A Hong Kong family office has reportedly made its first solo property acquisition in London, defying the pandemic to snap up a commercial building next to oyster sauce maker Lee Kum Kee Group’s £1.3 billion ($1.6 billion) Walkie Talkie building.
Hong Kong-listed Chuang’s Consortium International and Chuang’s China Investments, which had owned 10 Fenchurch Street jointly, announced on Sunday that they are selling the office block for £94.2 million to UK-registered entity Retain Prosper Limited.
A person familiar with the matter has indicated to Mingtiandi that Retain Prosper Limited is an affiliate of Mighty Divine, an investment firm reported to represent mainland Chinese high net worth families.
The sale to the investment firm based out of the Cheung Kong Centre in Central comes three and a half years after the two listed units of Chuang’s Group had purchased the property from Standard Life for £80 million in November 2016.
The companies said in a joint stock exchange announcement that they are disposing of the asset after having adopted a “cash is king” strategy amid the macro-economic uncertainties wrought by COVID-19 and the UK’s unresolved regulatory, labour and trade relationships with the European Union in the wake of Brexit.
Cashing in a London Investment
“The Chuang’s China board considers that the disposal represents a good opportunity for Chuang’s China Group to lock in its return on the property and enhance its cash position under the current situation,” the companies said in a statement.
Located at 6–12 Fenchurch Street and 1 Philpot Lane, the 11-storey office building is on a major thoroughfare through the City of London financial district and is a three minute walk from the Monument Underground station.
Based on the building’s gross floor area of 77,652 square feet (7,214 square metres), Mighty Divine has agreed to pay £1,213 per square foot for the 1983-vintage property.
Tenanted by insurers HDI Global and Atradius, together with healthcare recruitment company Sugarman Group, the property generated an annual rental income for the financial year ended 31 March 2019 of £4.2 million.
Mighty Divine has secured the deal by paying a deposit of £9.4 million, with the balance payable on completion, which is expected to take place in four months.
The family office, which is also licensed to trade on the securities and futures market in Hong Kong, is said by local UK media to have invested in other properties in London as a silent partner, although this is the first time the low profile firm has been revealed to have acquired an asset on its own.
The investment vehicle has also shown a taste for Hong Kong real estate, including purchasing a 104,136 square foot commercial tower on Kimberley Road in Tsim Sha Tsui from Henderson Land for HK$2.5 billion ($320 million) in July 2018, when the project was still being completed, according to a source who spoke to Mingtiandi.
Buying in a Downturn
The family office is making its acquisition of 10 Fenchurch Street at a time when COVID-19 has emptied offices across London and investors have stayed away from the City’s high-priced commercial assets.
According to the latest figures supplied by Savills, buyers spent just £478 million purchasing commercial property the City during March – a 72 percent drop from the £1.7 billion invested during the same month last year.
Although the property consultancy has yet to report evidence of asset owners dropping prices in the UK capital, the firm did indicate that some deals fell through during March, including Blackstone said to have withdrawn a reported £380 million offer to buy 25 Cabot Square on Canary Wharf from Hines during April.
In early March Singapore’s ARA Asset Management also pulled out of a deal to acquire a 50 percent stake in a £900 million London mixed-use development, as reported in Bloomberg and confirmed by a source familiar with the matter who spoke to Mingtiandi.
London Deals Dry Up
Prior to the spread of COVID-19 to Europe, Asian players had acquired several London properties during the first two months of the year, with investors encouraged by the finalising of the UK’s divorce from Europe.
The most high profile of these transactions came in January when the family office of Cheung Chung Kiu, the chairman of mainland developer CC Land, paid £210 million for a house in Knightsbridge – the highest price ever for a residential property in the Big Smoke.