ANALYSIS: 'Taiwanese investors competing with Koreans in London'

The recent acquisition by Taiwanese insurer Fubon Life of an office property in the City of London illustrates the advance by Asian investors in the UK capital and the growing competition between different Asian groups.

Fubon Life acquired the office complex at One Carter Lane in early November for £139 mln (€178 mln) from UK listed firm LondonMetric Property. The deal, reflecting an initial yield of 4.5%, marks Fubon's entry into the UK capital.

The insurer announced last year that it planned to inject around €2.5 bn in overseas properties after rules on insurers’ real estate investments were eased. It joins the growing ranks of international investors storming the capital.

Fubon Life is a unit of Fubon Financial, Taiwan’s second-biggest lender by market capitalisation, and one of five Taiwanese investors currently scouting London for investment opportunities.

‘There is a specific group of Taiwanese investors targeting London,’ said one analyst, who asked not to be identified. ‘There is not much to buy in Taiwan, so they are channelling their capital elsewhere.’ According to Andrew Thomas, a partner in the London market at C&W, Taiwanese investors have been scouting for investment opportunities in London ‘for a couple of years’. ‘They come to London first because it’s an easier market to enter than New York,’ he said. ‘Taiwanese investors are in competition with Korean investors – they are feeling their way through the market,’ said Thomas. Typically, they make up part of the ‘second tier capital’ looking to invest around £300 mln.

CATHAY LIFE
Rival Taiwanese insurer Cathay Life also entered the UK market this summer. In August, it snapped up the Woolgate Exchange office building in central London for around £320 mln. The 33,000 m2 property was sold by US private equity group TPG and Canadian group Ivanhoé Cambridge, which had acquired it in early 2013 for £265 mln. Woolgate Exchange is in the City of London financial district and is 100% let to Portigon Financial Services, with sub-tenants including Investec Asset Management, NASDAQ OMX, and the University of Chicago.

One property that might pique Fubon Life’s interest is CityPoint, an iconic landmark office building in London’s financial district that is believed to be ‘quietly available’, according to those who track the market. The 35-storey building is expected to appeal to a wide range of international investors, including Taiwanese and Chinese investors, and is expected to sell for around £600 mln.

International investors now far outpace their domestic counterparts in London. In the first three quarters of this year, there were £12.1 bn of office deals in Central London, broadly the same as the £12.16 bn in the same period last year, according to Cushman & Wakefield. However, this year, UK investors accounted for just 28% of deals, according to C&W.

SHIFT IN NATIONALITY
There has been a marked shift in the nationality of investors dominating the Central London scene in the past year. German investors, once so dominant in London, accounted for just 4.1% of deals in the first three quarters this year. They have rapidly been overtaken by US investors with 15.5%, Kuwaitis with 13.7%, Chinese investors with 10.9% and Singaporean investors with 3.9%, according to C&W.

One Carter Lane is a 129,000 sq ft (12,000 m2) office property opposite St Paul’s Cathedral. It is 73% let to MFS and SEB and the landlord is currently in negotiations with a potential tenant regarding the letting of the last two remaining floors. Under the terms of the deal with Fubon Life, LondonMetric will receive a non-refundable deposit of £6.94 mln. Completion of the sale is expected in January 2015.

The property was originally acquired in 2011 for £75 mln and LondonMetric has recently completed a comprehensive refurbishment at a net cost of £15 mln. LondonMetric was advised by Strutt & Parker and JLL. Fubon was represented by Savills.