Sauce maker Lee Kum Kee Group is the latest Hong Kong investor to stir up the London real estate market, buying a landmark office tower in the City of London for £1.3 billion ($1.7 billion), the highest price ever paid for a single commercial building in the British capital.
The real estate arm of the oyster sauce titan has agreed to purchase 20 Fenchurch Street, known as the Walkie Talkie building for its distinctive bulbous shape, from a pair of British property firms. The deal is expected to be completed by August.
The transaction creates a major presence for Lee Kum Kee in the London property landscape after the company bought an office building near the Canary Wharf district for £37 million last December.
Hong Kong Sauce Maker Scoops Up London’s Priciest Office
LKK Health Products Group, a member of Lee Kum Kee Group, announced that its wholly-owned subsidiary, Infinitus Property Investment, will purchase the the 37-storey complex from British commercial developers Land Securities Group (Landsec) and Canary Wharf Group, which each hold a 50 percent stake in the property, with an eye to future returns.
“The acquisition enables the Group to not only achieve a reasonable return from rental income, but also extend its property portfolio to a major overseas financial center for sustainable and stable capital appreciation,” the statement noted. “As such, the property will be held by the Group as a long-term investment.”
Completed in 2014, the 688,000 square foot tower in London’s traditional financial district is the sixth-tallest building in the UK, providing 671,000 square feet (62,338 square metres) of office space plus a 17,000 square foot (1,579 square metre) retail component. The property also features the Sky Garden, a three-storey glass dome offering wraparound views of the city. The office space is fully leased to tenants including insurers Markel Corporation and Liberty Mutual, with an average remaining lease term of 13 years.
Developed by a joint venture between Landsec and Canary Wharf, the building is noted for its unusual top-heavy shape in which the highest floors are the largest and most valuable. Canary Wharf manages its 50 percent stake on behalf of investors including sovereign wealth funds China Investment Corporation and Qatar Investment Authority, as well as Canada’s Brookfield and Morgan Stanley Real Estate Investing.
Landsec was not actively marketing its stake in the property but was convinced to sell based on the exceptional price it could bring. The transaction will allow Landsec to return about £475 million ($622 million) to shareholders, according to a statement by the company.
The building’s total selling price easily tops London’s previous record, Qatar Investment Authority’s purchase of HSBC Tower at 8 Canada Square for £1.1 billion ($1.7 billion) in December 2014.
UK Capital Gets Even Hotter
Asian investors continue to pile into the London property market, attracted by a weaker British pound and unfazed by the political ructions touched off by last year’s Brexit vote. The City of London saw approximately £5 billion ($6.5 billion) of commercial real estate investment in the first six months of 2017, jumping 17 percent year-on-year, according to data from property consultancy Savills. Asian buyers accounted for 50 percent of the total.
The Walkie Talkie deal comes in the same week that Shenzhen’s Cheung Kei Group scooped up 20 Canada Square, a 12-storey Canary Wharf office building, for £410 million ($530 million).
The deal also continues a string of London real estate investments by Hong Kong firms including SEA Holdings, Kwok Family Interests, Chinese Estates and New World Development, bringing the total value of their investments in the city to $3.8 billion this year.
Mainlanders have also made their presence felt in the big smoke, with Chongqing-based developer CC Land this past March agreeing to acquire the Leadenhall Building, the city’s tallest skyscraper, for $1.42 billion.
Oyster Sauce Maker Builds a Tasty Portfolio
Lee Kum Kee, a venerable Hong Kong company best known for its sauces and condiments, made its first London play last December by picking up an office building close to Canary Wharf, 3 Harbour Exchange, for £37 million ($46.6 million). This past May, the group was reported to be eyeing a bid for 30 St Mary Axe, a City of London landmark also known as the Gherkin tower, even though the property was not on sale.
The group has also been active in property investment in Hong Kong and mainland China. In December 2015, a unit of Lee Kum Kee partnered with developer China Vanke to buy the Corporate Avenue 3 building in Shanghai for RMB 5.7 billion ($885 million). The Hong Kong firm took a 90 percent stake in the building, which it renamed as Infinitus Tower.