Chinese Estates Marketing Office Block in London’s Mayfair for $172M

Chinese Estates Holdings has put up for sale an office block in London’s posh Mayfair area, as the developer formerly controlled by fugitive tycoon Joseph Lau seeks to shore up liquidity following a 93 percent net profit plunge last year.

Market sources told Mingtiandi that HKEX-listed Chinese Estates has appointed Colliers to market 14 St George Street at a guide price of £135 million ($171.5 million), eight years after the company acquired the freehold property from UK investment firm Aberdeen Asset Management for £121.7 million.

The developer is shopping the property after leasing revenue at its UK office properties declined 31 percent last year, which Chinese Estates attributed to the redevelopment and asset enhancement projects currently in progress in its London portfolio.

“In the United Kingdom, the Group is undergoing property redevelopment and asset enhancements for our investment properties located in the heart of London, and thus rental income will be affected,” Chinese Estates said in its latest annual report. “Looking into the year ahead, volatility and uncertainties are likely to remain in place. The Group is poised to meet challenges and seek opportunities for future growth.”

Heart of Mayfair

The asset’s guide price, which was first reported by UK’s React News, works out to £2,603 on a per square foot basis, representing a 10.9 percent premium to the £2,347 per square foot price paid by Chinese Estates to acquire the property in 2016.

Situated a 5-minute walk from both Bond Street and Oxford Circus Underground stations at the intersection of St George Street and Maddox Street in London’s West End district, the property has a net internal area of 51,861 square feet (4,818 square metres) across five floors and a lower ground level.

The asset is currently leased to two tenants at an estimated blended rent of £83.50 per square foot, including £130 per square foot on the top two floors, while the second floor is currently vacant and is being quoted at £130 per square foot. Average occupancy of the property last year stood at 98.5 percent, according to Chinese Estates’ annual report.

Those rental prices compare to average rents of over £180 per square foot in the St James’s area, where Chinese Estates also owns an 82,374 square foot office block at 11-12 St James’s Square. The developer acquired that property from Malaysia’s Employees’ Provident Wealth Fund for £175 million in 2017.

Other London assets in Chinese Estates’ investment portfolio include a retail, office and residential property at 61-67 Oxford Street, as well as a pair of office buildings at 120 Fleet Street, one of which is being redeveloped into a 540,800 square foot office and retail tower.

Lau’s brother Thomas has also invested in the London market with the 2020 purchase of the 1 St James’s Square office asset through his Hong Kong-listed department store operator Lifestyle International Holdings.

Retreat from London

Chinese Estates is the latest Hong Kong-based investor to put UK assets on the block 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.

Battered by high interest rates and the rise of remote working, London’s office market saw investment volume decline by 45 percent year-on-year in the first quarter, with the £1.3 billion in transactions during the period falling 62 percent below the 10-year quarterly average, according to Knight Frank.

In Hong Kong, values of grade-A office buildings have plunged 34 percent since 2019, according to JLL, while home prices fell to a seven-year low in the first quarter, down 23 percent from their 2021 peak.

This month, a private fund backed by a number of Hong Kong tycoons including New World Development’s Cheng family, Wharf Real Estate’s Woo family, and Far East Consortium International chairman David Chiu, cut the asking price for 3 St James’s Square, a grade-A office building located a 15-minute walk from 14 St George Street, by 13 percent. Far East Consortium also sold a pair of sites in Manchester last month for £17.24 million.

Earlier this year, Hong Kong property investor Lai Wing-to, known colloquially as the “Ten Billion Shop King”, began marketing a trio of commercial properties in the West End area known as the “Trinity Portfolio.” Those assets include Standbrook House, a 23,625 square foot property in the Bond Street luxury retail district that serves as the flagship store of luxury watchmaker Richard Mille.

In 2021, Pansy Ho, the eldest daughter of the late Macau casino tycoon Stanley Ho, sold 8 St James’s Square to German financial services firm Deka Immobilien Investment GmbH for £223 million after having purchased the property in 2017 for £213 million.