Mirae Asset, NH Investment seek to resell $94 mn stake in London building

Mirae Asset Daewoo Co. Ltd. and NH Investment & Securities Co. Ltd., which closed the £242 million ($340 million) joint acquisition of an London office building this week, are seeking to sell down 100 billion won ($94 million) worth of equity interests in the property to other South Korean institutional investors.

The two biggest securities companies in South Korea by equity capital spent 180 billion won ($170 million) – 90 billion won each - on the purchase of Cannon Bridge House in the City of London from the Blackstone Group, according to sources with knowledge on the matter on March 29.

Blackstone offered the property comprising two connected office buildings last year when it shed part of its London office portfolio. The private equity group bought Cannon Bridge House for about £170 million in 2015.

Mirae Asset and NH Investment snapped it up in an auction and completed the payment on March 28, on expectations that the London office market has room for further growth in price.

“After the Brexit decision, new office building development all but ground to a halt in London. A lack of new supply in the City of London’s office rental market underpinned the property value,” an NH Investment source told the Korean Investors.

The estimated cap rate, or net rental incomes divided by the purchase price, is above 5%, which is 1-2% points above the average rate of office buildings in gateway cities in Europe.

After the planned resale of equity interests, Mirae Asset and NH Investment will retain the remaining stake worth 80 billion won until the maturity of domestic funds set up for the investment.

They are considering spending extra money in refurbishing the property which Blackstone has yet to complete because of the Brexit decision in 2016.

Blackstone had renovated part of the space used as a London data center of the New York Stock Exchange for a new tenant in a value-add investment.

RELATIVE ATTRACTIVENESS

The pound’s weakness and low interest rates in Britain boost the expected return from the UK properties.

When converting the won into the pound, South Korean investors receive an additional interest payment of 0.3 to 0.4% per annum.

“US property prices have gone up sharply over the past couple of years and higher interest rate lowered their attractiveness. But Europe, in particular UK, where interest rates remain relatively low, looks attractive now,” said one of the sources.

Built in 1991, Cannon Bridge House has an office space of 26,626 square meters and is fully occupied.

Its tenants include Natixis Capital Partners, online brokerage firm IG Index, and food delivery start-up Deliveroo.

Mirae Asset Daewoo is the biggest South Korean securities firm with an equity capital of 7.3 trillion won at end-September 2017. Second-ranked rival NH Investment’s capital was 4.8 trillion won.

Gi-ho Park, head of NH Investment’s structured finance division and Won-seok Bong, a senior managing director of Mirae Asset Daewoo’s investment banking division, spearheaded the joint acquisition.

A joint venture between London-based Valesco Group and South Korea-based FG Asset Management Co. Ltd. secured the deal for the two South Korean brokerage companies.

With Asian investors piling into overseas real estate, Samsung SRA Asset Management Co. Ltd., the real estate investment arm of Samsung Life Insurance, bought 200 Aldergate, a London office building for approximately £315 million in February.

The deal marked a return of Samsung SRA to the London office property market after selling 30 Crown Place for around $290 million to a Chinese fund in 2016.

By Daehun Kim

daepun@hankyung.com