Stamford Land Corporation has snapped up a commercial building on one of the City of London’s most historic streets, teaming up with a private firm controlled by the chairman of the Singapore-listed company to acquire the asset for £260 million ($320 million), according to a stock exchange announcement.
Stamford paid Mitsubishi Estate around £156 million in cash for its 60 percent stake in 8 Finsbury Circus, with a unit of Ow Global paying the Japanese real estate firm £104 million for the remaining 40 percent stake in the office block.
The acquisition is the first in the UK for a Singapore-based company more familiar with New Zealand and Australia, where it has developed a number of upscale residential projects and operates the high-end Stamford Hotels in major cities in both countries.
The deal, which was completed on Friday, comes at a time when Asian investors have grown cautious about the UK capital, with transactions from the region accounting for less than 20 percent of investment volume last month, down from 57 percent recorded in December last year.
0% Vacancy, 14 Years Average Unexpired Lease, 4% Yield
Stamford Land’s newly acquired freehold office building has a net lettable area of approximately 180,000 square feet (16,723 square metres), arranged over a total of 10 floors.
Re-built to an award-winning design in 2016 by previous owners Mitsubishi Estate, the Portland stone-clad property is fully let and generates a passing rent of around £11 million per year, equating to £78 per square foot, with a weighted average unexpired lease term of 14 years.
The property’s four office tenants include investment manager Rathbones, Zurich-headquarted asset manager GAM, US consulting firm Charles River Associates, and the Development Bank of Japan, while a retail unit on the ground floor is let to a food and beverage establishment.
The building is a three minute walk from Moorgate London Underground station and adjacent to Sir Edward Lutyens’ Brittannic House, a 1920s-era listed property.
Stamford Land Corporation can expect a net initial yield for its new prize of 4 percent after costs, according to Savills, which was appointed by Mitsubishi Estate to advise on the sale, which started in late May.
London Transactions Slump to 10 Year Low
Commercial property investment in London has slid to its lowest point since 2010, with transaction volume totalling £3 billion during the first half of 2019 compared with £5.65 billion for the first six months of last year.
However, the 47 percent drop in turnover can be attributed as much to lack of stock as to waning investor appetite, according to Stephen Down, Savills’ head of central London investment.
As of mid-July, there were only 19 buildings worth £928.9 million being openly marketed in the city, compared with 45 worth £2.99 billion this time last year, according to the London-based agent.
“The speed at which Stamford Land Corporation wanted to close the deal on 8 Finsbury Circus, inside a week after bidding, signifies the appetite investors have for London,” Down said.
For London’s best commercial assets, there is still a deep market for investors who are risk averse, according to Savills’ head of cross border investment, Rasheed Hassan.
“Returns in London are more generous compared with Singapore where yield and the cost of financing are tight,” Hassan said. “We have a long record of Singaporeans investing in London in the past 10 years.”
Asia Not Rushing Back to London Just Yet
Stamford Land Corporation’s acquisition of 8 Finsbury Circus comes only two weeks after the purchase of 8 Salisbury Square for around £225 million by a joint venture led by a privately-held affiliate of Hong Kong and Singapore-based Wing Tai Group.
In the eight months preceding this pair of deals, however, Asian investors have only led three other London transactions of £100 million or more.
Just over a month ago, Beijing-based Cindat Capital Management teamed up with Oaktree Capital Management to buy the former Reuters’ HQ at 30 South Colonnade in Canary Wharf for a figure reported to be 60 percent less than the £215 million the beleaguered HNA Group acquired the asset for in 2015.
In December last year, Hana Alternative Asset Management bought the Sanctuary Buildings in Westminster from Blackstone for £285 million.
That deal was preceded by Wing Tai Properties’ purchase of Commerzbank’s London HQ at 80 Gresham Street for £460 million via a joint venture with Hong Kong-based Manhattan Garment Holdings in November last year.