1.13 billion! Vanke completes the sale of the London office building, and M&G takes over
On January 28, it was learned that Vanke sold its office building in downtown London, Ryder Court, to M&G Real Estate for 132 million pounds (1.13 billion yuan).
The UK-based fund manager said in a press release on Wednesday that M&G authorized the acquisition of five floors in the St. James district on behalf of the Asian segregated account and would retrofit the property. For the building's total floor area of 70,000 square feet (6,503 square meters), M&G paid approximately £1,886 ($2,546) per square foot.
On January 24, Vanke Overseas (01036. HK) announced that its indirect subsidiary, Lithium Concept Limited, intends to sell Ryder Court, an office building in London, UK, with net proceeds from the sale estimated at approximately £56 million.
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Vanke Overseas said the net proceeds from the sale were estimated to be about £56 million. The net proceeds will be used in part to cover the consideration of the acquisition of all of enigma Company Limited's issued share capital, while the remaining net proceeds will be used as general working capital.
"Shrinking" the overseas front
As early as March 2019, in order to highlight the determination to develop asset management and strengthen property development and property investment business, Vanke Overseas invested in a number of overseas projects by Vanke. At that time, the former acquired three properties and investment instruments from the latter for HK$1.138 billion in cash, respectively in London, England, San Francisco and New York.
Subsequently, in order to strengthen asset management and property development and property investment business, it also completed the acquisition of properties consisting of various plots of land located at 62, 64, 66 and 68 Chun Yang Street in Hong Kong (the "Chun Yang Street Property") in November of that year.
At the same time, Vanke Overseas has begun to provide asset management services to Vanke Hong Kong contractors in Hong Kong, the United Kingdom and the United States. An asset management service fee of 1.25% of the total invested capital of the relevant project is charged annually.
A series of acquisitions have enabled Vanke's overseas revenue to grow rapidly. In 2018, the company's revenue was HK$102 million, mainly from the rental income of rental units and parking spaces in the Regent Centre. By the end of 2019, Vanke's overseas revenue increased to HK$252 million, an increase of 147%.
In addition to the income from the rental of Regent Center units and parking spaces, the rental of RyderCourt, the interest on investment instruments and the provision of asset management services have become an important part of Vanke's overseas income. Six months after the completion of the acquisition, it contributed HK$25 million in revenue from the leasing of RyderCourt.
In 2020, Vanke's overseas revenue continued to grow significantly by 89% to HK$475 million. This includes HK$237 million from the provision of asset management services, HK$102 million from the rental of Regent Centre units and parking spaces, and HK$50.6 million from the rental of RyderCourt.
In the latest announcement, the investment property for sale is RyderCourt in London, Uk. On 30 November 2021, independent property valuers valued RyderCourt at £125 million. It is understood that assuming that the estimated NAV is equal to the NAV at the time of completion, the consideration of the shares to be sold is approximately £38 million.
Vanke Overseas believes that the sale of the property is more beneficial to the company and its shareholders as a whole, and it is also a "best opportunity to obtain cash" and "a good opportunity to leave the market". In fact, Vanke Overseas completed its acquisition of Ryder Court in June 2019, which was aimed at investing and expanding its business in the UK, thereby reducing the risk of investing solely in Hong Kong. However, after only about two and a half years of holding, Vanke Overseas chose to sell the only British project.
Based on past announcements, in 2019, when the acquisition was completed, RyderCourt's occupancy rate reached 99%, but in 2020 and the first half of 2021, the occupancy rate was recorded at 74% and 86% respectively; it can be compared that the occupancy rate of Hong Kong Regent Center, another leased property of Vanke Overseas, has been stable at more than 96%, and the income is more impressive.
Following the completion of the above-mentioned disposals and acquisitions, Vanke Overseas owns properties including Sham Shui Po Commercial and Residential Properties in Hong Kong, Regent Centre, Park Ao Bay, District 6 of West Railway Tsuen Wan West Station, 657 and 667 Mission Street in San Francisco, California, 25Park Row, a residential building in New York, and Chun Yang Street in Hong Kong.
London's office market is back alive
In fact, in the second half of 2021, especially since December, the London office market began to become active.
In December 2021, Bloomberg reported that the London headquarters building of UBS Group, owned by The Lee Ka-shing family's Cheung Sil Group, would be sold to the South Korean National Pension Corporation and Lingsheng Investment Management for about £1.25 billion. At that time, neither Changshi Group nor the Korean National Pension Corporation commented on the transaction, but a spokesman for Changshi pointed out that receiving bids did not mean that it would be sold.
That same month, an unnamed Hong Kong buyer spent £190 million to acquire 5 Fleet Place, an office building in the City of London, owned by China Poly Group, which is mainly leased to British law firm Charles Speechlys as its global headquarters.
In August 2021, Yutai Properties, another real estate listing platform owned by Chongqing Li Ka Shing Zhang, sold a four-storey four-storey office and commercial property in central London for HK$235 million.
These two deals do not mean that Chinese or Hong Kong interest in London is waning.
