Investors Play Monopoly Betting on London Real Estate
- London from above - courtesy of Telegraph
- More aerials - courtesy of BBC
- Richest Land Holder in London
- London's [high rise] skyline
- 250 high rises planned
- Best high-rises
- Central line
- Victoria line
London Still A Draw for Asian Investors
The prospect of high returns and a British tourism boom prompted Chow Tai Fook Group and some partners to snap up a luxury hotel in central London for £125.15 million (HK$1.6 billion). -- SCMP 2014 Apr 3
The deal works out to $877,000 for each room, making it the second-most expensive hotel deal in London this year in terms of price per room.
The private equity fund - formerly known as Polylinks International and formed by a group of wealthy Hong Kong, Singapore and Malaysian businessmen - has invested in the global property market.
The fund has seven partners: Chow Tai Fook Group, the Wee family of Singapore's United Overseas Bank, Lee Seng Huang of Malaysian-listed Mulpha International, Tom Chan from the founding family of Crocodile Garments, Arthur Liang from the family who were once major shareholders of The Hongkong and Shanghai Hotels, David Chiu of Far East Consortium International and New World Strategic Investment.
But only four of the partners - Chow Tai Fook, Mulpha, Chan and Liang - were involved in the acquisition of the 237-room Marriott London Grosvenor Square Hotel last month.
"It is our unique business model and the key to our success. Our members can choose to be involved in different property purchases, depending on their preferences," -- 2014 May 13 SCMP
Significant Asian Real Estate Transactions in London include:
- Gaw Capital purchase of Marks & Spencer hq
- CIC's purchase of Blackstone's office park
- 23% of foreign purchases are Singaporean
- Ridgeford & Concord Pacific JV - Marylebone
- CCB's purchaseof 111 Old Broad Street
GIC purchaser of Broadgate Stake
China Investment Corporation (CIC) is set to buy Chiswick Park, a west-London office development, from US private equity group Blackstone for about £800 million (S$1.6 billion), the Financial Times reported, citing people familiar with the matter.
Historical: Upswing in London
Prices of central London commercial property have soared, and now surpass their pre- crisis level
Source: Real Capital Analytics
Canary Wharf : History
When the global bank HSBC sold its London headquarters tower to a Spanish buyer in spring 2007, at the height of the credit and property boom, the deal was the single largest real estate transaction in British history.
Then the boom went bust, prompting a fire-sale handover of the building back to HSBC. Next came the nadir. A new owner, this time from South Korea, bought the tower in hopes of a rebound.
Now the 44-story building, still serving as HSBC’s headquarters, is for sale yet again.
Because the market is teeming with international money, some analysts predict the price this time will surpass that 2007 record of 1.1 billion pounds, or $1.8 billion — a forecast that might say everything you need to know about the boom-bust-boom of London commercial real estate.
Except that there is actually much more of a story to tell about the HSBC tower. As goes this building, so goes the London market.
“It traded right at the top, and then again at the bottom and now it’s right back up at the top,” said Simon Mallinson, managing director of Real Capital Analytics, a company that tracks global real estate transactions. “The tower is reflective of where the city is.”
Prices for London office buildings, not adjusted for inflation, have surpassed their previous high point reached in 2007 by 10 percent, according to Real Capital.
Last year, £19 billion worth of commercial real estate was sold, compared with the previous record of £17.9 billion in 2007, according to another firm, CBRE Global Research and Consulting.
“2013 was a storming year, the best year we have ever had,” said Neil Blake, a CBRE executive.
In recent months, the American investment company Blackstone, which scooped up London property during the depths of the crisis, has sold its stakes in two major building groups, posting giant profits on each. In a separate deal, St. Martins, the property division of the Kuwait Investment Authority, paid £1.7 billion — in cash — for another group of London buildings.
Residential real estate in London and southeast England generally, propelled by foreign money, is also on a tear, with prices running at an annual growth rate of 17 percent — which has politicians and central bankers wondering how to subdue the frenzy.
For international investors in commercial real estate, London has some important advantages over the United States. Sales proceeds on buildings do not incur capital gains taxes, and leases are much more favorable to owners than to renters.
