Korean Money Heating Up As Asian Investors Take A Punt On Dublin
It may still be in legals, but the successful bidder on No. 2 Dublin Landings is widely assumed to be a Korean investment fund, reflecting a growing appetite among Asian investors for core assets in the capital.
Since the start of the year, an increased number of Asian investors from a variety of locations have been looking at the Dublin market, JLL Ireland CEO John Moran said. “The newest entrants into the market are the South Koreans, who are probably some of the warmest money around at the moment," he said. "There has always been a bit of Singaporean capital floating around, although it comes in slightly different guises. Sometimes it’s backing other people or using different vehicles.”
So is this just a one off, or is Dublin firmly on the radar of Asian investors?
The European market in general has seen an increased interest from Asian investors, CBRE Head of Investment Properties Johnny Horgan said. “In their local markets, yields are 2.5/3% so they’re looking to increase their exposure internationally,” he said. “They have become very active in Europe and they like Ireland due to the pricing, lease terms, the income and the growth of the market here. And there’s a positive currency hedge at play.”
The high number of tech occupiers in Dublin is also attractive. “It’s advantageous from a currency perspective, all underpinned by the strong occupier fundamentals that exist here,” Moran said. “A lot of investors have seen the calibre of tenants taking space at the moment and decided this is a market they must be in.”
Interestingly, it’s not always easy to identify the sources of the Korean money. “They tend to use asset managers as their platform for entry into markets,” Moran said. “Sometimes it can be quite hard to navigate back to where the money is really coming from.”
Changing investor profile
The nature of Asian investment in Dublin has evolved in the last year, having previously tended to be development-led. For example, Singaporean property developer Oxley Holdings is Ballymore’s backer on the five-block Dublin Landings scheme on North Wall Quay.
And Hines partnered with Hong Kong-based real estate investment company Peterson Group to buy the Central Bank building on Dame Street and 2 Grand Parade in Dublin 6 at the beginning of 2017. The two acquisitions — bought for a combined €104M — were Peterson Group’s first in Ireland. While the Grand Parade building is fully let to Amazon, WeWork has recently signed up to pre-let all the office space at Central Plaza, which is now being redeveloped and is scheduled to be ready for occupation at the end of 2019.
Irish-Singaporean investment company Fine Grain Property, meanwhile, has focused on business parks, industrial zones and logistics hubs.
Dublin Landings – Part 1
Real interest in investment assets from Asia — and particularly Korea — was sparked with the placement on the market last October of No. 1 Dublin Landings, a 149K SF, 10-storey building pre-let to the National Treasury Management Agency on a 25-year term for just over €7M per annum.
CBRE and Knight Frank were the joint selling agents on the block, which, according to Horgan, ticked many of the boxes for Asian investors: government income, good lot size and a new building.
“I did a trip around Singapore, Hong Kong and Korea, met a lot of people and we got five bids from Asia on the back of that,” he said. “That was the first time people underwrote the deal, decided they liked Ireland and came and actually bid.”
Despite this interest, the successful bidder was German fund manager Patrizia, through its Triuva subsidiary, which paid €164M for the building.
The 226K SF Eir HQ building next to Heuston Station was sold earlier this year to Hong Kong-based Hutchison Group for €176M in an off-market deal. While the lease on the building runs until 2033, Eir is understood to be in advanced negotiations with AIB to sublet a substantial portion of the office space.
The purchase earlier this year of the Beckett Building on East Wall Road by Seoul-headquartered Kookmin Bank for €101M was the first large scale acquisition in Dublin by a Korean investor. The 188K SF building was sold by the Comer Group, which apparently paid €5M for it in 2013.
Facebook signed up to a 15-year lease in 2017 after the building had been vacant since its completion in 2007. The new tenant would have been a big selling point, Horgan said. “Korea is a very knowledge-based economy so when they see an occupier like Facebook it’s something they can relate to.”
Dublin Landings – Part 2
No. 2 Dublin Landings was put on the market at the beginning of June. It is understood that five Korean investors were involved in the bidding for the 100K SF block, which is fully let to WeWork on a 20-year lease with no break options.
The winning bidder is reported to be a South Korean institutional investor that has agreed to pay around €105M for the asset, more than €6M higher than the asking price.
Asian interest in Dublin seems unlikely to wane any time soon. “The hardest part was always getting them to look at Dublin in the first place,” Horgan said. “They’ve overcome that now.”
Large offices have been the main target for these investors to date and that is expected to continue. “You’d expect pretty strong Asian interest in any significant office investment that’s going to come to the market in due course,” Moran said.
Going forward, Johnny Ronan's Spencer Place scheme could well pique Asian interest if Salesforce ends up taking all 500K SF of office space — if it comes to market.