Receivers appointed by creditors of Cheung Kei Group have wrested control of the former Bear Stearns headquarters on London’s Canary Wharf from the company, making it the latest asset to be seized from the troubled mainland conglomerate headed by tycoon Chen Hongtian.
Representatives of business advisory firm FTI Consulting were appointed as joint administrators and fixed charge receivers for companies holding the leasehold interest and management rights for the 12-storey office block at 5 Churchill Place, according to a statement by the company dated 23 May, after Cheung Kei had defaulted on debt secured by the asset.
Cheung Kei had been attempting to find a buyer for the 2009-vintage asset and another Canary Wharf office block for more than a year, with the company originally asking £260 million ($320.56 million) for 5 Churchill Place. Both assets had been used as collateral for loans which Cheung Kei failed to repay, according to an earlier account by Bloomberg citing sources familiar with the process.
With property values sliding in Europe and Asia, Cheung Kei and its chairman have now lost control over four major property assets so far this year, with the latest seizure coming after receivers earlier this month began marketing a luxury apartment at Opus Hong Kong previously owned by Chen, as well as the firm’s corporate headquarters in Kowloon.
Business as Usual
FTI Consulting’s senior managing directors Ali Khaki, Andrew Johnson and Aaron Gardner have been named as designated receivers for the companies holding 5 Churchill Place and its management contract. Another officer from the advisory firm, Matthew Callaghan, joins Khaki and Johnson as joint administrators.
The consulting firm said the existing property and asset managers, BNP Paribas Real Estate and JLL, will remain in place to ensure operations at the office block will continue to run smoothly.
The three companies will provide suppliers and tenants additional information and guidance on the administration process in the coming days, it said.
Cheung Kei acquired the asset in December 2017 for £270 million financed in part with a £175 million loan from Lloyd’s Bank, as well as with mezzanine debt extended by an international conglomerate.
While Lloyd’s is understood to no longer hold the majority of that initial loan, a report by Bloomberg in March showed creditors have previously attempted to sell the senior loan prior to its due date last month.
Mingtiandi understands that the property, which JLL started marketing in early 2022, received bids of around £200 million last year but Cheung Kei reportedly deemed that level of compensation insufficient.
Built in 2009, 5 Churchill Place is currently anchored by JPMorgan Chase & Co which took over the lease when it acquired Bear Stearns in 2008. The New York-based financial giant now occupies 10 floors of the 313,000 square foot (29,000 square metre) asset.
UK Expansion Flop
The property is located a few blocks away from 20 Canada Square, which Cheung Kei acquired as its first London asset in July 2017. The company has been trying to offload that 12-storey office block for at least two years, after putting it on the market at an initial asking price of £385 million.
Bloomberg reported earlier that the mainland firm had defaulted on debt linked to that property last October.
Marketed as a renovation and repositioning project, the 556,000 square foot building received an offer at a valuation of £365 million in 2021, but that deal fell through later that year, according to sources.
Cheung Kei acquired 20 Canada Square in July 2017 for £410 million partially financed by a separate £265.5 million loan it borrowed from Lloyd’s Bank, which no longer holds a significant position in that facility. JLL and Cheung Kei had not responded to queries from Mingtiandi by the time of publication, while Lloyd’s Bank declined to comment.
The mainland firm acquired the pair of Canary Wharf assets as part of a plan to set up a European asset management business as the company sought to profit from a wave of mainland investment into the UK. That plan was never realised.
HQ, Homes Seized Back
Previously based in Shenzhen, Cheung Kei now lists Hong Kong as its home base.
Its former headquarters in Kowloon’s Hung Hom area, once known as Cheung Kei Center, is now named One HarbourGate East Tower, after receivers representing the company’s creditors repossessed the building in March.
The 17-storey office block is currently being marketed for sale by Savills in a tender closing 28 August.
Also in March, Chen, who started in garment making in Guangdong province before building a portfolio of properties, saw his 5,154 square foot apartment on the fifth floor of Swire Properties’ Opus complex in the Mid-Levels seized by creditors. The five-bedroom unit, which he bought for HK$387 million in 2015, is now up for sale via a tender closing 8 August.
Lenders also took over Chen’s personal residence at 15 Gough Hill Road on Victoria Peak during March, after the billionaire had purchased the stand-alone home for a record HK$2.1 billion in 2016.