The standard London lease terms, in real estate lingo, are “full repair, insure, upwards only with five-year review.” In other words, the tenant is responsible for any repairs, must insure the building and understands that typically the rent can only rise, not fall, after five years.
But as commercial real estate soars once again, banking is not driving the market as it did in the previous London cycle.
“The banks have been very much reduced in terms of occupancy needs, and what we see is the growth of other sectors,” said Peter Bennett, city surveyor for the City of London.
Driving this boom are business services and technology companies that are setting up or expanding their London bases. There is also considerable outside money, seeking the perceived security of hard assets in the British capital — whether pension funds from Norway, Canada and elsewhere or sovereign wealth funds from Asia and the Middle East.
Worldwide, sovereign wealth funds increased their direct investments in real estate to $21.6 billion last year, from $2.8 billion in 2010, according to Institutional Investor’s Sovereign Wealth Center. Britain received $9.4 billion of last year’s total — double the amount of the runner-up, the United States.
The money, Mr. Bennett said, used to come in national waves: the Americans, the Germans, the Japanese. “Now,” he said, “we have a tsunami of investors from all of the world all at the same time.”
As a result, the City of London, which generally refers to the square mile built by the Romans nearly 2,000 years ago, and which for centuries has been a center of banking and commerce, is now festooned with construction cranes.
New buildings, many with quirky, descriptive nicknames, have sprung up in the City in the last decade and others are still under construction. One of the newest is 122 Leadenhall Street, better known as the Cheesegrater for the distinctive wedge shape the architect, Richard Rogers, designed to avoid blocking the view of St. Paul’s Cathedral for neighboring buildings.
London’s other business “city,” where the HSBC tower sits, is Canary Wharf, the skyscraper park three and a half miles east of the more pedigreed City. It, too, is a magnet for foreign money.
Development of Canary Wharf, built on the site of former cargo docks, was begun in the late 1980s by a Canadian company, Olympia & York, which had the bad timing to be caught by one of London’s periodic real estate busts. Yet even though the initial development project went bankrupt in 1992, the next economic rebound, particularly in the financial industry, rekindled demand for office space.
HSBC was among the banking giants drawn to Canary Wharf for its modern, open space, which contrasted with the higgledy-piggledy layout of the centuries-old City.
HSBC commissioned Norman Foster to design its headquarters tower, on which it spent £500 million, and took up residence in 2002. Although architecturally nondescript compared with some of the nicknamed City icons, the tower is one of the largest single headquarters buildings in
Europe, with 1.1 million square feet.
But five years after HSBC moved in, with the credit-fueled finance industry at a fever pitch and commercial real estate starting to look very much like a bubble, bankers close to the company say HSBC decided it was “not in the property business.”
The bank decided to conduct a sale-leaseback, selling the building but taking out a lease as the tower’s main occupant — a setup that can be alluring to buyers, if the tenant is a reliable one.
In May 2007, HSBC found a ready buyer in an affiliate of Metrovacesa, a Spanish conglomerate with a big appetite for real estate even as some of the smarter money was growing wary.
The record £1.1 billion transaction involved HSBC’s leasing the building while also providing Metrovacesa with an £810 million loan to finance the purchase. When the debt-fueled real estate market began its tailspin a short time later, in a local version of the global vortex, Metrovacesa could not syndicate the loan.
By late 2008, with banks paralyzed and developers scrambling to clean up their own portfolios, the best prospective buyer looked to be the building’s anchor tenant and the Spanish company’s creditor, HSBC.
Negotiations went right up to midnight on a Tuesday in early December, a deadline the bank had set after Metrovacesa was unable to make a crucial loan payment. Having the upper hand, HSBC canceled the loan and took the building back, making £250 million.
But HSBC, under as much pressure as most other big banks during the depths of the financial crisis, was no more eager than it had been in 2007 to be in the real estate business. In late 2009, South Korea’s National Pension Service took the building off HSBC’s hands for even less than the bank had paid a year earlier: £773 million.
Nearly five years later, with London real estate red hot once more, the South Korean pension fund is eager to diversify its assets and realize some profits.
