Ping An Insurance, China’s second largest insurance company, has financed its second major City of London prime office acquisition in 18 months, Tower Place, with a five-year senior loan for just above £210m from Lloyds Bank’s Commercial Banking division.
Ping An Insurance acquired from Tower Place from Deutsche Asset & Wealth Management’s open-ended real estate fund, the €4.1bn Grundbesitz Europa, for approximately £327m which reflected a net initial yield of just over 5% yield.
The sale price reflected a modest discount to the £330m asking price when the 378,521 sq ft office block came to market through CBRE last October.
Tower Place, which was Grundbesitz Europa’s largest single asset, is a fully stabilised prime office block 99.3% let, primarily to Marsh & McLennan as its UK headquarters which is around half way through a 25-year unexpired lease, expiring in 2028.
Lloyds would not comment on loan pricing or its distribution strategy.
However, in a statement, Madeleine McDougall Lloyds’ head of origination within the bank’s global corporate real estate business, said: “This agreement with Ping An Insurance, one of China’s major financial sponsors, represents our appetite to support major inward investment into UK real estate from global institutions.
“In this capacity, we can help international investors leverage our extensive expertise of the UK market. Tower Place is a landmark building in the City and a trophy asset.”
Ping An Life Insurance’ entry in the direct UK commercial property investment came in July 2013 with the £260m acquisition of the Lloyd’s Building from CLI Group, a subsidiary of German bank Commerzbank, reflecting a net initial yield of 6.25%.
The two prime City of London office acquisitions – 18 months apart – demonstrate a 125 basis points yield compression over the period. This spread could, in part, be indicative of a yield premium for Lloyd’s Building given the building’s Grade I listing – which protects the office block to the same degree as St Paul’s Cathedral.
The Sir Norman Foster-designed Tower Place was built by Tishman Speyer and completed in 2003. Ping An was advised by Gaw Capital; CBRE advised the Grundbesitz Europa fund.