CapitaLand Adds £129M UK Biz Park to European Portfolio

CapitaLand has agreed to acquire a business park in the UK for £129 million ($168 million), as Southeast Asia’s largest real estate group boosts its portfolio in post-Brexit Britain.

The Singapore property giant said that its acquisition of the Arlington Business Park, once completed, will bring its European assets under management to S$4.8 billion ($3.4 billion), including 39 properties in the UK comprising one business park and 38 logistics assets, as well as  eight serviced residences under Ascott.

The announcement came the same day that the company released its 2019 financial results, which showed profits after tax and minority interest of S$2.1 billion – up 21 percent from the previous year.

Investing in Developed Markets

“The acquisition of Arlington Business Park is part of CapitaLand’s plan to increase our investments in developed markets such as Europe, Japan and the USA,” said CapitaLand Group’s Singapore and international president, Jason Leow.

Leow noted that CapitaLand’s strengthened presence in Europe will allow the company to “maintain a balanced portfolio between emerging and developed markets”.

Based on the combined net leasable area of 367,000 square feet (34,095 square metres) across the eleven office campus, CapitaLand is paying £351 per square foot for its latest UK business park.

Located on the outskirts of Reading in the southeast of England, the 1980s-era development occupies a 15 acre (6 hectare) site 60 kilometres west of London on the M4 motorway.

Property consultancy Savills predicted in its UK cross-sector outlook report released last month that office rental growth in Reading would grow 1.6 percent over the next three years, while rents in London would climb 4.5 percent.

The developer indicated that, having completed its S$11 billion acquisition of Ascendas-Singbridge last July, it expects to make use of expertise and assets gained through that deal to develop new investment opportunities in Europe, including through this latest UK deal.

“We can leverage this deep experience and our strong network of tenants to value add to Arlington Business Park,” said Leow.

The senior executive added that Capitaland would look at the option of spinning off sets of its European assets into investment vehicles or partnerships as the company builds its portfolio in the region.

Modernising a Dated Asset

The seller is a joint venture between UK private equity firm Patron Capital and London-based property asset manager APAM, which had acquired the business park in 2015 for £72 million.

After buying the asset, the APAM–Patron Capital JV carried out a rolling programme of upgrades, including new landscaping, upgrading the F&B offerings and fitness, setting up a floating meeting room on the park’s lake and putting in place an events programme for tenants.

Occupied by a range of tech, media and other multinationals, including Amazon, NTT Group and Honda, the business park’s occupancy stands at 77 percent with a weighted average lease expiry (WALE) of five years.

Betting on Britain Post-Brexit

CapitaLand said in its statement that it was targeting the UK’s regional business park sector as investors regain confidence in the market following Britain’s formal exit from the EU.

“With increased clarity post-Brexit, the acquisition is timely as general business sentiment has improved,” said CapitaLand International’s CEO Gerald Yong, who went on to say that the UK “offers strong fundamentals such as a resilient economy and transparency”.