A Hong Kong property billionaire has agreed to sell his stake in a London REIT for £436 million ($544 million), bringing to a close a long-running battle for control of the trust’s West End real estate portfolio.
Samuel Tak Lee, who already owns 1.3 million square feet (120,774 square metres) of commercial property just north of Oxford Street in London, is selling his 26.3 percent stake in Shaftesbury PLC for £0.54 per share, a 14 percent discount over the trust’s closing share price on Monday, according to a stock exchange announcement.
The share sale brings the curtain down on Lee’s struggle to take over the £4 billion real estate investment trust, which owns a 1.9 million square feet portfolio of commercial and residential assets across London’s West End shopping and entertainment districts, including properties in Covent Garden, Carnaby Street and Chinatown.
Separately, Lee, whose net worth is estimated at $3.7 billion, has withdrawn all legal proceedings taken out against Shaftesbury over a 2017 share placement by the REIT which the Hong Kong tycoon claimed was carried out to dilute his ownership interest and pre-empt a takeover bid.
Buy High, Sell Low
Lee is making his exit as shares in Shaftesbury have almost halved to £0.625 at the close of trading on Monday from a peak of £1.025 in 2018 – by which time Lee had built up a more than 26 percent stake in the trust. In the wake of the COVID-19 crisis, the REIT’s shares have dropped by a third since February alone.
The tycoon, whose Langham Estate also owns property in Switzerland, is offloading the shareholding he carved out for himself over a period of four years to rival West End REIT Capco.
Under the terms of the agreement, Capco will buy the shareholding from a discretionary trust set up by Lee, Veloqx Jersey Limited, in two tranches, with the sale of the first 20.9 percent holding expected to complete on 3 June at a cash consideration of £348 million.
Capco will buy the second tranche, representing 5.3 percent, for £88 million in cash once the transaction is approved by shareholders.
“As long-term investors in the Covent Garden estate and the West End, the investment in Shaftesbury represents a unique opportunity to deploy our capital in an exceptional portfolio at an attractive entry price, which we believe will generate long-term value for Capco shareholders,” Capco said in a statement.
The Shaftesbury portfolio, which is 97 percent occupied, generated an annual rental income of £98 million last year.
Lee, who inherited a Hong Kong property fortune built around family-owned Prudential Enterprise, had not replied to an enquiry from Mingtiandi at the time of publication.
Giving Up on a Takeover
The Hong Kong investor had been steadily building up his stake in Shaftesbury since purchasing an initial 5 percent of the trust in 2014, and building that holding to 11 percent by 2016 before more than doubling his bet to grab the eventual 26.3 percent by 2018.
Had Lee, whose Langham Estate stretches 13.8 acres between Oxford Street and Euston Road, achieved a holding of 30 percent, a takeover bid for Shaftesbury would have been required.
That potential takeover – which would have allowed him to stretch his holdings south from Oxford Street to Chinatown – was effectively scuppered when Shaftesbury raised £265 million through a share placing in December 2017.
Shaftesbury had argued that the capital raising was to fund expansion and refurbishments of its properties, but Lee sued the REIT in February last year for £10 million, claiming that it had carried out the placing to block his move to take control of the trust.
The sale to Capco, whose portfolio neighbours Shaftesbury’s, paves the way for what market analysts expect to be a merger of the two West End REITs.
A Love for West London
Following the sale, Lee will still own 142 London commercial properties – including the Langham Hotel – acquired through his purchase of the Langham Estate for £51 million in 1994.
The now 81-year-old had bought the estate out of receivership, after the previous owner, Grovewood Securities, had acquired it in 1990 for £5 million.
Lee has also developed the Knightsbridge Apartments residential development near Harrods in the West End, while his Hong Kong-based company Prudential Enterprise, which his father founded in 1958, owns the Prudential Hotel in Hong Kong.