New World, FEC, Wharf Owners Marketing London Office Block

New World, FEC, Wharf Owners Marketing London Office Block

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3 St James’s Square

A private investment vehicle backed by some of Hong Kong’s biggest property tycoons has slashed the asking price for a prime office building in London’s prestigious St James’ district, after the property’s value fell as much as 18.5 percent from when the club of investors purchased the asset seven years ago.

Joint Treasure International, a fund backed by investors including New World Development’s Cheng family, Wharf Real Estate’s Woo family, and Far East Consortium International chairman David Chiu, is marketing 3 St James’s Square for £135 million ($172 million) after having previously put the asset up for sale in February 2022 at an asking price of £155 million.

Market sources told Mingtiandi that the property is now worth between £110 million and £115 million ($140 million and $147 million), representing a decline of 14.8 percent to 18.5 percent from the £135 million price paid by the investor club to acquire the asset in 2017.

Joint Treasure’s retreat from the St James’s area, where high profile Hong Kong investors including Chinese Estates and Lifestyle International made investments in the years leading up to the pandemic, comes as the city’s real estate bosses look to sell assets after being stung by property slumps both at home and in the UK.

Posh Location

Joint Treasure, which paid £2,649 per square foot to purchase the grade-A asset, is seeking to break even on its investment after cutting the asking price by 13 percent, with market sources indicating that the building is now worth between £2,159 and £2,257 on a per square foot basis.

Cheng Kar-Shun, NWDCheng Kar-Shun, NWD

Henry Cheng, chairman of New World Development

Situated a 15-minute walk from Buckingham Palace in London’s City of Westminster, 3 St James’s Square spans 50,954 square feet of floor space across nine floors and a basement level. The property is leased to media company Condé Nast as well as various investment firms, with the basement and ground floors currently vacant.

The 1934-vintage building currently commands average passing rents of £101.95 per square foot, according to marketing documents seen by Mingtiandi, with that rental price representing a 43 percent discount to average rents of over £180 per square foot in the St James’s area, where Singaporean state-owned investment firm Temasek, US private equity titan Carlyle Group, and Miami-based real estate investment firm Starwood Capital lease office space.

Exclusive Club

Established in 2008 by the late former BNP Paribas banker Daniel Yiu as a private equity fund to invest in overseas properties primarily on behalf of Hong Kong-based tycoons and their families, Joint Treasure is said to have been backed by nine core investors at the time of the 3 St James’s Square acquisition, with backers free to opt into or out of the vehicle’s property purchases based on their preferences.

The fund’s investor roster also reportedly includes the Wee family of Singapore’s United Overseas Bank, Lee Seng Huang of Kuala Lumpur-listed property firm Mulpha International, Tom Chan from the founding family of Hong Kong textiles company Crocodile Garments, and Arthur Liang from a family who were once major shareholders of The Hongkong and Shanghai Hotels, which owns and operates the Peninsula hospitality brand.

Joint Treasure’s other investments included an 8-acre site in Beverly Hills which the fund acquired in 2010 for $148.3 million and sold to Wang Jianlin’s Dalian Wanda Group in 2014 for a reported $420 million, as well as the Marriott London Grosvenor Square hotel, which it picked up in 2014 for £125.2 million.

St James’s Trophies

3 St James’s Square is one of several commercial properties in London’s St James’s area to have been scooped up by Hong Kong investors as part of an influx of Hong Kong and mainland Chinese investment into the British capital in the years preceding the pandemic.

In 2017, Joseph Lau’s Chinese Estates bought 11-12 St James’s Square from Malaysia’s Employees’ Provident Wealth Fund for £175 million, while Lau’s brother Thomas followed suit in 2020 with the purchase of 1 St James’s Square through his Hong Kong-listed department store operator Lifestyle International Holdings.

Pansy Ho, the eldest daughter of the late Macau casino tycoon Stanley Ho, sold 8 St James’s Square in 2021 to German financial services firm Deka Immobilien Investment GmbH for £223 million after having purchased the property in 2017 for £213 million.

With Hong Kong now mired in a protracted property slump and London’s office market battered by high interest rates and the rise of remote working, Joint Treasure’s partners have been selling off assets to shore up liquidity.

Citywide office investment volume in London fell by 45 percent year-on-year in the first quarter with the £1.3 billion in transactions during the period falling 62 percent below the 10-year quarterly average. During the first three months of the year vacancy climbed to 9.9 percent from 9.5 percent a year ago, according to Knight Frank.

In Hong Kong, values of grade-A office buildings have plunged 34 percent since 2019, according to JLL, while home prices fell to a seven-year low in the first quarter, down 23 percent from their 2021 peak.

Henry Cheng’s New World Development, which has seen its shares trade at all-time lows after slashing its dividend by 80 percent following a 25 percent revenue drop in the six months ended December, earlier this year raised its target for non-core asset disposals to HK$8 billion from HK$6 billion. During the past 18 months the company has divested the D-Park mall in Hong Kong’s Tsuen Wan area, the 695-key Pentahotel in Kowloon, and a 51 percent stake in a Cheung Sha Wan office project.

Meanwhile, Wharf continues to seek buyers for the Scotts Square mall in Singapore’s Orchard Road area, with the Hong Kong developer’s Singapore subsidiary having cut the asking price for the retail property to S$450 million from S$500 million when it began marketing the asset several years ago.

Last month, Far East Consortium sold a pair of sites in Manchester for £17.24 million while moving forward on a proposed spin-off of its Czech casino and resort business. The developer is also marketing a pair of Ritz Carlton hotels in Melbourne and Perth for a combined asking price of A$500 million.

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