Wing Tai JV Said Buying London Office Building for £225M

A Hong Kong joint venture fronted by a privately-held affiliate of Wing Tai Group has agreed to buy an office building in London for around £225 million ($282 million), according to market sources who were in contact with Mingtiandi.

The Hong Kong investor is said to be purchasing 8 Salisbury Square, a 155,000 square foot (14,400 square metre) property just south of Fleet Street, from London-based real estate company Greycoat and alternative asset manager Cheyne Capital Management for around 6.25 percent less than the sellers asking price

The deal, which was facilitated by both Colliers International and Cushman & Wakefield,

Both Cushman & Wakefield and Eastdil Secured were retained by Cheyne Capital and Greycoat to advise on the sale of the property which allowed the UK duo to achieve a price increase of £105 million, or around an 87.5 percent markup, over what they paid to purchase the commercial asset five years ago. Buying the property at the equivalent of just under £1,452 per square foot, Wing Tai, which was advised in the transaction by Colliers International, can expect a net initial yield of 4.6 percent, according to UK media accounts.

Neither Singapore-listed Wing Tai Holdings nor Hong Kong-listed Wing Tai Properties has made announcements relevant to the transaction to their respective stock exchanges.

Renovated Building Brings in £10.36M in Rent Annually

Just a short walk from both Blackfriars and City Thameslink stations in London’s financial district, the eight-storey building was previously the headquarters of the accounting firm KPMG.

Greycoat and Cheyne upgraded the property in 2017, including adding a 35,000 square foot extension as wellas five roof terraces.

The improvements may have helped with leasing for the freehold development, which has a weighted average unexpired lease term of 10.5 years, with no break options on any of the office leases.

“The most recent letting to (American cloud computing company) ServiceNow achieved approximately £75 per square foot and demonstrated the strong rents that this property has achieved in a supply starved market,” Colliers International and Cushman & Wakefield said in a joint statement earlier this week.

Comprised of eight upper floors over a ground level, lower ground level and a basement, the building derives 25 percent of its income from the UK government-backed tenancies including the Health Foundation and British Business Bank. US-based consulting firms Berkeley Research Group and Gartner have also set up their offices in the facility.

Current passing rent totals £10.36 million per annum, inclusive of rental top-ups, and equates to an average rent of £62.61 per square foot. The building will provide over £98,000,000 of contractual income annually, said the statement.

Greycoat and Cheyne jointly bought the 1980s-vintage low-rise building from Deka Immobilien for £66m in 2014 when it was occupied by KPMG.

Wing Tai Still Loves London

Wing Tai’s affection for London has remained strong despite the UK’s Brexit uncertainty.

Last November, the family-controlled investment firm entered into a 50:50 joint venture with Hong Kong-based Manhattan Garment Holdings to buy Commerzbank’s London headquarters at 30 Gresham Street for £460 million.

City of London Commercial Property Investment Down 47%

London-based Savills said in its July City Investment Watch that investment turnover in London for the first half of the year was just under £3 billion, 47 percent lower than last year’s £5.65 billion for the same period, and the lowest since 2010.

“Although Brexit is making investors cautious, we cannot underestimate the effect the lack of available stock is having on transaction volumes, with just a small handful of buildings over £100 million available on the market,” said Richard Bullock, a director of the City Investment team at Savills that brokered the sale of 8 Salisbury Square to Cheyne Capital and Greycoat five years ago.

“We are continuing to see good demand from investors from all parts of the world, including Asia, however some overseas buyers are sitting on the fence, waiting to see what will happen with Brexit and hoping for favourable changes in currency rates,” Bullock added.

Competitive bidding shows that investor appetite is strong particularly for value add stock, but only 19 buildings worth £928.9 million are currently being openly marketed, compared with 45 worth £2.99 billion this time last year, according to the London-based agent.