Sanctuary Buildings, SW1 acquired for £285m

South Korean investment firm has completed the acquisition of The Sanctuary Buildings, Victoria, London

January 25, 2019

The South Korean investment firm Hana Alternative Asset Management (the investment arm of Korea’s largest financial group, Hana Financial Group) has completed the acquisition of The Sanctuary Buildings, Victoria, London, SW1 from Blackstone Property Partners for £285m, reflecting a net initial yield of 4.2%.

Hana Alternative Asset Management assembled and led a Korean consortium consisting of Hana Financial Investment and Kiwoom Securities in the lead up to the acquisition.

The 225,485 sq ft freehold office building, located in Westminster, is let to the Secretary of State and underwritten by the UK Government, for a further 15 years without break at a passing rent of £12.1m per annum, representing £53.77 per sq ft. The property is fully occupied by the Department of Education, who has been in occupation since 1991. In mid-2018 the UK Government decided to extend the lease by a further 15 years as a result of the property’s strategic central Westminster location and proximity to the Houses of Parliament. The property was comprehensively refurbished in 2009 and the eight floors are arranged around a large central atrium.

Julian Sandbach, head of London capital markets at JLL, said: “The acquisition of the Sanctuary Buildings by Hana Alternative and their partners represents the first investment by a South Korean institution of a government-leased property. We have seen Korean investors become increasingly acquisitive over the course last year, with over £3bn of Korean capital invested into Central London in 2018, as they continue to seek assets with long and secure income streams.”

As part of the acquisition, JLL secured a £180m senior loan from Rothesay Life on competitive terms.  David Barry, senior director, JLL debt advisory, said: “Securing a debt package on The Sanctuary Buildings from Rothesay Life resulted in the Korean Consortium generating a strong cash-on-cash return in excess of 7%. The transaction represents the international demand from overseas investors for long-dated income supported by good covenants which can provide strong financial returns. Through the combined team approach of investment and debt within JLL capital markets, we have been able to successfully close the acquisition which meets the Korean consortiums required returns.”

Harish Haridas, head of commercial real estate debt, Rothesay Life, said, “Rothesay Life is delighted to have supported Hana and JLL on this acquisition. Commercial real estate loans backed by high quality collateral are an important component of Rothesay Life’s investment strategy.”

Steve Paik, general manager at Hana Alternative, who has been the driving force behind the acquisition from Hana Alternative said: “As soon as this deal came across me, I couldn’t resist in making sure that Hana Alternative be involved in it. Completing this deal meant a lot on a personal level as well as on a group level. It is worth highlighting that this acquisition is being considered one of many key global investments completed by Korean financial institutions to date. Going forward, Hana Alternative aims to become a global investment power house, recognised by many institutions globally, consistently increasing their presence all over the world, actively working alongside with the leading experts in the field as we have done in this deal. I envisage greater volume of capital being deployed from Korea, and for sure, you will get to see a lot of our involvements in the market globally.”

JLL acted on behalf of Hana Alternative with BCLP (Legal) and Colby Associates (Financial & Tax).  Blackstone Property Partners was represented by CBRE and Savills. Rothesay Life was advised by Ashurst.