UK office buildings emerge as good investment opportunities for Hong Kong investors amid anti-government protests, Brexit chaos

By Enoch Yiuenoch.yiu@scmp.com / https://www.scmp.com/business/article/3035295/uk-office-buildings-emerge-good-investment-opportunities-hong-kong?utm_medium=partner&utm_campaign=contentexchange&utm_source=EdgeProp | November 26, 2019 11:57 AM SGT
Office buildings in the United Kingdom have emerged as sound investment options amid the Brexit chaos for Hong Kong investors who, driven by the anti-government protests at home, are increasingly eyeing opportunities abroad, according to Ship Street Advisors, a Hong Kong-based real-estate investment company.
"While the vote for Britain to leave the European Union may have created a lot of uncertainties, it also led to a fall in the value of pound sterling, which has made UK property a lot more attractive," said Paul Li Man-hong, a private-equity investment manager at the company.
"We keep an eye on office buildings, as they deliver stable rental income. We target the acquisition of office buildings occupied by government officials, or companies that serve the local community, such as law firms. Government officials and such companies will not move out even after Brexit," Li said. Stable rental income can deliver a rental yield of between 6 per cent and 8 per cent per annum, he added.
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More Hong Kong investors are considering opportunities abroad, according to Ship Street, as a result of the more than year-long US-China trade war and five months of protests in the city.
Paul Li Man-hong, private-equity investment manager at Ship Street Advisors. Photo: Jonathan Wong alt=Paul Li Man-hong, private-equity investment manager at Ship Street Advisors. Photo: Jonathan Wong
The pound has devalued by 15 per cent against the US dollar and the Hong Kong dollar since the Brexit vote in June 2016, and Ship Street has since 2017 raised £46.4 million (US$59.6 million) to acquire one office building each in Aberdeen, Birmingham, Glasgow, Leeds, Newcastle, Nottingham, Sheffield and two in Cardiff.
Li said Ship Street did not invest in Central London as it was too expensive. Buildings in other UK cities were cheaper, in a price range of between £136 and £284 per sq ft, averaging around £190 per sq ft.
This range is also cheaper than Hong Kong, the world's most expensive property market, where prime commercial buildings touched HK$20,000 to HK$50,000 (US$2,550 to US$6,370) per sq ft, depending on location.
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Other investors, however, do favour the British capital. Victor Li Tzar-kuoi, who took over from his father, Li Ka-shing, the richest man in Hong Kong, as chairman of Hong Kong conglomerates CK Hutchison Holdings and CK Assets Holdings, mid last year acquired the UBS headquarters in London from GIC and British Land for £1 billion. The building, 5 Broadgate, a three-year-old property close to Liverpool Street railway station, has a total gross floor area of 1.2 million sq ft. The price worked out to about £833 per sq ft.
The company in August also announced it would pay £2.7 billion to buy the entire issued capital of Greene King, which operates 2,700 pubs, restaurants and hotels in the UK, in its biggest overseas deal in two years. The acquisition will also double its UK exposure.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2019 South China Morning Post Publishers Ltd. All rights reserved.
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Copyright (c) 2019. South China Morning Post Publishers Ltd. All rights reserved.