China Resources Land has made its first major overseas investment, partnering with a European REIT to acquire a trophy office building in the City of London for £300 million ($384.6 million). The Shenzhen-based, Hong-Kong listed property developer teamed up with NorthStar Realty Europe to purchase the fully leased property from AXA Investment Managers, according to an announcement last week.
The property, 20 Gresham Street, is located near St Paul’s Cathedral and the Bank of England in London’s financial district and offers 242,807 square feet (22,558 square metres) of office space. NorthStar invested £26 million (approximately $34 million) by way of preferred equity and will retain a 20 percent stake in the project, according to local media accounts.
The acquisition by the state-run firm, which was China’s 10th largest developer by sales in 2016, is the latest in a series of London real estate investment commitments by mainland and Hong Kong players totalling over $4.7 billion in the last four months.
China Resources Land Heads Overseas for the First Time
AXA Investment Managers, a global multi-asset investor with 717 billion euros ($754.5 billion) of assets under management as of year-end 2016, purchased the property on behalf of a client in March 2011 for £200m. In February AXA had instructed global property consultancy Cushman & Wakefield to put the Kohn Pedersen Fox-designed office block back on the market. The seven-story building, which was completed in 2008, is fully leased to legal and financial services heavyweights including anchor tenant ICBC Standard Bank, TSB Bank, Sacker & Partners, and TLT.
The deal was done at a net initial yield of about 4.1 percent, however, the partners see opportunity to potentially improve on that return. “20 Gresham Street is a highly desirable building with a prime location in London and we feel confident there is significant opportunity to add value and drive strong returns through a number of pro-active initiatives,” NorthStar Realty Europe Chief Executive Officer Mahbod Nia said in a statement.
$4.7 Bil in Chinese Deals in London Since February 1st
China Resources Land joins a string of Hong Kong and mainland investors in betting on the London property market this year. The month of May saw a series of major deals in the British capital, starting with Hong Kong’s Chinese Estates buying a high-end commercial building in London’s West End for ₤174.9 million ($227 million).
Also in May, Hong Kong’s Kwok Family Interests took a 50 percent stake in a £500 million ($644 million), 804-unit condo project in east London’s docklands. SEA Holdings was the latest Hong Kong investor to join the fray this month, purchasing 33 Old Broad Street, a nine-storey building in the City of London, for £258 million ($334.4 million).
The Kwoks’ Hong Kong rival Henry Cheng Kar-shun, chairman of Hong Kong’s New World Development, in February committed £1 billion ($1.25 billion) to a mixed-use apartment, office and hotel development in London via his privately held vehicle Knight Dragon, making himself the largest Chinese investor in Britain since last year’s Brexit vote.
Cheng’s time at the top of London’s big buyer table was brief, however, with Chongqing-based CC Land surpassing the Hong Kong tycoon’s development project with the $1.42 purchase of London’s “Cheesegrater” office tower just one month later.
Mainland developer Guangzhou R&F made two major investments in London within a two-week period this March and April, picking up a 2.2 hectare residential site in the British capital for $74.8 million, followed by its buy of the mixed-use Vauxhall Square development for £157.7 million ($196 million).
Several other mainland and Hong Kong acquisitions have also been made in London since the first of February, including Chinese Estates’ chairman Joseph Lau’s ₤174.9 million ($227 million) purchase of a building on St James Square earlier this month.
Beijing-headquartered China Resources Land, a unit of state-owned giant China Resources, operates in 56 cities across China. The company’s investment portfolio spans 5.5 million square metres of properties in operation, including 22 shopping malls as of the end of last year. The developer reported annual revenue of HK$109.33 billion in 2016, growing 5.2 percent year-on-year.