A £1 billion ($1.5 billion) project to build a centre for Chinese businesses in London is facing an uncertain future after Beijing-based Advanced Business Park’s primary financial backer announced this week that it was putting its investment in the redevelopment of the Royal Albert Docks on hold.
The project, which promotes itself under the tagline, “London is getting a new heart,” now appears to be on life support after mainland private equity firm China Minsheng Investment said this week that it is putting its participation on hold.
The Royal Albert Docks project aimed to build a new business district in London catering to Chinese companies setting up offices in Europe. With its future now in question, Advanced Business Park’s £1 billion baby joins a growing list of cross-border Chinese real estate projects that have failed to move forward.
Chinese Partners Fail to Come to Terms on London Project
China Minsheng and Advanced Business Park had signed a preliminary agreement in February for the private equity firm, which is said to manage $8 billion in funds, to be the primary backer of the scheme to build offices, housing and shops on the 14 hectare (35 acre) site.
Now, however, Minsheng says that the two sides have been unable to move forward with the agreement after failing to come to terms over ownership stakes, according to a report in the Wall Street Journal. There were also concerns over spiralling development costs, estimates of which had rocketed by 30 percent since the cooperation agreement was announced, said an account in the South China Morning Post.
In its statement, China Minsheng held out hope that the two sides could still reach some agreement over the project. Advanced Business Park, however, seems ready to move on. On October 9th, Advanced’s chairman, Xu Weiping, told the Hong Kong media that his company would announce a new strategic investor in London this week.
When Advanced Business Park, which is a medium-sized developer of office parks on the mainland, first secured the Royal Albert Docks site in 2013, observers familiar with the company and with the London market, questioned the viability of the modest-sized company taking on a project of this scale as its maiden overseas effort.
Royal Albert Docks Project the Latest Cross-Border Real Estate Fail?
With its future appearing uncertain Advanced Business Park’s London Project risks joining a growing list of ambitious overseas ventures by Chinese real estate developers, including Dalian Wanda and Beijing Vantone, that have been shut down or scaled back in recent months.
In late September New York authorities approved a request by Beijing Vantone to cut back its New York project, The China Center, by 85 percent after the developer was unable to fill the space it planned to rent at Manhattan’s One World Trade Center.
Vantone’s China Center, which like the Royal Albert Docks project, had been promoted as an overseas home for Chinese companies, will now occupy just one floor of space in the New York tower, rather than the four floors it had signed up for in 2009.
Also last month, Wang Jianlin’s Dalian Wanda announced that it would close its New York office after the developer had failed to make progress on its plans to establish projects in the city. In 2013, Wang who has built his company into China’s most valuable commercial developer, announced that Wanda would soon develop a US$1 billion five star hotel project in New York. However, the billionaire’s comments at the time that “failure would be their tuition,” seemed prescient after the company failed to secure a site for the planned project over two years time.
In March this year, a £500 million ($772 million) plan for a Chinese developer to rebuild London’s famed Crystal Palace fizzled out after 16 months of delay. The privately held Shanghai developer Zhongrong Group failed to come up with a detailed plan for the project in time to meet local government deadlines.