China’s Outbound Ambitions Not Done Yet as Beijing Builder Eyes $204M London Prize

Beijing Zhaotai Group is poised to make its first foray into the British property market, as the mainland developer is in talks to buy a prime City of London commercial building for £145 million ($204 million), according to a report.

The Beijing-based builder is negotiating an off-market deal to acquire 45 Cannon Street, a 90,000 square foot (8,361 square metre) office and retail development, from Morgan Capital Partners, real estate information provider CoStar News reported.

Property brokerage Cushman & Wakefield is believed to be advising Beijing Zhaotai on the transaction, which is said to reflect a yield of 4.1 percent. CC Land – the Chinese buyer of London’s “Cheesegrater” office tower – previously bid to buy 45 Cannon Street at a lower price which would have provided a yield of 4.25 percent, but that offer was rejected, according to CoStar.

Beijing Zhaotai Poised to Land in London

The eight-storey building designed by architects Fletcher Priest provides 84,600 square feet of office space along with terraces, restaurant and retail space.

Europe-focussed property investor AOG Real Estate partnered with its London-based asset and development manager Morgan Capital Partners to redevelop the former 67,000 square foot building at 45 Cannon Street, after acquiring it in 2010.

The refurbished property, which is located opposite the Mansion House underground station and a short walk to St Paul’s Cathedral, was launched in July of last year ahead of its scheduled completion. A combined 53,000 square feet of office space has been leased to Canadian fintech firms Global Relay and OpenText.

Beijing Zhaotai has been eyeing the London real estate market for a while. The company is said to have negotiated to buy the Cursitor Building, a grade A office property at 38 Chancery Lane in London’s Midtown area, but the deal did not progress, according to CoStar.

Founded in 1992, Beijing Zhaotai has grown into a more than $11 billion conglomerate with interests in real estate, petroleum, trade, retail and health care. The company chaired by Mu Qiru had a 3 million square metre portfolio of commercial and residential properties in operation and under construction as of 2014, according to its corporate website.

Beijing Zhaotai’s projects include U-Town Plaza, a 380,000 square metre mixed-use complex in Beijing’s Chaoyang district; Fortune Time Mansion, an office building in the city’s financial street; and Shuijingtang Alley, a tourism property in the western Chinese city of Chengdu.

City of London Market Still Going Strong

Asian property investors are bullish on the City of London, with brokerage Savills having estimated that the financial district soaked up £12.6 billion ($16.9 billion) of total commercial real estate capital in 2017, double the 10-year average. Buyers from Hong Kong and mainland China accounted for 31.5 percent and five percent of the activity, respectively.

According to Savills, this past January saw a further £443.4 million across six transactions in the City, up nearly 50 percent year-on-year. Asian investors including Hong Kong-listed Fujian-based firm Hao Tian Development Group, which bought the Corn Exchange Building for £130 million, accounted for three out of the six transactions during the month.

The agency also reported that around £2.7 billion worth of opportunities were on the market, some £500 million of which have gone under offer since the start of the year. In February, a unit of Samsung scooped up 200 Aldersgate, a 434,000 square foot office building in the City of London for a reported £320 million ($457 million).