South Korean investors on track to invest £4bn in UK real estate this year [corrected]

South Korean investment in UK real estate in the first half of this year was already more than double the level recorded in the whole of 2017, according to Cushman & Wakefield.

The real estate consultancy said £1.1bn (€1.24bn) of property had been acquired by South Korean investors in the first six months of 2018, well above the £530m invested the year before.

Cushman & Wakefield said investment volumes were “set to continue to increase significantly for the remainder of the year”.

Four deals accounted for more than £1bn of real estate, all in central London, the largest of which was the £340m acquisition of 20 Old Bailey by Mirae Asset Global Investments.

The other three – Korea Investment Securities’ purchase of 70 Mark Lane, Samsung SRA’s acquisition of 200 Aldersgate, and the purchase of Cannon Bridge House by Mirae Asset Daewoo and NH Investment & Securities – all exceeded £200m.

The level of South Korean investment seen this year is comparable with that of Hong Kong (£1.73bn) and Chinese (£1.2bn) investors, and ahead of Singapore investors (£842m).

South Korean investor appetite looks set to continue in the second half of 2018, as KAIM OBO Hana Financial Group had already purchased Gallagher Retail Park outside Walsall for £172m in July, Cushman & Wakefield said.

Last year, the largest of seven South Korean investment deals was for Sainsbury’s Hams Hall in Birmingham, which was bought for £104m by Kiwoom Securities and KB Securities.

In contrast, there was only a single completed deal in 2016, for £127m, and no activity in 2015.

Cushman & Wakefield said the increased activity over recent years was a result of regulatory changes that have encouraged outward investment. The Capital Markets Act of 2015 kick-started the process and opened up the market to more potential capital.

Jonghan Kim, who specialises in advising firms from South Korea for Cushman & Wakefield’s EMEA capital markets team, said: “The Koreans have only started to buy again in London in 2018 as there had been concerns on the impact on the UK market following the vote to leave the EU.

“This was coupled with the fact that continental Europe was performing well and had exceptionally low costs of finance.

“Hedging premiums have also played a factor. As a result, the focus was on major continental centres such as Paris, Brussels and the German cities.

“However, the UK has come back on the agenda in 2018 in a big way as yields start to show relative value compared to other mainland European locations.

“I would not be surprised if total investment from Korea surpassed £4bn for 2018, which is remarkable when compared to 2017 levels.”

South Korean funds have also invested in the leisure sector in the first half of 2018, purchasing stakes in well-known hotel brands including JW Marriott and London Hilton on Park Lane.

This trend looks to be continuing as a number of investors are still looking for the mezzanine tranches of capital in hotels across Europe and the UK.

Argie Taylor, head of Asia-Pacific cross-border capital markets at Cushman & Wakefield, said: “In the past, a lot of Korean investment at the equity end of the capital stack has gone to the US and Australian markets, but today there is little or no arbitrage gain with financing, further strengthening the weight of equity coming to Europe.

”Korean return hurdles are achievable across Europe, whether inside the eurozone or not, and therefore we expect to see Korean capital continuing to be a major investor group in both UK and European markets.”

A previous version of this article wrongly listed The Dorchester as a hotel brand which had received investment. It was due to an error at source.

Related images

  • FG Valesco Cannon Bridge House

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