China Investment Corporation (CIC) is set to buy a London office project from Blackstone for more than US$1.28 billion (GBP 800 million) according to a report in the Financial Times.
CIC was first said to be in talks about acquiring Chiswick Park during December last year, however, discussions are now said to be in an advanced stage and a deal could be finalised before end of November according to the FT.
CIC Likes London
The deal for China’s $575 billion sovereign wealth fund to purchase the Chiswick Park business park in west London from the US private equity giant would be the second major purchase of London real estate by CIC.
The fund bought the London headquarters of investment bank Deutsche Bank last year for approximately £245 million ($392 million). During 2012 a CIC subsidiary also bought a $724 million stake in Heathrow Airport.
Blackstone Buys, Refinances and Sells to the Chinese
Blackstone bought Chiswick Park in 2011 for GBP 480 million and has since refinanced the project to begin construction of a seventh tower on the site.
The 33 acre campus style development serves as the European and UK headquarters for more than 20 companies, including Paramount Pictures, Discovery Channel and Tullow Oil. According to Savills, the leasing agent for Chiswick Park, the current vacancy level is 1 percent. Chiswick Park has 116,000 sqm of space (GFA) currently built, with another 51,000 sqm under development.
Blackstone originally tried to put Chiswick Park on the market last year at a price of US$1.3 billion, however, it subsequently reconsidered due to unfavourable market conditions. Earlier this year, the private equity firm raise a $960 million mezzanine round of financing to begin development of the 55,000 sqm seventh tower and to pay off existing debt.
Private Equity Firm Builds China Guanxi
During recent years Blackstone has increased its deals involving Chinese companies and taken steps to curry favour with the Chinese government.
Two weeks ago the private equity firm bought a forty percent stake in Chinese government linked mall developer SCP for a reported $400 million, and during August it acquired Hong Kong developer Tysan for $322 million, reportedly on the basis of Tysan’s extensive assets in China.
In April, Blackstone’s chairman, Stephen Schwarzman set up a $300 million scholarship fund at Beijing’s Tsinghua University in a move that was widely seen as effort to build ties with China’s government officials.