A Hong Kong herbal medicines producer has given the post-Brexit London office market a further restorative boost by acquiring the Walkie Talkie tower for £1.28 bn (€1.4 bn) - the largest office deal ever in the UK.
LKK Health Products Group (LKKHPG) - acting through its wholly owned subsidiary, Infinitus Property Investment, acquired 100% interest in 20 Fenchurch Street – aka the Walkie Talkie – from UK REIT Landsec and Canary Wharf Group.
Landsec - formerly Land Securities - and Canary Wharf Group completed the 37-storey office tower in 2014. The 66,240 m2 of leasable space is 100% let to investment grade tenants with an average of 13 years of income across the building. Both companies have agreed to sell their 50% stake to LKKHPG, valued at £641.3 mln (€718 mln) apiece.
'Our decision to sell 20 Fenchurch Street at an exceptional price and return cash to shareholders reflects our disciplined approach to the use of capital. The building has been an immensely successful project for Landsec and our partners,' commented Robert Noel, chief executive of Landsec. 'While we will be returning cash to shareholders as a result of the sale, our gearing will remain unchanged from current levels, ensuring we retain our significant firepower. This will allow us to move quickly to capitalise on opportunities whenever they might arise.'
Designed by Raphael Vinoly, the property also features the Sky Garden which has become one of the most popular visitor attractions in London.
LKKHPG, based in Hong Kong, is a herbal medicine manufacturer whose products include oyster sauce. The company is part of the Lee Kum Kee Group.
More Asian contenders
Eastdil Secured and CBRE managed the sale on behalf of the vendors.
It is believed that other Hong Kong-based investors including private dynasties were also in the running for the iconic office tower. Names that have circulated in UK press include Hong Kong-listed Chinese Estates and Asian Growth Properties, both of which have bought in London this year.
CC Land, the Chinese property company which bought the Cheesegrater building from British Land earlier this year, as well as Korea Investment Corporation and Singaporean investment company Temasek, have also been linked with the sale.
Cushman & Wakefield said it introduced LKKHPG to the deal and advised the Hong Kong firm through the acquisition of the property. The transaction represents a record for a single UK asset, surpassing the £1.175 bn (€1.32 bn) paid by the Qatar Investment Authority to acquire the HSBC Tower in Canary Wharf in December 2014.
'This record-breaking deal demonstrates the enormous investor appetite in London, and in the City’s reputation as the global place to do business. Since the vote to leave the EU, capital targeting London from the Asia-Pacific region has increased to record levels. This is partly due to currency fluctuations but is more indicative of longer-term confidence in London and investment strategies which are not derailed by short-term political uncertainty,' said James Beckham, head of London capital markets, Cushman & Wakefield.
While the two largest deals of the year have both seen deals in excess of £1.1 bn (€1.23 bn) from Hong Kong-based investors, capital from across the region is investing in London with buyers from Singapore to South Korea making acquisitions in recent weeks.
Expansion
Infinitus owns and manages 97,000 m2 of office and retail space in the central business districts of Guangzhou and Shanghai in China and the CBD in Hong Kong.
LKKHPG said that the Walk Talkie deal enabled the group to both achieve 'a reasonable return from rental income' and to extend its property portfolio to a major overseas financial centre for sustainable and stable capital appreciation. Therefore, the property will be held by as a long-term investment.
