R&F Flipping London’s Vauxhall Square to Adrian Cheng’s Flow Capital

Fresh from clinching a deal to buy extra time to make offshore debt payments, Guangzhou R&F Properties plans to resell a London mixed-use project just one month after exercising an option to repurchase the development from Far East Consortium.

R&F has agreed to sell Vauxhall Square to a fund managed by Hong Kong-based Flow Capital for £108.2 million ($120.9 million), the Guangdong-based developer said Wednesday in a filing with the Hong Kong stock exchange. Flow Capital is an affiliate of Astera Capital Partners, an asset management firm founded by New World Development CEO Adrian Cheng.

In early September, R&F announced that it was repurchasing Vauxhall Square for £106.6 million after selling the project near Battersea Power Station to Hong Kong-based Far East for £95.7 million in a deal that closed in April.

Flow Capital has advanced a bridging loan facility of up to £109 million to finance the troubled builder’s reacquisition of Vauxhall Square from Far East, and upon completion the fund manager will immediately buy the project from R&F at the agreed consideration.

Power of Attorney

Once the deal with Flow Capital closes, R&F will continue to manage and operate Vauxhall Square at its own expense and will have power of attorney to market the project to potential buyers on behalf of the new owner, while having the opportunity to profit from any markup in an eventual sale.

“The board intends to apply the net surplus from any successful authorised sale to repay the company’s indebtedness and as general working capital of the group,” R&F chairman Li Sze Lim said in this week’s filing.

R&F itself will reserve the option to repurchase Vauxhall Square within nine months of completing the sale to Flow Capital, as the company remains “optimistic about the prospects” of the development.

“By entering into the second disposal, the group will have more time to assess further options to extract additional value” from the project, Li said.

Back to Square One

Located just south of the River Thames in the former industrial area of Nine Elms, Vauxhall Square has planning consent for development of 133,000 square metres (over 1.4 million square feet) of gross floor area comprising residential, hotel, office, retail and leisure use. Construction has yet to begin on the main site.

R&F had stated in September that it planned to obtain external financing from independent third parties to buy back the project, while noting that the company might be required to transfer or pledge its entire stake in Vauxhall Square to a designated entity.

Far East, the developer led by second-generation tycoon David Chiu, expects to bag a gain of £10.9 million in return for holding the project for less than five months.

Meanwhile, R&F has improved its liquidity in recent months by getting extra time to pay off some of its obligations, including successfully negotiating an extension on $5.1 billion in offshore bonds in July. The company was able to push out the maturity on its entire offshore obligation by an average of three to four years for bonds that had been set to mature over the next two years.