CDL’s chief investment officer, Frank Khoo, is buying big in London
Shrugging off Brexit concerns, City Developments Limited (CDL) had added another trophy asset to its London collection. The Singapore-listed developer announced on Friday that it has acquired a prime office tower in London from Blackstone for £385 million ($493.99 million) — knocking £45 million ($57.74 million) off the asking price.
The acquisition of London’s 125 Old Broad Street – formerly known as the Stock Exchange Tower – comes just over a month after the Singaporean firm bought the 211,000 square foot London Aldgate House for £183 million to continue expanding recurring income in global gateway cities.
The two investments have been led by CDL’s chief investment officer Frank Khoo, the former head of real estate investment for Asia at AXA Investment Managers, after Khoo was appointed by CDL at the beginning of the year.
Singaporean Developer Still Likes London
“We have confidence in the long-term fundamentals of London as a global financial hub with a robust office market. The short-term uncertainties surrounding Brexit have presented us opportunities to acquire assets with deep value,” said Khoo in the statement.
The 1970-vintage property had housed the headquarters, offices and trading floor for the London Stock Exchange until 2004. Occupying a freehold island site in the City of London, bounded by Old Broad Street, Throgmorton Street and Threadneedle Walk, the landmark building is neighbour to the iconic Bank of England headquarters overlooking St Paul’s Cathedral.
The grade A complex consist of 329,200 square feet of office, retail and ancillary accommodation arranged over three basement levels, a ground floor, mezzanine and 26 upper floors, which saw significant refurbishment in 2008. The seller, Blackstone, put the property on the market late last year with an asking price of £430 million after the investment firm bought the asset in 2014 for £320 million as part of its core-plus real estate strategy.
London Office Tower Provides 4.7% Yield
The property currently provides the European headquarters for property consultancy Cushman & Wakefield, while also serving as the top European base for King & Spalding, and China International Capital Corporation, with a passing yield of about 4.7 percent.
The £385m landmark building housed the London Stock Exchange until 2004
The top five tenants in the building account for over 60 percent of the total net lettable area and income, CDL said.
“With average passing rents currently about 25 percent below prime average rents in the City of London, there is strong potential for positive rental reversions. In addition, the property’s overall weighted average unexpired lease term of five years (to lease breaks) and 5.4 years (to lease expiries) is attractive,” it added.
Cushman & Wakefield, which advised CDL on the purchase of 125 Old Broad Street and is also a tenant, said central London’s office market was “enjoying a robust performance” with the strongest quarterly leasing volume for three years, reported IPE Real Assets.
“The tightening of London’s existing office stock and limited new supply will also drive rental growth into 2021. Given its excellent location in a diverse business district, 125 Old Broad Street will continue to attract a strong tenant mix from the finance, legal, insurance and technology/media/telecommunications sectors,” Khoo said.
CDL Stays Busy Covering Europe
The UK has been one of the key overseas markets for strategic diversification for Singapore’s top home builder. Capitalising on attractive pricing and yields, the company, which also owns Republic Plaza along Singapore’s Raffles Place, has continued to expand its London commercial portfolio through off-market acquisitions of high performance assets, Khoo noted. In addition to 125 Old Broad Street and the Aldgate House, CDL holds 10 more projects in the financial center.
In early 2017, it acquired a luxury residential project in south London’s Battersea district for £58 million with a plan to transform the freehold Ransomes Wharf site on the south bank of the Thames river into a £222 million residential project.
CDL also acquired the Development House in the city’s Shoreditch area in 2016. Currently fully leased, the commercial property on Leonard Street in the emerging tech hub has already obtained planning approval to be redeveloped into a nine-storey building consisting of over 72,000 square foot of net lettable area.
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