South Korea's National Pension Service (NPS) will sign an 800 million pounds ($1.33 billion) sale and leaseback deal next week for HSBC's European HQ in London, an official at the fund said on Friday.
The landmark deal, one of the world's largest individual property transactions this year, provides evidence of a startling turnaround in Britain's rebounding property market, where fears of a pricing bubble are already growing.
We are in talks to close (the deal) early next week, a spokesman for the NPS told Reuters by telephone, confirming weeks of speculation linking the world's fifth largest pension fund to the iconic skyscraper in the Canary Wharf financial district.
Europe's biggest bank HSBC last month agreed the sale and leaseback of its New York headquarters on Fifth Avenue for $330 million. It also plans to sell its premises on Champs Elysees in Paris as part of a plan to shore up its balance sheet in the wake of the global financial crisis.
HSBC declined to comment.
Shares in the bank jumped to their highest point in just over a year on Tuesday after it released an upbeat third-quarter trading update, including the trimming in losses on U.S. consumer loans for three years.
The bank's better-than-expected performance in the first half of the year had prompted some analysts to suggest it could ask consultant CB Richard Ellis to put the building sales on ice until the global economic recovery gathered pace.
However, cash-rich sovereign wealth funds and institutions have flocked to Britain's real estate market since prices finally hit a bottom in September, encouraging HSBC to take advantage of the spurt in demand.
HSBC first sold its Canary Wharf headquarters in 2007 for a record-breaking 1 billion pounds at the peak of the market and then bought it back at a 250 million pounds profit last December, Nomura property analyst Mike Prew told Reuters.
It's now reselling, this time in a quantitative-easing style boost to the market. It looks like HSBC is reading the UK real estate cycle better than the Real Estate Investment Trust (REIT) industry, Prew said.
The Maeil Business Newspaper reported that the South Korean pension fund had trumped Deutsche Securities to secure the purchase, and that HSBC would lease the building for the next 18 years, without citing a source.
NPS, with around $200 billion in assets, plans to invest $3 billion in real estate in Tokyo, Sydney, New York and London this year.
It leads a welter of Asian pension and sovereign wealth funds with large warchests on a shopping spree for choice office buildings in global financial centres, striking while there are bargains to be had following a slump in prices.
NPS appointed real estate investment manager Rockspring Property Investment Managers LLP in September to take charge of its central London property acquisitions strategy. [ID:nL4405102]
Last week, the pension fund announced 268 million pounds worth of office deals in London.
(Reporting by Kim Yeon-hee and Lee Soo-jung in Seoul and Sinead Cruise in London; Editing by Jonathan Hopfner and Mike Nesbit)