The biggest acquisition in the UK market this year comes from a Singaporean buyer, as UK developer and investor Land Securities Group, announced on Friday that it had agreed to sell an office block in the City of London for £552 million ($742 million).
Sun Venture, an asset manager based in Southeast Asia’s wealthiest city, has agreed to make 1&2 New Ludgate, a five-year-old commercial complex in the City of London, its second acquisition in the UK, following a buy in July of this year.
In announcing the deal, Lendsec, which manages £11.8 billion in European properties, said that the sale, “demonstrates the strong investor demand for high quality London assets.” The purchase by Sun Venture is the latest in a string of UK real estate purchases by Singaporean institutions in 2020.
Buying into London’s Traditional Financial District
“1 & 2 New Ludgate are best-in-class assets and we are pleased to have them in our portfolio,” Sun Venture chairman Ricky Au said in a statement. “London remains attractive to investors taking a long-term view, and this second acquisition forms part of our strategy to expand our presence overseas.”
Au’s London prize is a 389,615 square foot (36,196 square metre) complex which occupies a 1.5 acre (6,070 square metre) site next to the Old Bailey in London’s financial district.
Opened in 2015 after being redeveloped by Landsec, 2 New Ludgate, one of the two buildings in the complex, is leased to Japan’s Mizuho Bank on a 20-year deal which was first signed in 2014. 1 New Ludgate is occupied in part by UK law firm Ropes & Gray, which leases three floors in the building. The Commonwealth Bank of Australia is also an occupier.
The property generates £23.7 million in contracted rental income annually, according to Landsec, and was valued at £546.4 million as of 31 March of this year.
The complex near St Paul’s Cathedral includes a total of 356,547 square feet of office space, and another 28,524 square feet of retail accommodation. At the consideration, Sun Venture is paying the equivalent of £1,416 per square foot for the property. Landsec was advised on the sale by CBRE, while JLL represented Sun Venture.
The London-listed firm lost £835 million during the six months which ended 31 March, according to its mid-year report.
In a statement last month announcing its financials, Landsec chief executive Mark Allan said, “The investment market for high-quality London office assets, such as those owned by Landsec, has remained robust throughout the pandemic and there is little sign of that interest waning. Access to this liquidity, coupled with the acquisition and development opportunities that are likely to arise as a result of increased obsolescence of older office stock, as well as the long-term need for urban mixed use regeneration, mean there will be ample opportunity for Landsec to create significant value.”
Singapore Chases UK Deals
Sun Venture’s second UK acquisition comes five months after the Singaporean firm purchased One New Oxford Street in London’s Midtown area from a Nuveen fund backed by the Central London Office Fund and British Airways Pension Trustees.
That deal was Sun Venture’s first outside of Singapore, where it manages around 800,000 square feet of property, alongside other assets. The asset manager paid around £174 million in that July acquisition of the 110,000 square foot office block, which is leased to H&M and Amazon’s Twitch video unit.
“As one of the largest global cross border deals of 2020, the acquisition by Sun Venture further underlines the confidence in best-in-class, income producing assets from Asian capital,” JLL head of capital strategies for Asia Pacific Tim Graham, said of this latest deal.
After several Singaporean groups made real estate acquisitions in the UK this year, Graham predicted that more cross-border purchases could be on their way. “Asian capital will continue to become a more influential presence in global real estate markets and the expertise of Singapore-based investors in international real estate markets will undoubtedly play to their advantage in 2021 and beyond,” the JLL executive director said.
Sun Venture’s purchase last week comes just under two months after Singapore-listed Suntec REIT made its UK debut with the £430.6 million purchase of a half-stake in the Nova Victoria complex in London’s West End.
Like Sun Venture’s acquisitions, that investment by the trust managed by Singapore’s ARA Asset Management chose a central London opportunity, while other institutions from the Lion City have pursued business park deals this year.
In August, Singapore’s Straits Trading, in a purchase managed by ARA, picked up the Bourne Business Park, a 182,364 square foot office facility in Addlestone, Surrey from LaSalle Investment Management for £76.7 million.
During February of this year, CapitaLand agreed to pay £129 million to buy the Arlington Business Park outside London from a joint venture between UK private equity firm Patron Capital and London-based property asset manager APAM.
Frasers Property had kicked off Singaporean investments in London assets this year with its £135 million January acquisition of Lakeshore, a business park in Bedfont Lakes, Feltham, Middlesex near London from UK private investment bank Evans Randall.