Blackstone is selling its London waterfront complex to a Singapore group for £395m

Blackstone has sold a £395million waterfront office complex near the Tower of London to a Singaporean investor who said the UK turmoil had created a buying opportunity.

St. Katharine Docks, a 185-berth office, retail and marina complex in the East City of London, has been acquired by City Developments Ltd, the Singapore-based real estate group led by billionaire investor Kwek Leng Beng.

The transaction comes at a difficult time for commercial real estate investors. Rising interest rates have pushed property valuations lower, and some property funds managed by several big investors, including Blackstone, have limited withdrawals when investors pull out.

The UK was hit particularly hard by last year’s ‘mini’ budget, which caused interest rates to rise sharply and shook investor confidence in the UK.

“The current uncertainty in the UK has presented us with strategic opportunities to acquire quality assets and expand our portfolio,” said Sherman Kwek, chief executive of City Developments. He said the company is confident in Britain’s long-term economic prospects.

The pound hit a record low against the US dollar after September’s ‘mini’ budget. It has since recovered from those lows but remains 9% lower year-on-year against the dollar, making UK assets better value for dollar-based international investors.

Zachary Gauge, head of real estate research at UBS Asset Management, said UK real estate “appears cheap relative to other global markets” following a sharp drop in valuations late last year.

Blackstone said foreign investors were temporarily put off by the turmoil but pent-up demand and lower sterling asset prices could attract buyers this year. “When I speak to investors from Asia, I think they see an attractive entry point into sterling,” said James Seppala, Blackstone’s head of real estate for Europe.

“My impression is that global capital may have paused for part of the fourth quarter, but that pause could well lead to a rebound in activity throughout 2023,” he added.

The 23-acre complex near the base of Tower Bridge, which takes its name from a 12th-century hospital built on the site, was the most valuable asset of Nick Leslau’s Max Property Group, which Blackstone acquired in 2014 and privatized. It spans 451,000 square feet of office space leased to tenants such as WeWork and Northeastern University and attracts nearly 6 million visitors each year.

Blackstone estimated the purchase of St Katharine Docks cost around £300million as part of the broader deal for Max’s portfolio. It is part of his fourth fund, Blackstone Real Estate Partners Europe, which raised €6.7 billion from institutional investors in 2013.

Blackstone is one of the world’s largest real estate investors with a global portfolio worth US$577 billion and around €120 billion in Europe, of which 13 percent consists of offices.

The deal takes City Developments’ UK portfolio to more than £1bn. It owns two other office buildings in the capital.