Receivers Marketing London Office Tower Seized From Mainland Tycoon

Savills has kicked off a sales campaign for 5 Churchill Place in London, attempting to find a buyer for the Canary Wharf office tower seized from mainland tycoon Chen Hongtian, who had earlier defaulted on loans backed by the onetime headquarters of now-defunct investment bank Bear Stearns.

The property consultancy is marketing the 12-storey office block on behalf of receivers from FTI Consulting, which had taken over the property from Chen, who chairs Shenzhen-based investment firm Cheung Kei Group, touting a pair of new tenants which moved into the property in July and the building’s virtual freehold title.

The 313,000 square foot (29,000 square metre) asset is being relaunched for sale as trades of office assets dropped by 64 percent in the third quarter, compared to a year ago, according to JLL, with Chen having laboured for more than a year to sell the building himself before the receivers seized it in May of this year.

Chen had originally acquired the 2009-vintage asset in 2017 for £270 million (then $363 million), in a buying spree that saw him pay record prices for homes and offices in Hong Kong and London, with five of those properties having been seized by creditors this year following loan defaults.

London Failing

With the building located on the eastern side of Canary Wharf, at the gateway to Wood Wharf, Savills is highlighting the 985 years remaining on 5 Churchill Place’s land lease, connectivity to the Elizabeth Line transit system and air rights in attempting to find a buyer for the property.

Credit Agricole and the World Association of Nuclear Operators both agreed to new leases in the building in July with the weighted average unexpired lease term to lease expiry in the property now at 10.5 years.

No price details for the property were provided in a sales flyer distributed by Savills, although sources familiar with the property told Mingtiandi earlier this year that Chen and Cheung Kei had been attempting to sell the building last year for £260 million. The company was said at the time to have received bids for both 5 Churchill Place and 20 Canada Square, another Canary Wharf tower the Chinese investor had purchased in 2017, however, none of those offers were accepted by Chen or Cheung Kei.

Some £1.2 billion in office properties found buyers in central London during the third quarter, according to a report by JLL earlier this month, with that amount down 64 percent from the same period a year earlier.

“The twin impacts of rapidly rising interest rates, coupled with structural challenges regarding the nature of office working have combined to deliver uncertainty to the marketplace,” said Julian Sandbach, head of central London capital markets at JLL, while expressing optimism that the majority of value reduction has already taken place.

Chen and Cheung Kei had purchased 5 Churchill Place with the help of a £175 million loan from Lloyd’s Bank as well as mezzanine debt extended by an undisclosed international conglomerate. Lloyd’s is understood to no longer hold the majority of that initial loan, which as of March this year was delinquent.

In late August receivers sold an apartment in Hong Kong’s Mid-Levels formerly owned by Chen for HK$420 million ($53.5 million), after the billionaire had defaulted on an HK$500 million mortgage on the property. That sale represented a 38 percent discount to the apartment’s market value.

Defaults and Seizures

The marketing effort for 5 Churchill Place makes it the fourth of Chen’s property trophies to have been put up for sale by receivers this year.

In addition to the Mid-Levels apartment, which had been put on the market in May, during that same month receivers began marketing One HarbourGate East Tower in Kowloon’s Hung Hom area after taking over the building formerly known as the Cheung Kei Center in March.

In August, receivers put up for sale a HK$2.1 billion mansion at 15 Gough Hill Road on Hong Kong’s Peak, which had been owned by Chen until being seized by creditors in March. All four of those properties have been marketed by Savills.

During June creditors also took over 20 Canada Square, which Chen had paid £385 million for six years ago, after the garment king last October had defaulted on a £265.5 million loan originally from Lloyd’s Bank which it had used to finance purchase of the London property.

Now considered a B grade office asset, 20 Canada Square is said to have been on the market for nearly two years before Cheung Kei defaulted, with that property having yet to be put up for sale by receivers.