More evidence that Asian investors have their sights set on European assets, creating financing opportunities.
The purchase of the Leadenhall Building in the City of London – known as the Cheesegrater for its likeness to the kitchen utensil – provided further evidence that Asian investors have a huge appetite for prime European property.
CC Land, the Hong Kong-based firm which now owns the 46-storey skyscraper, paid a handsome £1.15 billion (€1.3 billion) in March – easily outbidding rival suitors according to market talk. The fall in the value of sterling has further encouraged a raft of Asian investors to snap up some of Europe’s most prominent real estate assets. A report by JLL showed that Asian buyers accounted for 28 percent of UK property transactions in 2016, up 17 percent on 2015.
The upsurge in activity by Asian investors presents an opportunity for Europe’s property lenders to deploy large volumes of debt. However, as the Cheesegrater deal shows, prospective lenders to Asian sponsors have an advantage if they have links in the region, or an existing relationship with the borrower.
Last week, it was announced that Bank of China (Hong Kong), HSBC and ING was the trio of banks that is financing the Leadenhall Building acquisition in a deal understood to reflect a circa 55 percent loan-to-value. A significant presence in the Asian market is the common theme between these lenders.
In their early forays into the European market, Asian investors relied on banking relationships from their domestic markets for the debt. Just as Asian banks in Europe have increased their financing of non-Asian sponsors, the Asian sponsors have broadened their banking relationships in the region. But those lenders with links in the Asian markets are likely to be favoured.
HSBC – or to give it its official name, the Hongkong and Shanghai Banking Corporation – is the largest bank in Hong Kong due to its history there. The bank has also been reported to have provided a loan to finance Hong Kong investor SEA Holdings’ recent purchase of the London HQ of HBOS, in a further indication of the value of its Hong Kong links.
Dutch bank ING also has a large presence in the region, through which the bank has won significant business. In 2016, for instance, representatives of ING’s Manila office are said to have made an early approach to local billionaire Andrew Tan after he bought the Torre Espacio skyscraper in Madrid, leading to ING eventually financing the deal with a €280 million loan. Partly due to its Asian network, ING has also engaged in significant syndication activity, bringing banks from Korea, Japan and China into major European financing deals such as those for the Gherkin and the Salesforce Tower in London.
As tends to be the case in deals involving Asian sponsors, the Cheesegrater financing deal is shrouded in secrecy. The word on the market is that the deal was very much forged in Hong Kong, with the local branches of each lender heavily involved, even though the execution was reportedly passed to London.
Core Asian buyers show no signs of letting up. The recently agreed purchase of Blackstone’s European warehouse platform, Logicor, by China Investment Corporation for €12.25 billion was perhaps the clearest sign that Asian capital is focused on European property in what is a relatively late-cycle, stabilised sector. The primary beneficiaries on the lending side will be those who already have a track record with players from the region.