A stalled $1 billion London project planned by China’s Dalian Wanda Group has received timely financing after the Chinese developer’s plans suffered recent setbacks including a plunge in local property sales and having the Anglo-Chinese joint venture selected to build the landmark tower walk away from the deal in April.
Dalian Wanda Group, which acquired the long-delayed One Nine Elms project in 2013 has secured a £500m ($659 million) loan from Ping An Bank, a branch of one of China’s biggest financial groups, which is intended to see construction of the 200-metre tower through to its planned completion in 2019, according to statement by the developer.
The new financing, which comes as other developers in the area are being forced to cut prices on new housing by as much as 20 percent, allowed Wanda to bring on board British contractor Balfour Beatty to oversee construction of the two-tower complex which will include 439 homes and a 5-star Wanda Vista hotel.
Mainland Bank Helps Out Chinese Developer in London
“We are pleased to announce the arrangement of financing for One Nine Elms, which will support the successful delivery of this important mixed-use development,” said Tim Gawthorn, director at Wanda One UK. “On completion, One Nine Elms will bring high-quality residential apartments, a five-star Wanda Vista hotel, world-class amenities and public spaces for the community to enjoy.”
Mainland banks have become increasingly involved in funding large-scale property developments globally with Ping An competitor Bank of China becoming a leading source of real estate funding in Manhattan.
Wanda acquired the One Nine Elms project in 2013 from the UK’s Green Property which had already approved planning approval for the new development. Wanda’s project is one of nineteen developments planned in a former industrial area of London which is being converted to residential use.
New Contractor to Move Chinese Project Forward
“We are pleased to be awarded the pre-construction services agreement for One Nine Elms and to be partnering with Wanda One to get this fantastic project underway,” said Dean Banks, managing director at Balfour Beatty’s UK Construction Services.
Balfour Beatty signed a preliminary agreement to undertake the project on behalf of Wanda after a joint venture between UK construction giant Interserve and China’s largest construction company CSCEC agreed to abandon efforts to reach a final agreement on One Nine Elms.
The Anglo-Chinese joint venture had been chosen by Wanda in June 2013 after a lengthy selection process. Wanda’s Shanghai-based competitor Greenland Group also faced construction challenges in London after the builder that it hired to build a $900 million project on the site of the city’s historic Ram Brewery walked away in February this year.
With the Ping An financing in hand, Balfour Beatty and Wanda One say they hope to conclude a final agreement by the end of the year. The design for One Nine Elms was provided by US architecture firm Kohn Pedersen Fox.
Building into a Nine Elms Glut
The financing will help Wanda to move forward with construction of One Nine Elms, but the developer may face greater obstacles selling homes to buyers increasingly wary of the London market.
Wanda and its 18 competitors are currently building more than 20,000 homes in the Nine Elms area, with UK property firm St Modwen earlier this month writing down £21 million ($27.5 million) or ten percent on the value of its 57-acre project in Nine Elms.
St Modwen cited a fall in Nine Elms housing sales of 3.75 percent in explaining its writedown, while property consultancy JLL recently released figures showing that home sale in the area peaked in 2013 at 1313 units, and have falled each year since, even as developers have brought more projects on line.
Developers, including some active in Nine Elms, are now said to be offering discounts of up to 20 percent on bulk sales of units in London. The UK’s decision last month to exit the European Union has hit the London real estate market hard, with wealthy individuals from Asia, Russia and other areas rethinking the effectiveness of the city’s apartments as a wealth management tool.