Wing Tai Properties has entered a 50:50 joint venture with Hong Kong-based Manhattan Garment Holdings to buy a landmark commercial complex in London for £460 million ($591.1 million), according to a filing with the Hong Kong stock exchange on November 22.
The Hong Kong affiliate of Singapore-listed Wing Tai Holdings, together with its corporate partner, have committed to contribute £230 million ($296.7 million) each to the joint venture company.
Wing Tai, which had been said to be in talks regarding the acquisition two months ago, added that the purchase “provides an opportunity for the group to expand and diversify its property investment portfolio and generate a steady flow of rental income of the group.”
Prime London Commercial Asset Changes Hands
Owned by Samsung Life since 2013, the target property houses Commerzbank AG’s City of London headquarters. It is located at 30 Gresham Street in the City of London, bounded to the south by Russia Row and Trump Street, to the east by Lawrence Lane and to the west by Milk Street.
The 403,639 square feet (37,160 square meter) property is comprised of prime office, retail and ancillary accommodation arranged over two basement levels, lower ground, ground and eight upper floors. There are 48 car parking spaces located on the two basement levels. In addition to Commerzbank, Investec Plc is another major tenant in the building.
Samsung Life Insurance, the Seoul-based subsidiary of the Samsung Group, advised by DWS, instructed Knight Frank and CBRE earlier this summer to look for offers of around £425 million for the property, reflecting a yield of 4.25 percent. The Korean insurer had purchased the 2003-vintage asset in 2013 for about £300 million, according to reports at the time. It has since leased vacant space, increasing rental income.
Wing Tai said in its statement that it would fund its share of the investment via “internal resources and/or borrowing.”
Asian Investors Undeterred by Brexit Worries
Demand for large City of London offices with long leases has remained strong even after the UK opted to leave the European Union, helped along in no small part by investors from Hong Kong, Singapore and other Asian locations.
London was the destination for as much as 26 percent of Asian outbound capital in the first half of 2018, with both Singaporean and Hong Kong investors active in the British capital, according to the Emerging Trends in Real Estate report for Asia Pacific, published by the Urban Land Institute and PwC on Friday.
Earlier this month, Mingtiandi reported that Hong Kong billionaire property developer Li Ka-Shing’s CK Asset Holdings was in talks to purchase a majority stake in Earls Court, which has been valued at £700 million ($914.48 million). The potential acquisition would make a quick follow up to the company’s the company’s £1 billion June purchase of the UBS headquarters in London.
In October, Hong Kong’s Nan Fung bought a majority stake in Endurance Land to up its exposure in the United Kingdom, four months after the privately-held Hong Kong real estate developer purchased a £75 million City of London building.
Brexit is Scary, But Hong Kong Yields Terrify
London’s offices remain good value on a global basis with prime yields running at 4.25 per cent for City of London offices this year, according to Knight Frank. In contrast, Hong Kong’s average yields for grade A office assets stood at 2.3 per cent in September, according to the city’s Rating and Valuation Department.
Surveyors said the strong investment activity in London from foreign buyers is likely to continue. “I think there is a strong possibility that the central London office investment market will continue to be bullish due to more Far Eastern and overseas high net worth individuals looking for safe havens for their equity,” reported South China Morning Post, citing Richard Barker, a chartered surveyor at commercial property company RB Associates.
Wing Tai currently owns five other office buildings in London, including 10 Brook Street near Oxford Circus, 35 Berkeley Square and No. 1 Saville Row, according to its website.