R&F Selling Stake in London Project at $230M Loss, PWC Resigns as Auditors

Guangzhou R&F Properties continues its retreat from London’s Nine Elms regeneration area, announcing Thursday that it plans to sell its 50 percent stake in a joint project with fellow Chinese developer CC Land to the latter firm’s boss for HK$2.66 billion ($340 million).

R&F said it would be booking a loss of HK$1.84 billion ($230 million) on the disposal, with the proceeds from the divestment first being applied to repay loans owed by the group, which has RMB 18 billion ($2.7 billion) in capital market debt maturing or becoming puttable in 2022.

The stake sale by R&F, which in January negotiated a delayed payment schedule for $725 million in offshore bonds, came one day before the developer said that PricewaterhouseCoopers had resigned as its auditors and the company would not be publishing its audited financial results by 30 April, putting it in danger of suspension by the Hong Kong exchange.

The sale of the project known as Thames City marks R&F’s second Nine Elms disposal announced in as many months, after the cash-strapped developer in March agreed to sell its nearby Vauxhall Square mixed-use project to Hong Kong-based Far East Consortium for £95.7 million ($124.8 million).

Withering Elms

Formerly known as Nine Elms Square, Thames City is a mixed-use development consisting of 12 residential buildings, a park and other facilities such as a clubhouse, landscaped gardens, restaurants, retail outlets and commercial spaces, R&F said in a filing with the Hong Kong stock exchange.

Located south of Nine Elms Lane near London’s disused Battersea Power Station, R&F and CC Land had acquired the 449,000 square foot (41,713 square metre) site from Dalian Wanda Group in 2017 immediately following Wanda’s $605 million purchase of the project from St. Modwen Properties.

The buyer of the half-stake is an entity wholly owned by CC Land’s billionaire founder and chairman, Cheung Chung Kiu. R&F, controlled by co-chairmen Li Sze Lim and Zhang Li, said it expects to record a loss on the disposal of HK$1.84 billion ($230 million).

Taking into account Thames City’s saleable floor area of 1.7 million square feet, Cheung’s consideration values the project at roughly $400 per square foot of floor area.

Phase one of the project, comprising three residential towers, was launched for presale in 2020 and is under construction, R&F said. The Evening Standard newspaper reported last November that only one-third of the first phase’s 300 apartments had been sold, with prices ranging from £997,500 ($1.25 million) for a one-bedroom unit to £1.385 million for a three-bedroom.

Under a profit-sharing scheme, R&F is entitled to receive a portion of Cheung’s share of the profits from Thames City after the accumulated sales of phase-one units reach £1.2 billion in value.

Global Retreat

Following the Thames City sale, R&F still has two projects in the UK, including One Nine Elms, a £900 million mixed-use project that made unwanted headlines earlier this year when workers reportedly downed tools and walked off the site after the Chinese firm failed to pay the principal contractor.

The company’s Queen’s Square project in south London’s Croydon area has been stalled since 2020, with local news reports in February noting no plans for a restart on the project, which R&F had purchased from local developer Minerva in 2017 for £60 million (then $74.8 million).

On 25 March, R&F spooked investors with an announcement to the Hong Kong exchange that it expected to declare a 2021 loss of not less than RMB 8 billion ($1.21 billion), despite having taken in more than $1.6 billion selling a Guangzhou logistics facility to Blackstone last year.

The developer has also faced challenges with its Australian operations, with Aussie media reporting in April that R&F had abandoned a $4.7 billion residential project in the Brisbane area.

In Hong Kong, R&F has now appointed BDO Ltd, a local unit of Belgium-based accounting firm Binder Dijker Otte as its new auditors as it applies to the HKEX to avoid mandatory suspension of its stock this month after missing the 30 April deadline for submitting its financials and annual report.

Feeling Right at Home

Cheung and his CC Land vehicle have been aggressive buyers in the UK capital, most famously with the $1.42 billion acquisition of the City of London’s Leadenhall Building (aka the Cheesegrater) in 2017.

Later that same year, CC Land joined an investor group funding construction of the 40 Leadenhall (aka Gotham City) office project, Bloomberg reported. In 2019, the Chinese developer committed £182 million ($236 million) to a scheme to transform the Whiteleys department store in Queensway into a 1.1 million square foot mixed-use development.

More recently, Cheung raised eyebrows when he secured permission to redevelop an ageing Knightsbridge building into an eight-storey, 62,000 square foot palatial mansion overlooking Hyde Park in central London.