Chinachem Buys Deloitte London HQ From Landsec for $433M as UK Assets Maintain Appeal

Chinachem Group has acquired Deloitte’s headquarters building in the City of London for £349.5 million ($433 million), marking the Hong Kong developer’s second major property buy in the UK’s chief financial district in less than five months.

Chinachem purchased the 16-storey office tower, dubbed One New Street Square, from LSE-listed REIT Landsec, according to a Friday filing with the London Stock Exchange. Completed in 2016, the property is fully let to Deloitte on a lease expiring in 2036, with the Big Four accounting firm paying annual net rent of £16.8 million.

The deal follows Chinachem’s acquisition of another City landmark, the Kaleidoscope building, for £158.5 million ($182.5 million) last September. The latest trophy was “the best asset to hit the market in 2022”, said Nick Braybrook, partner and head of London capital markets at Knight Frank, which advised Landsec on the sale.

“Whilst the London market has had to adjust to rapidly rising interest rates as with so many other markets, it is a reminder that the best London assets can attract strong investor interest even in times of volatility,” Braybrook told Mingtiandi on Monday. “Chinachem now have two great assets in their London portfolio and I’m sure they will perform well going forward.”

Long-Term Holding

Chinachem’s acquisition price for the 276,502 square foot (25,688 square metre) office building represents a capital value of £1,264 ($1,565) per square foot. The consideration of £349.5 million is a 3.7 percent discount to a September 2022 valuation of £362.8 million for One New Street Square.

Upon completion, the building was the first in the world to achieve both BREEAM Outstanding and WELL Gold certification, Chinachem said in a release. It attained those credentials by featuring a biophilic design that incorporates 6,300 plants and 1,500 square feet of green walls, as well as landscaped terraces and other sustainability-focused amenities.

Deloitte leases a total of 485,000 square feet across One New Street Square and Two New Street Square at its campus just west of the Goldman Sachs head office at Shoe Lane and Farringdon Street. The accounting giant vacated two other buildings at the campus during the COVID-19 pandemic as staff shifted to remote work, according to the Financial Times.

“We’re delighted to have acquired One New Street Square as it is located in the strategic Central London area offering best-in-class building specifications and attractive returns,” said Chinachem executive director and CEO Donald Choi. “This is an important step forward for the group and we intend to hold the property as a long-term investment.”

Choi was quick to add that the developer’s recent moves did not signal a retrenchment from Hong Kong, where JLL reported that Grade A office rents fell 3.7 percent for the whole of 2022 as citywide vacancy climbed to 12.1 percent at year-end.

“While Hong Kong will remain our home and core market, we intend to incrementally increase the group’s exposure in gateway cities of major developed markets, so as to fulfil our business diversification objectives and build a resilient, long-term income stream,” the CEO said.

Eager Asian Buyers

Chinachem entered the London real estate market last year with its acquisition of the Kaleidoscope building near the Farringdon railway hub, about a 10-minute walk from the New Street Square campus.

The developer purchased the property at the corner of Lindsey Street and Charterhouse Street from local builder Helical at a price of £1,789 per square foot for the 88,580 square foot building, which houses TikTok’s London headquarters.

Following a medium-term strategic review announced in late 2020, Landsec has aimed to sell £2.5 billion worth of mature London offices. The trust has now sold £2.1 billion in assets, representing an average yield of 4.4 percent.

Those disposals included the £808.5 million sale of 21 Moorfields — Deutsche Bank’s London headquarters — to an investment vehicle managed by Australia’s Lendlease on behalf of TCorp, the financial markets partner of the New South Wales public sector. The September transaction marked the top office deal in central London by Asia Pacific-based capital in 2022, a year in which APAC investors dominated the local office market.

Last May, Landsec sold 32-50 Strand in the Charing Cross area to Singapore-listed Sinar Mas Land, with the developer controlled by Indonesia’s Widjaja family paying £195 million for the commercial building near Trafalgar Square.