Chinese investors are expected to be first in line to acquire Lloyds Banking Group's London headquarters at 25 Gresham Street after media reports revealed that the UK lender is putting its 11,150 m2 City of London offices on the market.
A flurry of high profile real estate deals to Asian investors saw them become the largest London buyers in H1 2017, according to CBRE, having invested a total of £3.2 bn into the capital so far this year.
90% of that – £2.9 bn – was accounted for by Hong Kong and Chinese investors.
Lee Kum Kee (LKK Health Products Group), acting through its subsidiary Infinitus Property Investment, acquired the Walkie Talkie tower at 20 Fenchurch Street from UK REIT Landsec and Canary Wharf Group for £1.28 bn (€1.4 bn) in July, marking the largest office deal ever in the UK.
The sale of the Walkie Talkie came four months after Hong Kong-listed CC Land acquired the Leadenhall Building, known as the Cheesegrater, for €1.3 bn.
25 Gresham Street - one of the City of London's few 'island' sites - comprises 10 floors of office space, and was built by Grimshaw Architects in 2002. The property is expected to fetch a price in the region of £150 mln (€162 mln).
Sale-and-leaseback
Lloyds Bank returned to full private ownership in May of this year after the UK goverment sold its remaining stake in the bank, more than eight years after a state bailout.
Since the government first acquired shares in Lloyds in 2009, the group has focused on repairing its balance sheet, reducing its cost base and cutting international exposure. It instructed CBRE to unload a number of properties in sale and leaseback deals, divesting hundreds of branches over the past five years.
These have including the Herd portfolio, comprising 44 retail premises across the UK sold for £50.05 mln (€54 mln) at a net initial yield of 9.00% to LaSalle/Flodrive, and more recently the Frankel portfolio, divested to real estate investment company Aprirose in January of this year for £39.5 mln (€43 mln). The portfolio includes 44 high street banks operating under the Bank of Scotland, Halifax and Lloyds brands.
Chinese money
PropertyEU's sister publication, EuroProperty, reported last month that conversations in City of London property circles are increasingly turning, not to Brexit, but to how long ‘the Chinese money’ will last.
The Chinese government recently announced plans to curb domestic firms' large overseas investments, concerned that the companies involved may be taking on too much debt. A document released by the Chinese cabinet suggested that Chinese firms would be encouraged to sell overseas assets.
A number of potential vendors are therefore understood to be looking to close deals before China's state-owned banks start limiting new debt facilities.
Last week, Chinese investor Wanda Group's proposed €532 mln acquisition of the Nine Elms Square scheme in southwest London fell through, but they were replaced by Hong Kong-listed peers R&F Properties and CC Land Holdings, who closed the deal for the development site with St. Modwen Properties and Vinci Group.
