China’s Cheung Kei Talks Up Investment Plan for Seized London Office Building

Cheung Kei Group said this week that it is negotiating with investors for the sale of a partial stake in 5 Churchill Place in London, in a statement released just days after it was revealed that the Canary Wharf office building had been taken over by receivers appointed after the mainland developer defaulted on loans backed by the property.

While admitting that four other properties, including its Hong Kong headquarters had been taken over by banks “due to slight defaults” on mortgage loans, in the statement released on 29 May, just two days after Mingtiandi reported the seizure of 5 Churchill Place, the company lashed out at media reports releasing what it said was “false information about the operations of Cheung Kei Group.”

After stating that it has “encountered periodic cash problems,” the company run by tycoon Chen Hongtian said that “its debt ratio is at relatively low level compared to its peers.”

Government property records in Hong Kong show that, during the first quarter of this year, creditors seized a pair of homes in the city from Chen and the 300,000 square foot (27,870 square metre) Cheung Kei Center (now One HarbourGate East Tower) from his company.

However, in May Chen told the South China Morning Post that he was in talks to retrieve the assets from lenders after a “short-term liquidity issue.”

Going Asset Light the Hard Way

After having defaulted on a loan on 20 Canada Square on Canary Wharf in October of last year, according to a Bloomberg report, Cheung Kei said in its release this week that both of its London properties are undergoing what it terms an orderly reorganisation.

Cheung Kei said that it plans to cooperate with senior investors to transform 20 Canada Square into a large scale commercial complex to be renamed Asia Center, while indicating that the reorganisation is supported by the owners of Canary Wharf. The mainland developer did not provider further details regarding its investors or the project plan.

The company expressed confidence that its problems with financial institutions can be resolved while indicating that it reserved the right to take legal action against media or individual publishing false information.

Cheung Kei’s London office assets, together with its former headquarters in Hong Kong, were used as security for loans worth a combined HK$6 billion ($770 million), which the mainland firm has failed to repay.

In the interview with the SCMP last month, Chen, who started in garment making in Guangdong province before building a portfolio of properties, claimed that there were plans to inject fresh funds to enable it to buy back its Hong Kong properties, but did not elaborate on details.

In Cheung Kei’s statement this week it acknowledged the bank seizures of its Hong Kong assets.

Things Fall Apart

Business advisory firm FTI Consulting said late last week that it had been appointed as joint administrators and fixed charge receivers for 5 Churchill Place, after Cheung Kei had tried unsuccessfully since early 2022 to find a buyer for the property.

The company began marketing 20 Canada Square as a renovation and repositioning project in 2021, but a £365-million potential deal that year fell through.

The former Cheung Kei Center in Kowloon’s Hung Hom area is currently being marketed for sale by Savills in a tender closing 28 August. Chen’s 5,154 square foot apartment on the fifth floor of Swire Properties’ Opus complex in the Mid-Levels is also now up for sale via a tender closing 8 August.

The mainland firm has asked the media and the public for more understanding as it tackles its financial woes.

“If the irrational factors of all parties make the enterprise fall into unnecessary difficulties, it will not benefit individuals, enterprises, financial institutions or even the society, and will only cause a serious blow to the investment confidence of the enterprise and bring immeasurable harm to the enterprise,” it said in the statement.

Mingtiandi reached out to FTI Consulting for comment regarding Cheung Kei’s statement, but had not received a response by the time of publication.