CK Asset in Talks to Buy $920M London Project From Capco

Hong Kong billionaire property developer Li Ka-Shing’s CK Asset Holdings is in talks with a partner in a joint venture that owns Earls Court, a 3.4 million square foot (374,000 square meter) estate in west London to purchase a majority stake in the district which has been valued at £700 million ($914.48 million).

Capital & Counties Properties (Capco) confirmed in a statement released yesterday in London that it has received proposals with regard to its interest in the property which it is considering, including “discussions with CK Asset Holdings Limited regarding a conditional proposal for the sale of substantially all of Capco’s interests in Earls Court Properties (excluding the Lillie Square joint venture).”

Should CK Asset, which is now helmed by Li Ka-shing’s oldest son, Victor, follow through on the potential acquisition, it would make a quick follow-up the company’s £1 billion June purchase of the UBS headquarters in London amid a surge of UK property deals by Hong Kong investors in 2018.

CK Asset Buys Rapidly Depreciating London Project

Although Capco has not revealed financial specifics of the discussions, an account in Bloomberg citing sources familiar with the transaction said that CK Asset proposes to purchase 90 percent of the west London site which straddles the Royal Borough of Kensington and Chelsea in the UK capital and is approved for construction of 7,500 homes.

Capco owns a 63 percent stake in the former site of the Earls Court Exhibition Centres, along with adjoining properties, through a joint venture with public transit unit Transport for London. The joint venture holds a 999 year lease on the property, with Capco responsible for business and development of the site. Ownership of the site involves titles to a number of separate parcels, according to Bloomberg, some of which Capco owns jointly with other investors.

The high-end London developer, has already cleared land on the site after a decade-long preparation process, according to an account in the Estates Gazette. The company may be motivated to make a sale by a recent slide in value for the west London project, as home prices in the UK capital continue to decline this year.

The developer had estimated the value of its Earl Court site at £1.4 billion ($1.83 billion) in December 2015, then downgraded that to £1.2 billion ($1.57 billion)in its interim results last year. It had revalued the site at £759 million ($991.56 million) by December, following the sale of the Empress State Building to the Mayor’s Office for Policing and Crime. As of June 2018, the company has adjusted the site’s valuation to £700 million as shown on its website.

Capco noted in its most recent annual report that it was looking to “bring forward developments through the introduction of third-party capital.”

Capco had entered into a joint venture with the Kwok Family Interests, the family office of Sun Hung Kai Property’s Kwok family, to develop Lillie Square in Earls Court in 2011 and this year has been busy selling apartments in ‘9 Lillie Square’, the fourth block within the second phase of that project.

CK Asset Wants More of London

In June, CK Asset bought 5 Broadgate, which houses UBS’s London headquarters, from GIC and British Land for £1 billion ($1.3 billion), one month after Victor Li took the reins of the developer built by his father, Li Ka-Shing.

Many of the developer’s friends and competitors have also been active in the UK this year, with privately owned Nan Fung last month buying a majority stake in Endurance Land to up its exposure in the United Kingdom.

In September, Sun Hung Kai teamed up with Irish developer Ballymore to take over a pair of sites in the Isle of Dogs area on London’s East End for £50.8 million ($66.6 million) as the seed for a £1 billion residential project, and in June, Hong Kong’s Lai Sun Group won approval to develop a 56-storey office tower on London’s Leadenhall Street, after tycoon Peter Lam’s textiles-to-property group had purchased a pair of existing properties on the same block as London’s Gherkin office tower in 2014 and 2015.

Despite Brexit fears, London remains a top destination for real estate buyers globally, with Asian investors in particular snapping up assets. Just last week Singapore-listed developer CDL acquired a prime office tower in London from Blackstone for £385 million ($493.99 million), knocking £45 million ($57.74 million) off the asking price.