Korean fund ready to buy HSBC head office

Published 13th Nov 2009

South Korea’s £125 billion state pension fund is poised to buy HSBC’s head office building in London in an £800 million investment lunge for one of Canary Wharf’s foremost landmarks.

The deal, whose negotiations were first revealed by The Times in September, is expected to be signed early next week and follows about three months of talks and competition from several rival bidders.

The move marks by far the biggest play so far in what Korea’s National Pension Service (NPS) has said will be a $3 billion spending spree in London, Sydney, Paris and New York. The fund, bloated with about $16 billion profits from investment gains this year, is determined to invest its way out of traditional equity and bond assets and flex its muscles in post-financial crisis markets. Last week, the pension fund signed about £268 million worth of office deals in prime spots of central London.

The renewed boldness of the NPS echoes a more bullish tone across the South Korean economy, whose export strength has been flattered by the weakness of its currency, the won.

The NPS, which is among the top five largest pension funds in the world, is understood to have beaten Deutsche Securities to the deal; HSBC is expected to retain a lease on the building for at least another 18 years.

Banking analysts in Hong Kong said that HSBC’s sale of the property is significant but not surprising. HSBC, with its focus shifting east, is already considering the sale of other local headquarter buildings in New York and Paris: both in glittering locations.

HSBC publicly acknowledged this year that the global economy had made a “gravitational shift” towards Asia — a view reflected last night by the finance ministers of 21 Asia-Pacific nations gathering for summit talks in Singapore. It was Asia, the ministers agreed, that was leading the world from its worst financial crisis since the 1930s.

Singapopre's Finance Minister said that future patterns of economic demand would change forever and the world would no longer be so dependent on the US consumer.

HSBC’s 42-storey tower was bought for more than £1 billion by Metrovacesa of Spain in 2007 and was bought back by HSBC last year.

The South Korean fund's newly aggressive international appetite has further to run. It currently allocates 3.7 per cent of its assets to property and plans to raise that to above 5 per cent.

Source: ' Times '

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