Korea Investment seals $266 mn City of London property deal

Korea Investment & Securities Co. Ltd. has acquired a 15-story office building in the City of London for £200.5 million ($266 million), taking advantage of the weakened pound and the attractive valuation of UK properties compared to other European real estate markets.

The purchase of the grade A tower at 70 Mark Lane was the first property investment by the South Korean securities company in London and expected to generate an annual yield at the upper end of the 6% range, depending on currency hedging cost and gains from the prospective sale.

It was first reported by South Korean news outlet MoneyToday on June 21 and confirmed by a source with knowledge of the matter.

Of the acquisition price, Korea Investment Management Co. Ltd., an affiliate of the brokerage firm, will underwrite 130 billion won ($117 million) for resale to other institutional investors.

The deal will be closed on June 22 when final payment is due.

The office building was constructed in 2014 by Japanese developer Mitsui Fudosan. It has been used as headquarters of Switzerland’s Zurich Insurance Group and Miller Insurance Services, a UK insurance broker.

It has 11 years of remaining lease term with the tenants, and rents can be raised every five years.

The transaction was arranged by London-based Knight Frank Investment Management LLP. (KFIM).

KFIM had worked for other South Korean investment companies in two recent property acquisitions made in Scotland and Dublin.

Including the 70 Mark Lane deal, Korea Investment has snapped up over 1 trillion won worth of overseas properties so far this year, which include a Silicon Valley campus of eBay Inc. and GSK’s Philadelphia headquarters building.

The relative underperformance of the British real estate market, caused by the Brexit decision in 2016, has raised the attractiveness of UK office buildings.

Last month, Mirae Asset Financial Group bought a prime office building in the City of London from the Blackstone Group for £340 million, betting on a recovery in high-end London office buildings from the Brexit-induced slowdown.

Its brokerage arm Mirae Asset Daewoo Co. Ltd. is looking for an additional property investment target in London with an increased capital base, MoneyToday added.

It raised 700 billion won ($631 million) in fresh equity capital through rights offering in March, saying that the proceeds will be used as operating expense, according to its recent regulatory filing.

By Daehun Kim

daepun@hankyung.com