SEA Holdings has become the latest in a string of Hong Kong investors to wager on London’s property market, agreeing to purchase a nine-storey office building in the British capital for £258 million ($334.4 million), the company confirmed this week. A unit of the Hong Kong-listed firm reached a sale and purchase agreement with private equity real estate shop Evans Randall to acquire 33 Old Broad Street, a 191,000 square foot (17,744 metre) office building in the City of London financial district.
The deal marks the second London foray for SEA, which last November picked up 20 Moorgate, a prime City of London office property let to the Bank of England, through subsidiary Asian Growth Properties for £155 million ($192 million). SEA, chaired by Lu Wing Chi, develops and invests in office, retail and residential properties in Hong Kong and mainland China, and operates hotels in Hong Kong.
Hong Kong Investor Encouraged By London Rental Income
“The Acquisition is an excellent opportunity for the Company to acquire a high quality commercial property at a prime location in the City of London with a stable rental income,” SEA Holdings announced to the Hong Kong Stock Exchange. “The Board considers that the Acquisition would enable the Group to achieve a reasonable return from rental income and provides an excellent opportunity for the Group to expand its property portfolio by the addition of overseas properties with a view to maximizing its value for the Shareholders.”
Thirty-three Old Broad Street is let entirely to the Bank of Scotland, serving as the City of London headquarters of banking and insurance firm HBOS, which along with Bank of Scotland is a subsidiary of Lloyds Banking Group. The high-spec property is estimated to generate a current rental income of £10.3 million (approximately $13.4 million) per year, equating to £53.92 ($69.94) per square foot. It is located at 33-41 Old Broad Street, a short walk from the Liverpool Street Underground station and from SEA’s previous London acquisition 20 Moorgate in the heart of the City of London business district.
Built in 1997 by British developer Helical Bar (now Helical), the property was sold to Evan Randall in 2006 for £197 million ($364 million). In November 2015, the wealthy Tsai family of Taiwanese financial services colossus Fubon Financial reportedly agreed to terms to acquire the property, but the deal did not close. SEA’s recent acquisition was made through its wholly-owned subsidiary Business Empire Investments Limited.
Undaunted, Hong Kong Investors Dive into London
The deal by SEA Holdings comes on the heels of a series of London acquisitions by Hong Kong property tycoons, who are benefiting from a relatively weak pound (despite a recent modest rise against the dollar), and are apparently undaunted by the political uncertainty in Britain amidst Brexit worries and the upcoming snap general election.
Last week, it was reported that Hong Kong’s Kwok Family Interests agreed to take a 50 percent stake in a £500 million ($644 million) condo project in east London’s docklands. The Kwok family, which controls blue-chip developer Sun Hung Kai, is joining Irish developer Ballymore to build Goodluck Hope, an 804-unit residential project that also includes commercial and educational space.
Earlier this month, Hong Kong billionaire Joseph Lau’s Chinese Estates bought a high-end commercial building in London’s West End from the Employees’ Provident Wealth Fund of Malaysia for ₤174.9 million ($227 million). The developer was able to snap up the property, 1-12 St James’s Square, for $13 million less than what the seller paid for it in August 2011, thanks to the pound’s devaluation against the dollar.
This past February, New World Development chairman Henry Cheng Kar-shun became the biggest single Chinese investor in the UK following last year’s Brexit vote by committing £1 billion ($1.25 billion) to a mixed-use apartment, office and hotel development, known as Peninsula Place, via his privately held vehicle Knight Dragon.