R&F Selling South London Project to Far East Consortium at $90M Loss

Guangzhou R&F Properties looks set to pare back its collection of assets in London’s Nine Elms regeneration area, as the cash-strapped developer has agreed to sell its Vauxhall Square mixed-use project to Hong Kong-based Far East Consortium (FEC) for £95.7 million ($124.8 million).

Located just south of the River Thames in a traditionally industrial zone to the east of the disused Battersea Power Station, Vauxhall Square has planning consent for a gross floor area of 133,000 square metres (over 1.4 million square feet) comprising residential, hotel, office, retail and leisure use. Construction has yet to begin on the main site, R&F said Monday in a filing with the Hong Kong stock exchange.

The developer will record a loss of more than £68.8 million ($89.9 million) on the disposal of the property, which Savills appraised at a market value of £165 million in October 2020. R&F, co-chaired by Hong Kong billionaire Li Sze Lim and mainland counterpart Zhang Li, had bought the 3.4 acre (1.4 hectare) site from London-based property investment firm CLS Holdings for £157.7 million ($196 million) in 2017.

“The disposal is beneficial to the group in optimising the allocation of resources, increasing its capital reserve and reducing its gearing ratio, which is conducive to the group’s ability to reduce risks and achieve long-term stable and healthy development,” Li said in Monday’s filing.

Shrinking Footprint

Vauxhall Square is one of a set of ongoing projects undertaken by R&F in the urban renewal hotspot of Nine Elms. The others include One Nine Elms, a 103,000 square metre mixed-use project purchased from fellow mainland builder Dalian Wanda Group in early 2018, and Nine Elms Square, a 12-building project including 1,500 homes acquired from Wanda and Chongqing-based CC Land in 2017.

The £900 million One Nine Elms project made unwanted headlines earlier this year when workers reportedly downed tools and walked off the site after R&F failed to pay the principal contractor, London-based Multiplex.

“Work is continuing at One Nine Elms while we discuss a set of issues with Multiplex to ensure a successful completion of the development,” an R&F representative told Mingtiandi in January.

A frequent trader of UK real estate, FEC will pay roughly £720 ($938) per square metre of maximum built area to take over the Vauxhall Square project. The developer led by second-generation tycoon David Chiu described the property as an “attractive acquisition” in a location with ample public transport and strong capital appreciation potential.

Cash Crunch

R&F has retained the option to repurchase Vauxhall Square from FEC for about £106.6 million within six months of the deal’s completion. “Even if the repurchase option is exercised, the deal will offer an attractive return to the group in a short time frame,” FEC said in a separate filing on Monday.

But the thinly stretched R&F has been pulling out the stops just to service its liabilities, which include RMB 18 billion in capital market debt maturing or becoming puttable in 2022.

Last December, the developer agreed to sell its remaining 30 percent interest in a Guangzhou logistics park to US private equity giant Blackstone for RMB 3.4 billion ($540 million).

In January, R&F won a six-month extension to repay a $750 million offshore note, with S&P Global Ratings labelling the manoeuvre a default in all but name.

Then last month, R&F asked the South Korean government to extend the construction deadline of its Midan City Resort Complex until March 2024.