A group of companies controlled by the son-in-law of Hong Kong’s richest man have become the latest Asian investors to bet on London property, as Magnificent Hotel Investments revealed to the city’s stock exchange recently.
MHI, which is led by William Cheng Kai-man, a son-in-law of Henderson Land Development chairman Lee Shau Kee, has purchased the former City of London police headquarters for £40 million, according to the regulatory filing.
The Hong Kong-listed hotel operator and developer, which is part of Cheng’s Shun Ho group of companies, completed the acquisition of the heritage property at 37 Wood Street on 29 January 2020 from the City of London Corporation via a public tender.
The company said in a joint statement with Hong Kong-listed Shun Ho Holdings and Shun Ho Properties – which has a controlling stake in Magnificent – that it intends to convert the City police station into a “deluxe heritage hotel” with about 200 rooms.
The acquisition marks the group’s second purchase in London following the acquisition of the Royal Scot Hotel Travelodge in 2016. Cheng’s father-in-law, Lee Shau-kee was recognised by Forbes last week as Hong Kong’s richest man with a fortune of $30.4 billion — narrowly surpassing Li Ka-shing’s $29.4 billion horde.
Snapping Up a Heritage Property
Based on the gross internal area of 117,472 square feet (10,913 square metres), Magnificent has paid £341 per square foot for the 1960s-era building in the City’s Square Mile – London’s primary financial district.
“Magnificent Hotels is honoured to have acquired this unique property which provides huge potential to elaborate its heritage by sensitively refurbishing and enhancing the grade II* listed former police station,” said Cheng, referring to the cop shop’s legal status as a historically important building.
Built around a courtyard with a 12-storey tower in one corner, the four-storey Wood Street Police Station comes with a 151-year lease at a peppercorn rent and is within five minutes’ walking distance from St Paul’s tube station as well as the London Stock Exchange.
The City of London Police will continue to occupy the property at a nominal fee under a leaseback agreement through 10 December 2020, after which the yearly rent will be £800,004.
Turning away from Hong Kong
Cheng is homing in on London for his latest venture as hotel bookings in Hong Kong – where seven of MHI’s ten hotels are located – have collapsed over the past six months.
“In view of the current social instability, economic and tourism difficulties in Hong Kong, the management intends to invest in more UK hotel properties with stable income and development potential because the UK real estate market offers good recurring income and capital gain potential,” the joint announcement stated.
With the Asian financial hub disrupted by pro-democracy demonstrations and now the outbreak of the coronavirus, the latest official statistics show that visitors to the city halved to 3,191,466 in December compared with the same month in 2018, and were 14 percent down for 2019 overall compared with the year before.
In light of the situation in Hong Kong, Cheng said in the companies’ bourse filing that he intends to diversify the group’s property investments and establish a London office in the near future.
Buying as Hotel Investment Picks Up
Cheng’s property group – which now owns a portfolio of ten hotels including one in Shanghai in addition to its set in Hong Kong – is making its purchase as negotiations surrounding Brexit have been blamed for a drop in investment in the UK’s property market.
However, a flurry of transactions in the final quarter of the year as Brexit negotiations neared a conclusion saw 25 percent of the £6 billion full year total transacted in the last three months of 2019.
“A lack of clarity over the UK’s position outside of the EU, combined with a turbulent political climate, led to minimal investment during Q2 and Q3, as investors deferred their investment decisions,” the authors of the report noted.
Adding to the London Collection
Cheng bought his first hotel in London almost five years ago, snapping up a Travelodge on King’s Cross Road for £70 million.
Located at 100 King’s Cross Road, Cheng’s Magnificent Hotel Investments paid £171,568 per room for the 408-room budget hotel.