Chuang's China exits London office for €107m, citing Covid-19 and Brexit

A private Hong Kong family office has acquired 10 Fenchurch Street in the City of London from Chuang's China Group for £94.2 mln (€107 mln).

The deal was signed by a private vehicle of Hong Kong's Mighty Divine Investments, dubbed Retain Prosper Limited, which was incorporated in Hong Kong in November 2019.

The property is fully leased and generates an annual rent of about £4.1 mln. According to the vendor, Hong Kong peer Chuang's China, the asset was valued at £96.5 mln on 31 March by an independent valuer, nearly £8 mln less than its book valuation of £104 mln as of 30 September 2019.

Brexit and Covid-19
Chuang's China announced in its 2020 interim report (published in October) that it had decided to 'consider disposal of this property', mentioning Brexit concerns and a strategy to pursue a 'cash is king' principle.

In a note regarding the sale, the firm cited the global pandemic as also influencing its decision on the deal. 'Since the outbreak of Covid-19 and the accelerating confirmed cases across the globe, the macro-economic outlook has become gloomy and uncertain with increasing concerns over investment activities,' it said.

Chuang's China furthermore reiterated that Brexit was still a worry with 'its related uncertainties over regulatory, labour and trade relationships with the European Union affect(ing) the businesses and investment sentiment'.

The firm acknowledged that the asset's sale price was below both the September book value and the more recent March appraisal, but had concluded that the disposal would in any case unlock a premium of around 19.1% over the original acquisition cost.

Deal history
The freehold EC3 property was acquired by Chuang's China in 2016 from Standard Life for around £80 mln, at the time representing a net initial yield of 4.4%. It represented Chuang's China first - and ultimately only - deal in London. Chuang's China has around £48.7 mln of debt tied up in the property, which will be repaid on completion of the deal.

The closing - conditional on Chuang's China shareholders approving the disposal - is slated for the beginning of September.

The multi-let office comprises some 7,200 m2 of office and retail space and was built in 1983. It was renovated 10 years ago by Standard Life in a project led by John Robertson Architects which added 1,750 m2 across two further office floors and retail space at ground level.

Standard Life acquired the building for £38.8 mln in August 2006.

 

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