Cathay Life’s Woolgate Exchange purchase to trigger MetLife senior repayment

Cathay Life, one of Taiwan’s largest insurance firms, has gone under offer to buy Woolgate Exchange in the City of London for £320m, repaying MetLife’s senior which was refinanced only six months ago.

Cathay Life InsuranceCathay Life Insurance has agreed terms to buy Woolgate Exchange on Basinghall Street from TPG Capital and Ivanhoé Cambridge at a net initial yield of just over 5.1%, writes James Buckley.

The trophy acquisition, expected to close in the coming days, marks Cathay Life’s London real estate debut and after losing out to Gingko Tree Investments and Tishman Speyer on their joint venture purchase of Sainsbury’s UK headquarters at 33 Holborn for £310m earlier this year.

This acquisition by Cathay Life is also a first for a Taiwanese insurance firm and could be a forerunner of a new wave of property investors from the country, after the relaxation of previously prohibitive regulation for overseas investment.

Last April, Taiwan’s Financial Supervisory Commission lifted the restriction on domestic insurance companies acquiring overseas commercial property in an effort to ease yield compression within Taiwan.  In the capital Taipei, for example, prime office yields have tightened to between 2% to 2.5%.

CoStar News understands that the new regulatory framework for Taiwan’s overseas investments prohibits leverage which will trigger the early repayment of MetLife’s £164m interest-only five year senior loan, refinanced at the end of January to keep pace with tightening senior credit spreads.

Furthermore, only insurance companies with a risk-based capital ratio (RBC) at or above 200% are permitted to invest in foreign property; with a 10% cap on the amount they can spend overseas.

It is also expected that Taiwanese insurers will have to invest in wholly-owned buildings, rather than through joint ventures.

As a result, the pool of potential Taiwanese investors is expected to be restricted to the country’s largest institutions – which in addition to Cathay Life include Fubon Life, Shin Kong Life and Nan Shan Life.

Fubon Life Insurance, a subsidiary of the country’s second-biggest financial company, could be the next Taiwanese investor to move on London’s commercial property market with as much as £1.8bn earmarked for overseas acquisitions over the next five years.

Taiwan’s Financial Supervisory Commission has recommended Fubon to prioritise London, New York, Frankfurt, Ho Chi Minh City, Shanghai and Toronto.

TPG Capital and Ivanhoé Cambridge appointed Eastdil in May to sell the 340,000 sq ft Woolgate Exchange for £325m, reflecting a net initial yield of 5.06%, less than 18 months after buying the prime City trophy.

Achieving a sale price of £320m reflects prime City office yield compression alongside completed asset management initiatives.

Most recently NASDAQ OMX, the world’s largest exchange company, signed a deal to relocate its London headquarters to Woolgate Exchange, taking 31,000 sq ft on the third floor of the Basinghall Street building on a sub-lease from Portigon – previously West LB.

Also, around the time of TPG and Ivanhoé Cambridge’s acquisition, law firm Sidley Austin opted against moving out of the building instead of exercising a break option on 80,000 sq ft of office space. At the same time, Investec concluded negotiations to re-gear its lease over 30,000 sq ft at Woolgate Exchange.

As it stands the future occupancy of Portigon is unknown. The firm, which has a rent review next year, has a lease expiry in 2020 and subleases space to the likes of Sidley Austin, Investec, Navigant, CVS, Chicago Booth and Knight Frank.

TPG bought the legacy B-Loan then in turn TPG acquired Woolgate Exchange with Ivanhoé Cambridge in a joint venture.  It is understood that Ivanhoé Cambridge is the majority equity partner with around 95% to TPG’s 5%, although Ivanhoé’s capital is managed through a TPG separate account.

CBRE has the mandate to advise Cathay Life on its London acquisitions.

All parties declined to comment.

About CoStar News

Finance Editor, CoStar News
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