Savills Investment Management has completed the acquisition of two London office buildings for a combined circa £500m on behalf of Korean and Taiwanese investors.
The investment manager has acquired 200 Aldersgate, EC1, on behalf of Samsung SRA, the real estate investment arm of the Korean conglomerate, for £315m. AshbyCapital sold the 430,000 sq ft building, which was originally the HQ of Clifford Chance, and was extensively refurbished in 2011 to appeal to a wide range of tenants including FTI Consulting, Thomas Cook and Cass Business School. The agreed price reflects a yield of circa 4.5%.
The office building will be the first asset in Samsung SRA’s second closed end global office fund. It is the largest single asset ever acquired by Savills IM and the first time the investment manager has partnered with Samsung SRA. TH Real Estate has backed the acquisition with a £200m loan at a 65% LTV and term of five years.
Acting on behalf of a Taiwanese investor, Savills IM has also completed the purchase of Great Portland Estates’ 30 Broadwick Street, W1, for £190m. The property provides more than 75,000 sq ft of offices and 20,000 sq ft of retail space. Tenants include Exponent Private Equity and Ivy Soho Brasserie. The purchase price reflects a yield of circa 4%.
Savills advised Savills IM on the acquisition of Broadwick Street; CBRE and Colliers International represented the vendor; Savills and CBRE advised AshbyCapital on the sale of 200 Aldersgate.
Jon Crossfield’s forecast
More than €2bn was invested in Europe by Asian clients of Savills IM in 2017. Jon Crossfield, head of strategic partnerships and co-head of UK at Savills IM, shares his forecast for the future of Asian capital inflows into UK real estate:
“We expect there will continue to be a wide range of Asian investors continuing to invest in London. Despite concerns over Brexit and debate over tax changes, it will remain one of the world’s largest and most liquid and transparent real estate markets and the long-term attractions to business and employees are clear.
“We have obviously seen a huge wave of private capital from Hong Kong, China and Singapore over the last few years and despite the pound increasing recently, we expect that to continue. Their reasons for investing and looking for diversification are varied, as is the risk and return that capital can consider.
“We believe the Japanese will invest more in the next few years and the larger Malaysia funds will also remain very committed to and comfortable in the UK. Whilst it is true South Korea investors have focused more on the continent in last 24 months, this is becoming increasingly challenging with prime net yields across most of the core continental office markets now at 3-4%.
“In the UK, most of the demand remains focused on London and in the office sectors, but we have seen an increasing number of transactions in the regional office markets and logistics sectors from Korea and others, particularly where the credit and income return is strong.
“I don’t think Korean investors’ interest ever went away and is now spreading to the rest of the UK too. After the initial office purchases 3-5 years ago, some have already realised good returns, and chosen to then diversify across the continent in both office and increasingly logistics sectors.
“Although the Brexit uncertainty has not helped, the UK is not the only country in Europe to have political issues and yields in the UK are above many places on the continent. Although the average UK lease term is shortening, it is still long compared to across Europe and the lease structure gives greater certainty.
“As investors mature and become more experienced, they will be able to consider more active management situations and the purchase of 200 Aldersgate is a good example.”
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