Bids for Chinese Estates London Property Said to Fall 35% Below Asking Price

Chinese Estates Holdings is said to have received bids as low as 35 percent below asking price for an office block in London’s West End, as the Hong Kong-based developer plans to divest one of its last remaining UK investment properties.

The HKEX-listed firm formerly chaired by fugitive tycoon Joseph Lau has received bids in the range of £130 million to £160 million ($164 million to $201 million) for 11-12 St James’s Square and 14-17 Ormond Yard, according to market sources who spoke with Mingtiandi. Those offers represent a discount of 20 percent to 35 percent from the reported £200 million that Chinese Estates had been seeking for the asset.

Chinese Estates is planning to offload the property as part of a retreat from the British capital, with the developer in August having sold the 14 St George Street office block in the West End. The company is also understood to be weighing an exit from its flagship office redevelopment at 120 Fleet Street in the City of London, while Lau has reportedly put his Belgravia mansion up for sale at an asking price of £90 million.

The company, which posted a HK$422 million loss in the first half of this year following a 93 percent plunge in annual net profit last year, said in its interim report that it will “continue to monitor and refine its (UK) asset portfolio at opportune times”. Chinese Estates had not responded to Mingtiandi inquiries by the time of publication.

14% Occupancy

The reported bid prices range from £1,578 to £1,942 on a per square foot basis, with market sources indicating that UK real estate investment manager Valesco Group is among the bidders. Valesco Group had not responded to Mingtiandi inquiries by the time of publication.

Situated a four-minute walk from the Piccadilly Circus Underground station, near the junction of St James’s Square and Duke of York Street, the grade A property comprises two adjoining buildings with a total net lettable area of 82,374 square feet (7,653 square metres) across six upper levels, the ground floor and a basement level.

Chinese Estates, which uses the ground floor as its UK office, acquired the freehold property in 2017 from Malaysia’s Employees’ Provident Wealth Fund for £175 million, with the value of the asset having fallen to £163.9 million in September 2021. The property’s occupancy averaged approximately 14.2 percent during the first half of the year.

Should a deal be consummated, the divestment would leave a retail, office and residential property at 61-67 Oxford Street and 11-14 Soho Street as Chinese Estates’ sole remaining investment property in London.

The company is reportedly also weighing an exit from its office redevelopment project at 120 Fleet Street in the City of London after having declared plans to invest £429 million in the property in 2022.

That project comprises the River Court office block, which served as the former European headquarters of Goldman Sachs, and the adjacent Daily Express Building, with Chinese Estates planning to redevelop River Court into a 21-storey tower with 540,800 square feet of office space and 18,600 square feet of retail space.

Demolition of River Court was completed in December, but construction stalled after Chinese Estates and contractor Lendlease reportedly failed to come to agreement on pricing.

London Exodus

Chinese Estates is among a growing cohort of Hong Kong-based investors rushing to divest UK assets amid property slumps both in London and at home, marking a reversal from the influx of Asian investment into the British capital in the years leading up to the pandemic.

Joint Treasure International, a fund backed by investors including New World Development’s Cheng family, Wharf Real Estate’s Woo family, and Far East Consortium International chairman David Chiu, earlier this month sold the 3 St James’s Square office block, located just steps from 11-12 St James’s Square, to US commercial REIT Realty Income for a reported £125 million.

In September, HKEX-listed developer China Motor Bus Company agreed to sell the Albany House office block in London’s Westminster area to UK-based real estate and hospitality firm Integrity International Group for £47 million.

That deal came a month after Hong Kong investor Lai Wing-to sold a commercial building at 147-155 Wardour Street to Singapore-based fund manager HECapital for around £35 million. In August the veteran property player offloaded an office and retail building at 291 Oxford Street & 2 Harewood Place to JP Morgan for £71.4 million after having been reported earlier this year to be seeking a buyer for Standbrook House at 2-5 Old Bond Street.

London’s West End logged £790 million of office investment in the third quarter, representing a 20.4 percent decline from the prior quarter and 39 percent lower than the long-term average volume of £1.3 billion, according to Knight Frank. Office vacancy in the area averaged 7.8 percent in the third quarter, according to the consultancy.