The tower could be alluring to a new owner because that same anchor tenant, HSBC, has 13 years remaining on its lease, and the rent will increase every year by 2.5 to 6 percent, depending on where the retail price index falls.
“The lease is completely unique and the building is attracting interest from billionaires, national pension funds and sovereign wealth funds,” said Andrew Hawkins, a director at JLL, one of the two brokers working on the sale.
Still, some analysts are skeptical that the price will break the £1.1 billion mark set in 2007, noting that Canary Wharf is well east of central London.
For all that, though, Mr. Blake of CBRE Global Research does not see a top yet to the current market.
“We are not at the end here,” he said. “We are only at the beginning.”
That could mean the HSBC tower, the litmus test of London real estate, might change hands yet again. At a price that will be a sign of the times
China firm buys Tallest Residential Tower in EuropeChina state-backed Greenland Group has snapped up the stalled site of Europe's tallest residential tower, in London's Canary Wharf financial district, after an earlier deal with an Irish group fell through.
Greenland confirmed on March 12, 2014 that it exchanged contracts with Commercial Estates Group to buy the Hertsmere site for ~£ 600 million.
The site has permission to build a 242-meter tall building containing 700 residential, offices and shops.
Hong Kong Monetary Authority set to play London Real
- London Metal Exchange purchased by Hong Kong Exchange & Clearing - Telegraph version
Foreign embassies abandoning elite London addresses
The stamp duty bill alone for the sale will come to £1,260,000
- Canadian High Commission Premises - Office & Residential - For Sale
- Foreigners leave units empty
- Empty Hamstead mansions
- "Unoccupied" tax being considered by Council
Kensington & Chelsea
- Spectacular Kensington home for sale - the head of Mercedes Benz's private home
- Regent Park
- Manse overlooking Hyde Park for sale
- £9m Mayfair apartment
- 45 bedrooms, bullet proof windows, Rutland Gate for £300 million
- Where Prices start at $80 million - the high end set
- New in Highgate's Bishops Avenue - not my cup of tea
- Artist studio in Kensington
Nearly a year and a half after it hit the market for a whopping $160 million, London's One Cornwall Terrace has sold to British property tycoon Marcus Cooper, according to The Sun.
He reportedly paid $120 million for the home, significantly less than its asking price. Even with the discount, it's a record price for a terraced home, The Sun reports.
The 21,500-square-foot mansion, near Regent's Park, is named after King George IV, who was originally the Duke Of Cornwall. It has seven bedrooms, nine bathrooms, and 11 reception rooms.
It was the official London residence of the New Zealand High Commissioner from 1955 until the 1970s, and was later occupied by squatters, according to The Sun.
But it later went a full restoration, and now includes a sports complex with an indoor swimming pool, iPad-controlled lighting, and a 40-meter landscaped garden.
Cooper, founder of Marcus Cooper Group, is a property developer in London whose portfolio includes residential and commercial properties throughout the city
Voracious investor demand for the best real estate in London
- The luxury shopping strip that is home to Prada, Louis Vuitton and Gucci provide low yields - just 2.75% presently on Bond Street.
- The current yield on Bond Street property is below the 10-year average of 3.7% and 5% yields on the best office blocks in London's financial distric and central Paris respectively.
- Office conversion to resi?
- Oxford purchase of Royal Exchange
SEPTEMBER 06, 2013
- Foreigners buy more than half of the new homes in Luxe market
- Prime Residential in high demand
- No less than nine separate property exhibitions featuring United Kingdom property investment opportunities take place in Singapore this weekend
Asians play Monopoly in London
- Hong Kong investors target prime retail
- Commercial Investments by Asians
- Asians love London
- Asian billionaires have doubled
- Geely buys maker of London Cabs
Rich students move into luxury UK digsThey are snapping up flats that bankers used to occupy
10 Jul 2012 09:40
[LONDON] Floor-to-ceiling windows, chairs by French designer Philippe Starck, four-poster beds and a short walk from the Louis Vuitton store on London's Bond Street.
These are no ordinary student digs.
