Hong Kong’s Liu Chong Hing Investment Buys London Commercial Building for $55M

Liu Chong Hing Investment has acquired a commercial building in London’s West End for £44 million ($54.7 million), as the Hong Kong-based firm takes advantage of a market slowdown to pick up its first real estate asset in the UK.

Barratt House at 341-349 Oxford Street is a seven-storey complex with 16,200 square feet (1,505 square metres) of retail, leisure/pub and office accommodation fully let to seven tenants, Liu Chong Hing said in a filing with the Hong Kong stock exchange. The asset occupies a corner near the junction with New Bond Street at the northern edge of Mayfair.

Liu Chong Hing said it bought the building from sellers including British insurer Aviva Life & Pensions UK. The firm controlled by the prominent Liu family is looking to expand into new property markets after focusing on Hong Kong and mainland China.

“With the prime location of the property coupled with the implementation of the New West End Company initiatives for transformation of Oxford Street, the board considers that the long-term appeal of Oxford Street will benefit investment return of the property,” said chairman Liu Lit Chi.

West End Whirl

The wedge-shaped Barratt House sits among a number of large-scale redevelopments in London’s Oxford Street shopping mecca. The property comprises 6,052 square feet of retail units, 1,904 square feet of public house units and 8,244 square feet of refurbished offices.

Liu Chong Hing’s consideration, which it satisfied via the company’s internal resources, works out to £2,716 ($3,377) per square foot of lettable space. The asset’s aggregate 2022 rent of £2,455,000 implies a gross income yield in the neighbourhood of 5.6 percent. Barratt House is held on four separate leaseholds with 1,872 years to expiry, a “virtual freehold”.

Chris Pilgrim, managing director of the Asia Pacific capital markets business at Colliers, said the West End has performed particularly well given the continued lack of Grade A stock and vacancy rates at less than 2 percent in the London core.

“The recognised legal system, relatively depressed sterling and stability returning to the debt markets continue to drive demand for West End assets,” Pilgrim told Mingtiandi. “The weight of equity for such assets, particularly from the private sub-£100 million investors, continues to put pressure on competitiveness and pricing.”

The West End typically has smaller properties than in the City of London or Canary Wharf, but at a higher value per square foot, providing a defensive market for equity-rich investors from Asia looking to deploy meaningful capital, Pilgrim said.

Comings and Goings

While Liu Chong Hing has picked this moment to make a splash in London’s real estate market, other Greater China investors have been eyeing the exits.

Last month brought reports that mainland property investor Cheung Kei Group was struggling to offload a pair of office buildings in Canary Wharf after already defaulting on a loan backed by one of the two properties.

JLL is marketing both 20 Canada Square and 5 Churchill Place in the prime commercial district, with an account in Bloomberg indicating that Cheung Kei had failed to repay a £265.5 million loan on 20 Canada Square when it came due last October, with debt secured by 5 Churchill Place said to be coming due this month.

Also in March, Chinese sovereign wealth fund CIC agreed to sell Deutsche Bank’s UK headquarters to a joint venture of Malaysian conglomerate Gamuda Berhad and UK investment manager Castleforge Partners for £257 million. The JV seeks to acquire Winchester House in the City of London despite the German banking giant planning to exit the 317,000 square foot building next year.