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Cathay Life to make £320m UK investment debut

The Taiwanese insurance company’s acquisition of Woolgate Exchange provides current owners TPG Capital and Ivanhoe Cambridge with an early exit.

Cathay Life, the Taiwanese insurance company, is poised to make its first UK office investment with the purchase of Woolgate Exchange for £320 million (€403.8 million; $542.6 million), according to multiple reports.

The sale also marks a quick exit for owners TPG Capital, the US private equity firm, and Canadian institutional investor Ivanhoé Cambridge, who acquired the asset 18 months ago.

A completed sale of the 340,000 square foot office on Basinghall Street in the City of would reflect a net initial yield of about 5.1 percent, 0.8 percent lower than the pair’s purchasing yield.

The acquisition is part of Cathay Life’s plans to expand its property investing footprint overseas and more broadly, it sits within a wider theme of Taiwanese insurers seeking to take advantage of favourable regulations adopted by the country’s government last year allowing for investment in the asset class internationally.

According to a report published earlier this month by CBRE, the property advisory firm, Taiwanese insurance companies are likely to be among the most active Asian institutional investors in overseas real estate markets. The firm said these insurers were influenced into investing offshore as a result of a lack of opportunities and low yields for the assets domestically.

Marc Giuffrida, executive director in CBRE’s global capital markets team, said in the report: “Given the low yield levels and the shortage of investable stock, particularly stabilized income producing assets in domestic markets, Asian insurance companies will have to explore opportunities in overseas markets.”

Indeed, it is understood that average yields for prime real estate in Taipei, the capital city of Taiwan, are between 2 percent and 2.5 percent, making the 5 percent-plus yield generated by its acquisition of Woolgate Exchange comparatively more attractive.