The National Pension Service of Korea (NPS), Korea’s preeminent state investor, has sold a landmark office property in London to the Qatar Investment Authority (QIA) in a rare example of one state investment fund selling to another.
Investment bank JPMorgan Asset Management announced today it had advised the NPS on its sale of the 1 million square foot office, without revealing a price. Advisors Jones Lang LaSalle and GM Real Estate were appointed earlier this year to sell the property reportedly for above £1.1 billion (€1.385 billion; $1.7 billion).
Besides its size, it is a significant deal as rarely does one state investment fund sell large real estate assets to another, particularly so shortly after acquiring it. NPS purchased 8 Canada Square in 2009, as the property markets were reeling from the effects of the global financial crisis, in a transaction valued at £772.5 million – implying it will make a handsome profit from its disposal.
Nonetheless, most large state investors are widely expected to retain their property assets for long-term income production purposes. Further, they have not been expected to transfer large trophy assets in gateway cities such as London, given how fiercely sought after they are, and not to other state investors. Indeed, 8 Canada Square was marketed by JLL and GM Real Estate to more than 50 investors across 14 cities in just 10 days, according to JPMorgan, such was the immense interest in the building.
Bradley Larsen, co-head of European acquisitions for JP Morgan Asset Management, said: “By design, NPS capitalised on the cyclicality of the global real estate capital market by timing their entry into the London market at or near its nadir. We are delighted that NPS has been rewarded with an outstanding risk-adjusted return. Qatar Investment Authority is buying one of London’s premier core office assets with a long-term lease to a high credit tenant, HSBC. ”
Long known as the HSBC Tower, construction began just before the millennium and the office was officially opened in April 2003 for the owner-occupying investment bank. HSBC sold the tower to Spanish property company Metrovacesa for a then-record for a single building sale price of more than £1 billion in April 2007. However, after facing financial troubles, Metrovacesa sold it back to HSBC little more than a year later in a deal that led to it claiming it had made a £250 million profit on the sale and subsequent repurchase. HSBC later sold the asset to NPS in November 2009 for £772.5 million.
Berwin Leighton Paisner and Deloitte also advised NPS on the sale.
The sale of 8 Canada Square comes as Canary Wharf major landlord Songbird Estates has just been the subject of a hostile takeover bid by the QIA. In tandem with global investment manager Brookfield Asset Management, a major shareholder of the Canary Wharft Group, in which Songbird owns a majority stake, the QIA has attempted to wrestle control of the £2.5 billion, AIM-listed firm, from its other notable stakeholders, including another large state investment fund, the China Investment Corporation.