Tuesday, December 1, 2015

Ho Bee Land - Acquisition of Prime Office Building in London

I recently updated Ho Bee Q3 results here for those who are interested in the counter.
 
 
 
 
Today, they once again made an announcement that they have made their 6th acquisition of prime office building in London. It is a freehold property named Apollo House and Lunar House located at Croydon, London and they were purchased for a total consideration of £99 million, which is equivalent to about S$210 million.
 
The good thing about the property is they have a long WALE lease currently let out to the British government until 2023. The current rent reflects a very low average rent of £12.50 psf, which they believe is highly reversionary once the annual rent review is done at the end of the year. This represents a net property yield of 5.35% which is set to go up over time.
 
The management has not provided further details about how they were going to fund the acquisition, but since internal funds are limited, most should come from borrowings. Already, they have a net gearing of 0.50x prior to this announcement. This is set to go up once the acquisition is completed. Given their ability to cover the interest coverage sufficiently, I am not yet worried about their high borrowings.
 
Ho Bee's strategy remains clear and it appears they are going aggressive on building up their investment properties which will now ballooned up to more than S$3 billion once the acquisition is completed. This appears to be the way going forward that they are going for more recurring income in the midst of these global slowdown.
 
 
 

2 comments:

  1. it looks like their long-term prospect is really great. In the recent years, the Chinese and middle eastern are buying London properties inflated the real estate prices here. I wonder if it did the same to these skyscraper? Nonetheless, they would still making a huge profit with the government contracts.

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    Replies
    1. Hi Vivianne

      I wonder if the smart money if all flowing back to the US now given that the Dollar is going to go up shortly. Pounds certainly are an attraction, which then leads to a property glut there.

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