Singapore’s Ho Bee Land has agreed to acquire a property in London that increases its already sizeable holdings in the European financial capital by about 50 percent.
The £650 million ($864 million) acquisition of Ropemaker Place, a 21-storey office building, is the company’s most expensive purchase ever in the city and brings its total investment in London property to S$2.4 billion ($1.7 billion).
The company announced the transaction to the Singapore stock exchange on Monday, citing a sale and purchase agreement signed on June 15th.
SG Developer Buys From Mainland China, Korean Investors
Ho Bee’s latest London trophy at 25 Ropemaker Street is set on 1.37 acres of freehold land in EC2 district within the City of London financial district. The 2009 vintage structure has a total rentable area of 602,000 square feet (56,000 square metres), according to the statement by Ho Bee, including 565,000 square feet of grade A office space and another 30,000 square feet of retail area.
The Singaporean developer is acquiring the British Land-developed property from Frasia Intermediate S.à.r.l, a Luxembourg-registered vehicle managed by AXA Investment Management’s real estate division, which, according to an account in London’s Estates Gazette was managing the asset on behalf of Chinese sovereign fund Gingko Tree Investment and South Korea’s Hanwha Group. JLL and Eastdil Secured had been engaged to market the property last December for a reported asking price of £700 million.
According to the statement from Ho Bee, the building has a weighted average lease term of 10.5 years to expiry and 8.5 years to break option. The annual rental income of about £30.57 million provides a running yield of approximately 4.68 percent.
Tenants at Ropemaker Place include Australia’s Macquarie Group, IHS Markit, MUFG Securities and The Bank of Tokyo-Mitsubishi. Ho Bee said in its statement that the quality of the tenants combined with the relatively long lease terms will make the property resilient through any uncertainty caused by Brexit. The company adds that the Arup Associates-designed structure is at the vanguard of sustainability, having been the first building in the City of London to achieve LEED Platinum pre-certification.
Another selling point for Ropemaker Place is its proximity to London’s transportation networks. The building is 200 metres from Moorgate Station, which will connect to the city’s new Crossrail line at Liverpool Station. Once Crossrail is open in December 2018 and fully operational a year later, travel times to key points in and around London will be cut by about half. The building is 400 metres from Liverpool station itself.
Ho Bee Loves London Over New York
In its statement to the Singapore exchange, Ho Bee’s chairman, Chua Thian Poh characterised the transaction as a bet on London’s long-term health. “Despite Brexit, London has proven resilient and maintained its position as the world’s top financial city ahead of New York,” Chua said.
The Singaporean billionaire pointed to the UK political turmoil creating openings for new acquisitions, adding that, “The Brexit uncertainty has, in fact, provided us with the opportunity to suss out excellent investment opportunities like Ropemaker Place.
Following the Ropemaker Place acquisition, which Ho Bee accomplished via subsidiary Grandeur Property Investments, the developer’s London investments jumped to 41 percent of its entire portfolio, and the company now has over 1.5 million square feet of space in the city.
Last year, Ho Bee acquired 67 Lombard Street for £129.3 million ($172.0 million) — a 1930s structure in the City of London near the Bank of England. Ho Bee was also reported to have bid on 70 Mark Lane in 2017, but by early 2018 no transaction had been completed.
As of the end of 2017, the company had a total of S$1.24 billion ($918 million) invested in six commercial buildings in the city, equivalent to 26 percent of its overall portfolio. Ho Bee’s lettable area in the city totalled 90,535 square metres, and all but one are freehold. Rents from the London properties in 2017 were £30.5 million ($40.6 million), or about 33 percent of the company’s total revenues, according to the company’s annual report. Yields from these assets ranged from 4 percent to 5.5 percent.
Asian Investors Look to London for Portfolio Diversification
Founded in 1987 as a property developer, Ho Bee made its first investment in London in 1996 and listed on the Singapore Exchange in 1999.
Chua Thian Poh, the company’s founder, chairman, CEO and controlling shareholder, has commented to the press that the 1997 crash taught him the dangers of concentration and the need to have assets outside his home market and region.
Some of London’s largest transactions in recent years have been undertaken by investors from Asia. In 2017, The Leadenhall Building, also known as the Cheesegrater, went to Hong Kong-listed CC Land for £1.13 billion ($1.5 million). Shortly thereafter, 20 Fenchurch Street was purchased by Kong Kong’s Lee Kum Kee International for $1.7 billion.