Singapore’s Straits Trading has revived the island nation’s romance with UK real estate with an announcement late yesterday that it had purchased a business park near London for approximately £76.7 million ($101 million) in cash.
The SGX-listed investment firm purchased Bourne Business Park, a 182,364 square foot (16,942 square metre) office facility in Addlestone, Surrey from LaSalle Investment through its Straits Real Estate subsidiary. Straits explained the purchase as an opportunity to chase potentially higher rates of return than it has achieved through its existing direct investments, all of which are Asia Pacific.
The acquisition gives Straits the opportunity to add a UK property to a portfolio which already includes assets in Japan, Korea, China and Australia, and comes six months after Singapore’s largest developer, CapitaLand, bought a business park 30 miles (48 kilometres) away for £129 million.
Property 96% Leased
“We see value in the Property as it gives us a resilient stream of income via its stable existing leases, Desmond Tang, CEO of Straits Real Estate said.
Tang’s new property consists of six stand-alone buildings constructed between 1999 and 2017, with LaSalle having added new blocks to the complex since 2014, while upgrading some of the existing structures. At the consideration reported, Straits is paying the equivalent of just less than £2,358 per square foot for its foothold just over twenty miles southwest of central London.
The complex connects to London via the M25 and M3 motorways as well as via rail through Weybridge Station, which is 1.5 miles away.
Bourne Business Park is currently 96 percent occupied, according to Straits, with Japan’s Astellas Pharma having agreed late last year to lease around 40,000 square feet in the complex. Other tenants include Schindler Lifts, recruitment firm Page Group, shipping service provider CHEP and property consultancy Mundays among others.
Flying to Heathrow for a 3% Yield
While Straits pointed to a strategy of investing in potentially higher yielding properties in explaining its investment, based on the approximately £1.2 million in net profit before tax declared for the 12 months ending 30 June, Straits is buying the property at a net initial yield of around 3.13 percent.
In commenting on the outlook for the office property Straits’ Tang said, “There is also value-add potential through refurbishment or redevelopment of part of the business park.” At present, most tenants in the nearly fully occupied complex are there for the long term with the asset currently carrying a weighted average lease term of 7.5 years, according to the company statement.
Straits’ most recent previous overseas deal came in September of last year when it acquired a set of three freehold apartment buildings in Tokyo for around $29 million. The company is also a significant shareholder in Singapore’s ARA Asset Management.
LaSalle, which originally developed Bourne Business Park, had put the property on the market in February at an asking price of £84 million, according to local media reports. The deal is expected to close in the fourth quarter of this year.
JLL which brokered the deal on behalf of LaSalle as exclusive sales agent, sees the transaction as a reminder of the enduring role of Asian corporates and fund managers in European markets.
“Investors from Asia Pacific continue to lead the field in terms of global cross-border real estate activity, with Singapore consistently being a prominent source of capital, Tim Graham, JLL’s head of capital strategies for Asia Pacific told Mingtiandi.
Singapore Rediscovers the UK
After playing a leading role in UK real estate markets in recent years, Singaporean investors had been relatively quiet in London and other cities this year as the coronavirus roiled markets and restricted travel.
In a deal with similarities to Straits’ transaction this week, CapitaLand in February agreed to purchase the Arlington Business Park in Reading for £129 million, making it the Temasek Holdings-controlled developer’s second office campus in the country.
In January, Singapore-listed Frasers Property agreed to pay £135 million to add the Lakeshore business park in Feltham, Middlesex to its set of six existing UK business parks.