Hong Kong Tycoons Selling London West End Office to US REIT Realty Income for $162M

A private investment vehicle backed by some of Hong Kong’s biggest property tycoons is selling a prime office building in London’s St James’s district, as the city’s real estate investors continue to divest properties after being stung by slumps at home and in the UK.

Joint Treasure International, a fund backed by investors including New World Development’s Cheng family, Wharf Real Estate’s Woo family, and Far East Consortium International chairman David Chiu, is selling 3 St James’s Square to San Diego-based commercial property trust Realty Income, according to Savills. The US-listed REIT is said to be buying the asset for £125 million ($161.5 million), according to US media outlet CoStar.

The reported acquisition price represents a 19 percent discount from the £155 million asking price when Joint Treasure initially put the property up for sale in 2022, with the vehicle’s partners having reduced that price to £135 million in June.

Savills described the transaction as further evidence of “demand for large-scale assets across the risks spectrum”. Realty Income had not responded to Mingtiandi inquiries by the time of publication.

Posh Area

At the reported transaction price, Joint Treasure is selling the grade-A asset in London’s City of Westminster at £2,453 per square foot. The club of investors purchased the asset for £135 million from UK-based office investment fund Welput in 2017.

Situated a 15-minute walk from Buckingham Palace, 3 St James’s Square spans 50,954 square feet of floor space across nine floors and a basement level. The property is leased to media company Condé Nast as well as various investment firms, with the basement and ground floors currently vacant.

The 1934-vintage building currently commands average passing rents of £101.95 per square foot, according to marketing documents seen by Mingtiandi, with that rental price representing a 43 percent discount to average rents of over £180 per square foot in the St James’s area, where Singaporean state-owned investment firm Temasek, US private equity titan Carlyle Group, and Miami-based real estate investment firm Starwood Capital lease office space.

London’s West End area logged £790 million of office investment in the third quarter, representing a 20.4 percent decline from the prior quarter and 39 percent lower than the long-term average volume of £1.3 billion, according to Knight Frank. Office vacancy in the area averaged 7.8 percent in the third quarter, according to the consultancy.

Exclusive Club

Established in 2008 by the late former BNP Paribas banker Daniel Yiu as a private equity fund to invest in overseas properties on behalf of some of Hong Kong’s wealthiest families, Joint Treasure is said to have been backed by nine core investors at the time of the 3 St James’s Square acquisition, with backers free to opt into or out of the vehicle’s property purchases based on their preferences.

The fund’s investor roster also reportedly includes the Wee family of Singapore’s United Overseas Bank, Lee Seng Huang of Kuala Lumpur-listed property firm Mulpha International, Tom Chan from the founding family of Hong Kong textiles company Crocodile Garments, and Arthur Liang from a family who were once major shareholders of The Hongkong and Shanghai Hotels, which owns and operates the Peninsula hospitality brand.

Joint Treasure’s other investments included an 8-acre site in Beverly Hills which the fund acquired in 2010 for $148.3 million and sold to Wang Jianlin’s Dalian Wanda Group in 2014 for a reported $420 million, as well as the Marriott London Grosvenor Square hotel, which it picked up in 2014 for £125.2 million.

London Exodus

Joint Treasure is among a growing cohort of Hong Kong-based investors rushing to divest UK assets, marking a reversal from the influx of Asian investment into the British capital in the years leading up to the pandemic.

In September, Hong Kong developer Chinese Estates reportedly put up for sale a commercial and residential property at 11-12 St James’s Square after selling an office block at 14 St George Street in August, with both of those properties located in London’s West End area. The builder is also understood to be weighing an exit from its flagship office redevelopment project at 120 Fleet Street in the City of London, while the company’s former chairman Joseph Lau is said to be seeking £90 million for his Belgravia mansion.

HKEX-listed developer China Motor Bus Company in September agreed to sell the Albany House office block in London’s Westminster area to UK-based real estate and hospitality firm Integrity International Group for £47 million.

That deal came a month after Hong Kong investor Lai Wing-to sold a commercial building at 147-155 Wardour Street to Singapore-based fund manager HECapital for around £35 million. That same month, the veteran property player offloaded an office and retail building at 291 Oxford Street & 2 Harewood Place to JP Morgan for £71.4 million after having been reported earlier this year to be seeking a buyer for Standbrook House at 2-5 Old Bond Street.

In January, local developer and investor Oval Real Estate teamed up with US investment firm Elliott Management to acquire a set of 27 assets from Langham Estate, a sprawling collection of West End commercial and residential properties owned by Hong Kong property tycoon Samuel Tak Lee.