Apartments for rent in London's most exclusive neighbourhoods have traditionally been the preserve of bankers.
As the potency of the financial sector wanes, they are increasingly let to children of the international super-rich studying at the city's universities.
"I chose the place and then asked my parents whether it was alright," said Sumiro, a 21-year-old Indonesian student who will be living alone in the £895 a week (S$1,763) two-bedroom apartment with the Philippe Starck chairs when he starts university in September.
Another attraction were his numerous friends living nearby, he said.
Unlike the stereotypical British students who squeeze into cramped flats and shop in budget stores, the offspring of the super- rich exhibit a taste for luxury furnishings, in-house gyms and cleaners that visit twice a week.
"They're looking for a hotel room," said Naomi Heaton, chief executive of residential fund manager London Central Portfolio (LCP), which has students from Russia, China and Saudi Arabia renting homes in an overall property portfolio worth £500 million. "Many of them would have experienced a fairly sophisticated lifestyle, travelling around the world business class. Their requirements are similar to that of corporate tenants."
Nadine, the daughter of a Lebanese businessman, laid out her accommodation requirements.
"We didn't want a typical British student pad, we wanted something quite big, quite decent, so that there would be space for our parents and friends when they visited," said Nadine, who lived in a £2,400 a month London flat while studying last year.
The rise of the wealthy foreign student comes as companies in the financial sector cut jobs and budgets, under pressure from shareholders and politicians.
At the same time, strong economic growth in China and other parts of Asia has created immense wealth, mainly fuelled by manufacturing, construction and commodities. The number of US dollar millionaires in Asia outnumbered North America for the first time in 2011.
It has led to a surge in demand from overseas buyers of the best London homes, seen by many as a sound investment.
Prices for the most sought after central London properties have risen about 44 per cent in the last three years, more than twice the increase across the capital as a whole, Knight Frank data shows.
"The wealth underpinning the student market is stronger than the wealth underpinning the corporate tenant market," Ms Heaton said.
Paris and New York are also popular student destinations. In February, Russian fertiliser oligarch Dmitry Rybolovlev paid US$88 million for New York's most expensive apartment, a penthouse the size of two-and-a-half tennis courts with views of Central Park, for his student daughter.
The previous owner was a banker - former Citigroup CEO Sandy Weill.
Parents keen to get the best located homes for their children are often prepared to outbid bankers, Ms Heaton said. They also sometimes pay a year's rent upfront as their children do not have a UK credit history.
LCP research showed that the proportion of homes in prime neighbourhoods such as Mayfair and Knightsbridge rented by international students doubled to 23 per cent in the six years to June 2012, becoming the second largest group behind the financial sector at 45 per cent.
"With the current rates of growth, international students would represent 50 per cent by 2020," LCP's head of investment Management, Hugh Best, told Reuters, saying that expansion in the financial sector was likely to plateau.
Job cuts among bankers caused prime London rents to fall for the first time in two years, property consultant Savills said on June 22.
Foreign students in the City of Westminster district, which includes some of the city's priciest streets, pay an average annual rent of £28,878, LCP said. By contrast, the average UK student paid £3,490 in 2011, data on UK website Accommodation for Students said.
About 26 per cent of London's students are from overseas, with China, India and Nigeria sending the most students to the UK between 2009 and 2011, data from the UK Council for International Student Affairs showed.
Bankers squeezed by cut budgets were eyeing moves to cheaper housing in less central London neighbourhoods such as Fulham or Bayswater, said Matthew Hobbs, who heads the lettings team at Savills's Kensington office.
"Instead of spending £1,000 a week, they're spending £800 a week. They're scaling back. You can rent a nice house in Islington for 80 per cent of what you can rent a nice house in Kensington for." - Reuters Published by Singapore Business Times
New UK Tax on Foreign Home Buyers
A hefty captial gains tax of up to 28% on any future flippings of homes in the U.K. begins in April 2015.
- Cornwall Terrace sold for £80 million
- Inside Cornwall Terrace - stunning!
- 5 % yield on Single Family
Localization: Creative Value-Adding
|Globe & Mail|