Hong Kong developer Chinachem Group has taken its expansion spree international with the £158 million ($186.2 million) purchase of TikTok’s London headquarters as its first British acquisition, according to a report by the UK’s React News.
Just one week after it was revealed that the privately held firm was making its initial venture into the logistics market by taking a 49 percent stake in a $1.4 billion ESR project in Hong Kong’s Kwai Chung area, Chinachem is buying the Kaleidoscope, a six-storey office building in central London’s Farringdon area after the online video service leased the whole building early last year.
At the reported consideration, Chinachem is paying about £1,782 per square foot for the 2019-vintage building’s 88,680 square feet (8,239 square metres) of office space above a single retail floor, after local developer Helical had reportedly put the property on the market in January at £180 million.
Chinachem’s UK purchase reignites Asian acquisitions of London office assets after an early 2022 surge which included Singapore-based Ho Bee Land purchasing the Scalpel office tower in the City of London for £718 million in February after Hong Kong’s K&K Property had purchased commercial building at 15 Adam Street for £66.1 million just a few weeks earlier.
Sellers Get Flexible
With Chinachem picking up the property on the corner of Lindsey Street and Charterhouse Street at a 12 percent discount from the seller’s asking price, the transaction could demonstrate a buying window for investors with available cash. Representatives from Chinachem did not comment on the deal when contacted by Mingtiandi.
“The purchase represents a big vote of confidence in the London office market,” said Ciarán Londra, a partner at law firm Bryan Cave Leighton Paisner in Singapore who specialises in real estate transactions.
“The transaction price, which has been reported as being under the seller’s asking, shows that there is currently flexibility in the London office market, making this a perhaps once in a cycle opportunity for certain investors to come in over the coming period, such as family offices amongst others,” said Londra.
TikTok made it easy for Helical to market the project after it signed a 15-year lease for the building in March 2021, with the tenant having a option to exit the deal for the property atop the Farringdon Elizabeth Line station after a decade. The division of Chinese tech giant Bytedance, agreed to pay a blended rent of £86 per square foot of area per month for the project, and was granted a 24-month rent free period, Savills said in an office leasing report last year.
The mainland video giant is said to be eyeing still further expansion in London, having this March announced that it would lease another 100,000 square feet of office space at Moor Place, which is within a 15-minute walk of the Kaleidoscope.
With the acquisition of the Kaleidoscope Chinachem extends its recent expansion and acquires its first property outside of its home city.
Founded more than 60 years ago by a Shanghai merchant family, the company has been one of Hong Kong’s largest builders since the 1970s, and is currently redeveloping the Central Market on Des Voeux Road as it expands its commercial portfolio.
In April of this year the developer picked up its third Hong Kong site in 15 months when it won a government tender for a commercial site near the city’s international airport with a $350 million bid. In May of last year Chinachem had teamed up with local competitor Hysan Development to acquire a commercial site in the Causeway Bay area in separate government tender for $2.6 billion.
The company’s portfolio includes office buildings such as the Chinachem Tower on Connaught Road in Central; the Fanling Town Centre in the New Territories, as well as other shopping malls and the Harbour Industrial Centre on Ap Lei Chau island, among other properties.
Asia Loves London
“London is a safe haven for capital,” said Londra. “It’s got excellent liquidity, and relatively high yields compared to other jurisdictions, particularly compared to Hong Kong and Singapore.”
Chinachem is making its London entrance after Asian outbound commercial real estate investment reached $54.6 billion in 2021, which was up 69 percent from a year earlier and surpassed 2019’s pre-pandemic level, according to data from CBRE.
While full year tallies for 2022 will have to wait for a few months longer, Asian investors nabbed a number of London assets during the first half of 2022, in addition to the Ho Bee and K&K deals.
In February, Hong Kong’s Chevalier International Holdings agreed to buy an office building at 30 King Street in the City of London from the BBC Pension Trust for £45.9 million, and during that same month Singapore’s Sun Venture completed its acquisition of a freehold office building at 120 Moorgate in central London from WeWork Capital Advisors for £148 million.