While economists and major fund managers debate the impact of the UK Brexit decision, Hong Kong-based real estate investors seem have already passed judgement that the 2016 black swan event represents the buying opportunity of the decade.
Tai United, that recently revealed a plan to form a UK real estate platform, announced on 24 November that it had agreed to purchase the 10 Hammersmith Grove office building in London from the UK’s Brockton Capital for £103.5m ($128 million), according to an announcement to the Hong Kong stock exchange. It is the third London office complex purchased by a Hong Kong firm this month, and the second UK acquisition by Tai United in less than six weeks.
Mainland Investors Back Hong Kong Acquisition of London Asset
Tai United’s new 110,045 square foot (10,223 square metre) London building is fully let out with Philip Morris, Accor and Fox among the tenants who hold 10 or 20-year leases. The offices bring in an annual income of £5.6 million ($6.9 million). In addition to being the birthplace of a number of actors including Hugh Grant, Benedict Cumberbatch and Sacha Baron Cohen, the west London district boasts a number of theaters and shopping complexes.
London-based Brockton is selling off 10 Hammersmith Grove after buying it a few months earlier. The office building was one of a number of assets in Aberdeen Asset Management’s Aberdeen UK Property Fund that was hastily put up for sale in the aftermath of the fund being suspended post-Brexit.
The opportunity seems well-suited for Tai United, which appointed a new board dominated by mainland investors in October, and changed its name from Bestway International Holdings earlier this year.
HK Firms Pump $700 Million into London Office Sector
With Tai United’s acquisition, firms from the former British colony have now bought more than $700 million in London offices in a little more than 30 days with unheralded outfits leading the charge.
Asian Growth Properties purchased 20 Moorgate in the City of London a few weeks back. The Hong Kong-listed company paid around £154 million ($191 million) to Deutsche Fonds Holdings AG to acquire the building which is currently let to the Bank of England.
Hong Kong-based Kingboard Chemical Holdings started the wave of investment in late October, handing Brookfield Property Partners £271 million ($331 million) for Moor Place, a building that houses WeWork’s European headquarters.
Tai United made its maiden UK transaction in October, buying a set of posh rental residences at 6 – 9 Buckingham Gate in London for GBP112 million ($140.5 million) through acquisition of two British holding companies.
Shortly after that deal the Hong Kong entity declared its intention to establish “a portfolio of quality commercial (including hospitality) and residential properties” in the UK, with a target portfolio size ranging from GBP1.0 billion to GBP2.0 billion ($1.25 billion to $2.5 billion).
Mainland Firms Dominate HK Office Sales
Even with the dark cloud of Brexit looming over the UK’s real estate scene, at least buyers from Hong Kong can get hold of buildings in London. A rapid influx of mainland capital into Hong Kong has heated up competition for local assets in recent months, with the recent depreciation of the Chinese yuan increasing the demand for Hong Kong dollar deals. During the first half of this year, mainland investors accounted for 64 percent of the total office sales transactions in the city, research from Knight Frank revealed.
In July, Shenzhen-based billionaire Chen Hongtian purchased the 15-storey east tower at One Harbourgate for HK$4.5 billion ($580 million) while Li Ka-shing reportedly put The Center up for sale in August with several of China’s state-owned companies ready to hand over in excess of HK$35 billion ($4.5 billion) to make it the city’s richest property sale to date.