Shimao Sells London Office Building for $395M in Struggle to Pay Off Debts

Shimao Group has closed on the sale of an office building in the City of London for GBP 315 million ($395 million), according to a UK news report, as the Shanghai-based developer fights to regain its financial footing after a series of defaults.

The group headed by tycoon Hui Wing Mau sold Sancroft at St Paul’s, a 303,000 square foot (28,150 square metre) grade A property at 15 Newgate Street EC1A 7AZ to a joint venture of local investment manager Greycoat and Japan’s Mitsui Fudosan, according to London-based React News, in a deal which closed on 21 April.

The sale by a subsidiary of Shanghai Shimao Co Ltd, the primary onshore unit of the Hong Kong-listed group, provides fresh cash after Shimao Group declared in audited financials released on Friday that it had lost RMB 5.1 billion ($734 million) in 2022. Shimao Group is attempting to reach an agreement with creditors to restructure $11.8 billion in offshore debt, as its Hong Kong-listed stock remains suspended since the first of April last year after the company failed to file its 2021 financial reports.

Hui Wing Mau had bought the building then known as Christ Church Court in July 2015 for what was later revealed to be GBP 270 million (then $419 million), and had then embarked on an extensive renovation which was completed last year. The building is now said to be half-occupied with the sale having been first reported early last month.

Sold Half-Empty

At the time that Shimao acquired the 2000-vintage property eight years ago, it was fully leased to Goldman Sachs through 2025, although the investment bank had an option to break that lease in 2020. When Goldman exercised that option following the opening of its Plumtree Court headquarters in the City in 2019, the nine-storey building was vacant with contractor McLaughlin & Harvey having completed a 16-month, GBP 54 million renovation in April of last year.

Flexible office provider Convene has now leased 45,000 square metres of the building and law firm Goodwin Proctor has signed up for another 90,000 square feet, bringing the building close to half-occupancy. At the reported compensation, Greycoat and Mitsui Fudosan are paying the equivalent of GBP 1,040 per square foot for the office block.

Following the renovation, the property is kitted out with raised floors, an on-site gym and bicycle parking as well as shower and locker facilities. Located near St Paul’s Cathedral, the office building is also designed to achieve LEED Platinum and BREEAM Excellent ratings for sustainability.

The conclusion of the sale to Greycoat and Mitsui comes after an earlier agreement by the UK investor, with backing from Goldman Sachs, fell apart after the US investment bank backed out of what had been a GBP 370 million deal. Greycoat was back with its new partner just one month later, according to React News.

Motivated Seller

The London sale was closed just under one month after JLL announced that it had been appointed to sell Shimao’s Sheraton & Four Points by Sheraton Tung Chung Hotel in Hong Kong’s Tung Chung area. With more than 1,200 keys, Shimao is asking $828 million for the double-branded complex near the city’s international airport.

In September of last year Shimao had agreed to sell stakes in a pair of Beijing projects to state-backed China Resources Land in a deal which helped it to raise $480 million.

These asset sales follow a string of defaults and other financial mishaps for a builder which had ranked as China’s eighth largest developer by sales as recently as 2020.

In January of this year, Shimao Services, a property management unit of Shimao Group, replaced its auditor for the second time in nine months, with PWC also having walked away from auditing Shimao Group’s books.

In November of last year, Shimao, together with fellow mainland developer china SCE Group, were sued by Everbright Trust after missing payment on RMB 1.6 billion in trust loans linked to a development project. In July 2022, Shimao defaulted on a $1 billion offshore bond and hired restructuring advisors.

In early April Shimao said it had circulated draft restructuring proposal to groups of its creditors and that the parties have working to reach mutually agreeable terms for repayment.