The UK narrowly avoided crashing out of the EU without a trade deal last week, but London may still seem like a haven of stability to investors from places facing their own economic challenges, as Hong Kong developer K&K adds a pair of West End office buildings to its portfolio.
The private company founded by Bossini heir Raymond Law Ka-kui together with his son Kino Law has acquired Endeavour House on Shaftesbury Avenue and Corinthian House at 279 Tottenham Court Road in the British capital for a total of £180 million ($244 million), according to public records.
K&K’s dual purchase, which comes just one year after the developer made its first foray into the London market, makes it the second Hong Kong investor to make a major office acquisition in the West End in December, after Thomas Lau’s Lifestyle International announced its purchase of BP’s London headquarters for £250.1 million just a few days earlier.
Investing in the West End
K&K acquired Endeavour House, an 85,040 square foot (7,900 square metre) freehold property from Aberdeen Standard Investments for £115 million, securing with it the rights to the building’s annual rental income of £5.9 million derived from nine tenants.
At the purchase consideration, the Hong Kong investor is paying the equivalent of £1,352 per square foot for the 1982-vintage property and earning a net initial yield of 4.8 percent, according to an account in London’s Estates Gazette.
“Location is the major drive for the acquisition, given it is in close proximity to the Tottenham Court Road Station, which will be one of the major stations for the London Crossrail Project which connects from the East to the West of London,” said Gigi Wong, head of international capital at JLL in Hong Kong, which advised K&K on the purchases of the two assets.
Wong pointed out that the West End has undergone significant regeneration recently, and that both assets have some potential for enhancements which could boost returns for the buyer.
Less than a third of a mile (half a kilometre) north and west of Endeavour House, K&K is purchasing Corinthian House for £65 million from Deloitte, which is acting as administrator for Arcadia, the bankrupt parent company of the same-named fashion retailer.
The Law family vehicle is paying the equivalent of £1,869 per square foot for the freehold building, which was originally built in 1909 and renovated in 1997.
UK finance firm HBOS is signed up to occupy the retail element of the 37,000 square foot building for another 12 years, and K&K is purchasing Corinthian House at a 4.25 percent initial yield. The office leases on Corinthian House’s upper floors are set to expire in September next year, according to the Estates Gazette account, providing an opportunity for an upgrade.
Both properties are within a few minutes walk of Orion House, a 90,916 square foot office tower which K&K purchased from Sonny Kalsi’s BentallGreenOak last December for £130 million. Raymond Law’s brother, Law Kar Po, controls Singapore’s Park Hotel Group, which manages hospitality assets in Japan, China and five other countries, in addition to its hometown.
No Brexit Worries in Hong Kong
Although analysts have identified threats to Britain’s service industries from the recent trade pact with the European Union, Wong said the Brexit fallout has not dissuaded Asian buyers from investing in the London offices occupied by many of these legal, accounting and other professional firms.
“It has not been a major concern, given they feel that the effect would only be temporary, especially as the UK and EU have finally agreed to a deal that will define their future relationship,” Wong said.
That confidence is evident in Lifestyle International’s announcement on 18 December that it had agreed to purchase 1 St James’s Square in London from BP under a sale and leaseback agreement, which was also brokered by JLL.
BP will continue to occupy the 121,000 square foot office space for another two years after the deal closing, with the Hong Kong department store operator, which is controlled by the younger brother of Chinese Estates boss Joseph Lau, paying the equivalent of £2,067 per square foot for the asset in London’s Covent Garden neighbourhood.
1 St James’s Square is just over a half-mile from K&K’s most recent acquisitions, with Lifestyle International having first announced its plan to purchase the property at the end of October.