Hong Kong Dept Store Owner Closes In on $307M Buy of BP’s London HQ

Hong Kong-listed Lifestyle International Holdings is close to signing a deal to purchase BP’s London headquarters at posh 1 St James’s Square for a reported £235 million ($307 million), as investors from the Asian financial hub continue to favour London assets.

In a 29 October notice to the Hong Kong stock exchange, department store operator Lifestyle International said it had agreed with “the seller” to the purchase “of a commercial property in London”, without providing further specifics. The potential sale was originally reported in The Times at the end of August, and comes as the UK oil giant looks to make efficiencies in light of a downturn in global crude prices and its own transition to greener energy and remote work.

While Lifestyle International cautioned that no deal has been agreed to at this time, should the acquisition be completed at the reported terms it would bring acquisitions of London properties by Hong Kong investors to nearly £1 billion this year, despite the COVID-19 pandemic and growing turmoil around Brexit.

According to Lifestyle’s announcement, if completed the purchase of the 120,000 square foot (11,150 square metre) office building will include a leaseback agreement with BP for up to two years. No further details were revealed due to the private nature of the sale. BP purchased the building in 2001 for £117 million, according to Bloomberg.

Retail Giant Explores Property Safe Haven

The low-rise office building is located on historic St James’s Square in the City of Westminster and marks the first UK real estate acquisition by Thomas Lau’s firm, which is best known in Hong Kong for operating Sogo department stores in locations like Tsim Sha Tsui and Causeway Bay.

Lau is the brother of billionaire investor and developer Joseph Lau, whose Chinese Estates Holdings purchased 11-12 St James’s Square in London, a few doors down from his younger sibling’s prospective prize, for ₤175 million in 2017.

In May of this year, Lifestyle International announced to the Hong Kong stock exchange that it had invested around £50 million to purchase a stake in UK developer and investor Land Securities.

BP Adjusts to the Oil Slide

As the pandemic-inspired work-from-home trend exerted its influence on the commercial real estate sector and traditional work patterns, UK media reported in August that BP would be adopting flexible work practices and reducing staff. The company adopted that approach as offices across the globe emptied out in March and April and have yet to fully recover: only 13 percent of London workers were back in their offices in August, The Times said.

BP’s third-quarter results reported losses of $500 million — an improvement on the second quarter’s gruesome $16.8 billion in losses. The energy sector has had a rough go of it in 2020, with the COVID-19 crisis lowering crude oil prices from $60 a barrel in January to around $39 on Thursday due to travel restrictions and plummeting demand. At mid-year, nearly 20 energy companies had filed for bankruptcy protection in the US.

Hong Kong Capital Keeps Flowing Into UK

Hong Kong investors have stayed bullish on UK property in recent years, both before and after Brexit, thanks to a favourable currency play, and COVID has done little to dissuade SAR investors from continuing to pour money into British assets. That pattern will likely continue until the end of 2020, JLL theorised in July.

Link REIT in July made one of the largest real estate investments in London this year when it purchased 25 Cabot Square in Canary Wharf, home of Morgan Stanley’s European headquarters, from Hines Global REIT for £371.4 million.

The family office of Hong Kong-based property billionaire Cheung Chung Kiu started off 2020 by purchasing a 45-room mansion in Knightsbridge, also in London’s West End, for £210 million.

Then in February, Far East Consortium picked up a 49,213 square foot Canary Wharf residential development site for just over £28 million, following the Hong Kong developer’s July 2019 eight-hectare purchase of a site in Manchester. And in June, Hong Kong investor Tenacity Group purchased 20 Farringdon Street for £121 million.