International Property

Chinese capital pours into London offices as CC Land closes deal on ‘Cheesegrater’ tower purchase

PUBLISHED : Wednesday, 01 March, 2017, 11:49pm
UPDATED : Thursday, 02 March, 2017, 10:45pm

A real estate company controlled by Chinese tycoon Cheung Chung-kiu agreed to buy the Leadenhall Building in London, the Square Mile’s tallest tower known as the “Cheesegrater”, for £1.135 billion (US$1.4 billion).

The deal marks the largest ever Chinese purchase of British real estate.

Chongqin-based, Hong Kong-listed CC Land Holdings will pay cash to buy 100 per cent of the building shares owned separately by British Land and Canada’s Oxford Properties, it said in a stock exchange filing Wednesday.

“The Leadenhall Building is a world class skyscraper and office tower boasting an impressive lease portfolio, commanding strong recurring rentals and will be held by the group as an investment property for long term capital growth,” said Peter Lam How-mun, deputy chairman and managing director of CC Land.

The developer, with a market capitalisation of 6 billion yuan (US$873 million), also expects the purchase will affirm its presence in international property markets.

“China has a growing number of companies with a global vision,” said David Ji, the head of research for China at property consultancy Knight Frank.

Given Britain has good relations with China, London’s unique position as a financial centre and a cheap pound after the Brexit vote, the city’s office buildings looks very attractive for Chinese investors, Ji said.

The nation’s second largest property developer China Vanke, bought its first office building – Ryder Court in London’s Mayfair – for £115 million last September.

In the same month, China Minsheng Investment Corp purchased Societe Generale’s London headquarters for £84.5 million.

China has a growing number of companies with a global vision
David Ji, Knight Frank

Other eye-catching deals include Hong Kong’s Kingboard Chemical Holdings’ acquisition of Moor Place in the City of London for £271 million, which is the European headquarters of co-working space start-up WeWork.

Knight Frank estimates Chinese capital (including Hong Kong), accounted for 31.2 per cent of overseas investment in London central office space in 2016.

As China has tightened controls on Chinese companies seeking to invest overseas to stem capital flight, including the calling off of state-owned enterprises entering into real estate transactions valued at more than US$1 billion, privately owned firms backed by strong offshore financing channels have become the major force in overseas buying.

In January, CC Land, chaired by Cheung Chung-kiu, paid £290 million for a prime office building in London’s West End to mark its first overseas investment.

Cheung, 43, has been dubbed the richest man in Chongqing city in China’s southwest. He owns four-listed companies in Hong Kong and maintains close relationships with some of Hong Kong’s property tycoons.

CoStar News reported that the Chinese developer beat state-owned rival bidders Korea Investment Corp and Temasek Holdings of Singapore to secure the “Cheesegrater” deal.

The transaction will also be the second biggest single asset purchase in Britain, only behind the 2014 sale of the HSBC tower for £1.18 billion.

At 46 storeys, the 225-metre “Cheesegrater” in the City of London financial district comprises about 610,000 square feet of office and retail space. It is reportedly fully occupied, with the top floor taken by asset manager Kames Capital for a record-breaking £100 per square foot. Other tenants include Aon and Amlin.