Hwa Hong took a 71.39% interest in Garrett Property Holdings (GPH) for a nominal value of £71.39 (S$123.90), with the remaining shares held by unrelated parties including Langland Estates Ltd (UK) and Steptwice Company. GPH in turn owns property investment firm Capital Garrett, which has signed agreements with two unrelated third parties to acquire a freehold property at 20 Garrett Street, London for £18.5 million.
The acquisition was an off-market transaction and was completed on Friday. It will be funded by a combination of bank loans and internal cash sources. The property has a total lettable floor area of about 17,500 square feet and comprises office accommodation over three floors and a lower ground floor.
It is fully leased until September 2029 with upward-only rent reviews in September 2019 and 2024. It produces an annual gross rental income of about £610,000 translating to £35 per square foot which is considered "low", Hwa Hong said.
The passing rent presents a discount of about 30% to current estimated market rents for similar buildings in the area and represents room for rental increases. The area in the borough of Hackney, where the property is located, is commonly referred to as East London Tech City or Silicon Roundabout as it is London's main technology cluster with more than 1,000 technology companies located there.
The Old Street area is popular with both startup technology companies as well as established technology and media companies such as Adobe and CBS Corporation.
Hwa Hong said the acquisition allows it to expand its commercial property portfolio in London and is in line with the group's strategy to seek value-add opportunities in the central London commercial property market for recurrent rental income and capital appreciation. It also plans to raise rentals in the upcoming rent review process in 2019.
Hwa Hong expects the acquisition to be accretive to the group's earnings per share at current levels of rent, although not very significantly. Its shares last closed at S$0.285 on the stock market on Thursday.
"Adapted from The Straits Times, 22 Dec 2018."