korean unit, together with London-based affiliate ARA Dunedin, purchased Marble Arch Place, a 141,854 square foot (13,179 square metre) office and retail project overlooking Hyde Park from Almacantar, after the UK developer recently completed construction.

ARA, which is buying the project at an investment yield of over 4 percent, noted that the deal represented a rare opportunity to acquire an asset in one of London’s most desirable office locations.

“The asset sits at the forefront of several of London’s most carefully curated districts: Mayfair, Hyde Park and the Connaught Village, with full views of Hyde Park from the second floor up,” ARA Korea chief executive told Mingtiandi. “The rents are very high in this location and new construction is very rare.”

Overlooking the Marble Arch

The seven-storey tower at 55 Bryanston Street was designed by architect Rafael Viñoly and has 95,749 square feet of office space stacked above 46,105 square feet of shops over three floors (including a below ground level) in one of London’s most exclusive neighbourhoods.

“This area is highly sought after for global PE and finance firms and new supply is limited,” ARA’s Kang said. “You are directly overlooking the Marble Arch itself and within two minutes from the Marble Arch station.”

The office space in the project, which received an Excellent rating under the UK’s BREEAM code for green buildings, is already 88 percent let for a 15 year term to private equity firm Bridgepoint, with ARA pointing out that the West End is a hub for private equity firms with Blackstone and Invesco also having their offices nearby.

This presence of global finance firms has helped the West End weather recent turbulence, including the pandemic challenges.

“When Covid-19 hit the overall occupancy in London was hit, but the West End was least affected,” Kang said. The overall city saw office vacancy rise close to 10 percent, but in the West End remained more resilient with a vacancy rate of 6 percent.”

The office tower is part of mixed-use development which includes The Bryanston, a 17-storey condo tower which is currently being marketed directly by Almacantar. London’s React News, which first reported the potential transaction around three months ago, noted that the developer is scheduled to repay a £310M loan used to fund construction of the building in February of next year.

In a report published this month, property consultancy Savills said that, at the end of October, office space under offer in the West End was up 34 percent compared to the long-term average, and had reached a two-year high.

Office rents in the West End averaged £81.45 per square foot per year for grade A properties, with top spaces leasing for £136.50 during October.

In September, the Kuok family of Kerry Properties and the Shangri-La Hotel Group joined what has been a growing number of Asian investors betting on the returns from West End office space with the purchase of Cassini House, an office block in the St James area for £145.5 million.

Korea Outbound

The venture into one of London’s poshest districts puts ARA Korea and NH among the growing wave of Korean institutions searching for opportunities in overseas real estate, as competition for assets grows in their home market.

“Korean pension funds and other investors are being flooded with fresh capital each year and they need to deploy on an annual basis,” Kang said. “Given the local market limitations, it is inevitable that they look outside Korea, and the first focus tends to be on global gateway cities like London.”

In Korea, where ARA manages a range of REITs and private funds, the firm’s local unit teamed up with local investment banking giant NH Investment in 2019 to purchase the Seoul Square office tower for $890 million. The two companies teamed up again last year to acquire Tower II of Seoul’s Parc1 complex for $897 million.

Extending Partnerships

With Korean investors on the lookout for attractive assets, Kang said that his team in Seoul have been working with ARA Dunedin to identify potential opportunities, with a focus on the London market. With the deal now complete, ARA Dunedin will continue to manage the asset.

The acquisition is the fourth London office buy on behalf of an ARA managed fund since the firm entered the UK capital in October last year. In that inaugural London deal, Suntec REIT, a Singapore-listed trust managed by a unit of ARA, purchased a 50 percent stake in the Nova Victoria complex in the West End for $560 million in October of last year.

Then in the first quarter of this year, ARA Dunedin acquired another West End property as it picked up Aviva Investors’ Ealing Cross office project for the equivalent of $99 million, before Suntec REIT agreed to acquire The Minster Building in the City of London for $489 million in June of this year.

Kang noted that the company’s growing track record in the UK capital is helping the company’s standing with asset owners, with Almacantar said to have chosen ARA’s offer over competing bids at higher price points, due to their confidence that the Singapore-based firm would follow through on its proposal.

ARA Asset Management is in the process of being acquired by ESR, with shareholders of the Hong Kong-listed industrial specialist having approved the $5.2 billion acquisition in early November, with final completion expected early next year.