Hong Kong developer Wing Tai part of joint venture acquiring US$591 million building in Central London
- London offices remain good value with prime yields running at 4.25 per cent this year, according to Knight Frank
- Mainland Chinese and Hong Kong buyers made up 39 per cent of Central London’s office deals by foreign buyers last year
Hong Kong developers are on a shopping spree, buying up London property as they seek higher yields and to diversify risks.
Wing Tai Properties and Manhattan Garments have entered into a 50:50 joint venture to buy a commercial building in the heart of London for £460 million (US$591.1 million), according to a Wing Tai filing with the Hong Kong stock exchange on Friday.
The pair will each contribute £230 million to the joint venture, and Wing Tai’s share of the investment will be funded by “internal resources and/or borrowing”, it said.
Located at 30 Gresham Street, the property provides a total of 403,639 sq ft of office and retail space over two basement, one lower ground, one ground and eight upper floors. There are 48 car parking spaces located on the two basement levels.
It will “provide an opportunity for the group to expand and diversify its property investment portfolio and generate a steady flow of rental income”, said Wing Tai. Shares in the company eased by 1.65 per cent on Friday after the announcement.
In June, CK Asset Holdings acquired 5 Broadgate, a three-year-old building close to the Liverpool Street railway station with a total gross floor area of 1.2 million sq ft for £1 billion. Nan Fung Development bought a majority stake in UK developer Endurance Land last month to increase its exposure there.
The Hong Kong food conglomerate Lee Kum Kee paid about £1.28 billion for 20 Fenchurch Street, the 34-storey skyscraper known as the “Walkie Talkie”, in August last year.
Chinese investment in the UK last year leapt fourfold year on year to US$9.69 billion, according to Knight Frank, as Chinese investors seized the opportunity to acquire prime commercial property in the UK amid the Brexit vote turmoil and the subsequent devaluation of the pound.
In fact, it said, mainland Chinese and Hong Kong buyers made up 39 per cent of Central London’s office deals by foreign buyers last year.
Part of the reason is high yields. London’s offices remain good value on a global basis with prime
yields running at 4.25 per cent for City of London offices this year, according to Knight Frank.
In contrast, Hong Kong’s yield of grade A offices stood at 2.3 per cent in September, according to the Rating and Valuation Department.
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And surveyors said the strong investment activity in London from foreign buyers is likely to continue. “I think there is a strong possibility that the central London office investment market will continue to be bullish due to more Far Eastern and overseas high net worth individuals looking for safe havens for their equity,” said Richard Barker, a chartered surveyor at commercial property company RB Associates.
Developed in 2003, 30 Gresham Street is opposite a town hall and is near a number of important railway stations in Central London, according to the building’s agent, Savills. The building is notably the London headquarters of German bank Commerzbank AG.
Wing Tai currently owns five other office buildings in London, including 10 Brook Street near Oxford Circus, 35 Berkeley Square and No. 1 Saville Row, according to its website.