Hong Kong tycoon Victor Li uses cash from sale of The Center to buy London office tower for £1 billion
Move comes a day after his CK Asset Holdings said it would join a consortium to acquire Australian gas pipeline company APA Group for US$10 billion
Victor Li Tzar-kuoi has bought a grade-A office tower in London for £1 billion (US$1.3 billion) as he embarks on an acquisition spree for overseas assets after taking control of Hong Kong conglomerate CK Group from his billionaire father Li Ka-shing.
CK Asset Holdings acquired 5 Broadgate, a three-year-old building close to Liverpool Street train station with a total gross floor area of 1.2 million sq ft, according to a statement on Thursday. The price works out to about £833 per sq ft.
“The cost per sq ft of 5 Broadgate represents only about one-third that of The Center,” the company said, adding that only a quarter of the proceeds from the sale of The Center was used.
The Center, the tallest office tower in Li’s property portfolio, was sold to a consortium of mainland Chinese and Hong Kong investors for a record HK$40.2 billion, making it the world’s single priciest real estate transaction. The deal, completed early last month, translates to an estimated HK$33,000 per sq ft.
CK Asset said that the annual rental income generated from 5 Broadgate, which serves as UBS’s London headquarters, was nearly half that of The Center and its capitalisation rate almost double.
Raymond Cheng, a property analyst at CGS-CIMB Securities, said the acquisition was a smart move.
“CK Group has been selling assets at high prices and recycling the cash to buy something cheap with better yields,” he said.
He believes the investment yield for the London tower would be between 5 to 6 per cent, double the 2 per cent for The Center, which generated an annual rental income of about HK$800 million.
On Wednesday, CK Asset said it would team up with CK Infrastructure Holdings and Power Asset Holdings to make a A$13 billion (US$10 billion) offer for Australian gas pipeline company APA Group.
Cheng said CK Asset would need to invest HK$20 billion in APA if the deal were to proceed.
“CK Asset will have used close to HK$30 billion of the HK$40.2 billion sale proceeds from the disposal of The Center,” he said.
Gerald Ma, a member of the executive committee of CK Asset, spearheaded the acquisition.
“With ample cash on hand, the company is diligently looking for investment opportunities in property, infrastructure, and other industries that meet our stringent investment criteria,” he said.
Li is also said to be drawing up plans to redevelop Hutchison House office tower in Central.
Surveyors believe the redevelopment would cost about HK$5 billion, based on construction costs of HK$10,000 per sq ft.
Meanwhile, Swire Properties is said to be in talks to sell its stakes in two office buildings, Cityplaza Three and Cityplaza Four, to Hengli Investments Holding Group for more than HK$14 billion, according to Bloomberg, which quoted people familiar with the matter, adding to a spate of deals in the world’s priciest office market.