London’s ‘Cheesegrater’ Sold to Chinese Firm for $1.4 Billion
CC Land Holdings Ltd, backed by a Hong Kong property tycoon, has agreed to pay £1.15 billion ($1.42 billion) for a London skyscraper in one of the city’s biggest ever real estate deals.
British Land PLC and Oxford Properties Group, the real-estate arm of Canadian pension fund OMERS, said Wednesday that they sold the Leadenhall Building, known locally as the Cheesegrater for its triangular shape.
Investment in London property from China and Hong Kong has surged in recent months. A weak pound versus the yuan, alongside economic and political pressures at home, have been driving the acquisition spree.
CC Land Holdings, controlled by Cheung Chung Kiu, bought a different London office building for £292 million earlier this year.
At 736 feet, the Cheesegrater is the tallest tower in London’s main financial district. It was valued at £915 million at the end of September.
The deal is the biggest transaction of a single London building since Qatar’s sovereign-wealth fund bought the London headquarters of HSBC Holdings PLC for over £1.1 billion in 2014.
Investors from China and Hong Kong bought more than £3 billion of central London property last year, more than those from the U.S. or Europe, according to real-estate broker JLL.
The influx stands out because U.K. property transaction volumes have fallen sharply in the last year. Britain’s decision to leave the European Union, as well as high prices following a multi-year property boom, have made some overseas investors wary of current values.
But for Chinese investors, London property looks much different.
Currency has been a big factor. While the yuan has lost value against the dollar, it is up 12% versus sterling since the Brexit vote last June, making assets in the U.K. a bargain.
Yields on London property are also attractive relative to those in Hong Kong, a boon for investors hunting for returns in an environment of ultra-low interest rates at global central banks.
The average capitalization rate—a measure of yield—on offices in the City of London was 4.6% at the end of last year, according to Real Capital Analytics. In Hong Kong, the yield on offices was just 2.6%.
Worries that the Chinese property market is overheated, and the possibility that Beijing could impose more stringent curbs on outbound capital flows from China is also speeding efforts to invest overseas, further driving demand for London property.
Analysts for months have expected British Land to sell its 50% stake in the Cheesegrater. British Land said Wednesday it will use the money from the sale to pay down its debt.
The Cheesegrater’s 46 floors of office space are fully let. Completed in the summer of 2014, the building’s angled design stems from local planning requirements that preserve views of St. Paul’s Cathedral from certain vantage points.
“This sale shows continued investor appetite for best in class, well located property in London,” said Tim Roberts, head of offices and residential at British Land, in a statement.
( Source )