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London building just broke a property price-tag record

Finance Markets / Latest Activity


Jul 28 2017

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Jack Sidders

Originally published in Bloomberg

Land Securities Group Plc and Canary Wharf Group Plc agreed to sell the skyscraper known as the Walkie Talkie to Hong Kong-based LKK Health Products Group Ltd. for 1.28 billion pounds ($1.7 billion), according to a statement Thursday.

The price, a record for a single U.K. office property, is remarkable given that the building will face ongoing maintenance costs, JPMorgan Chase & Co. analysts including Tim Leckie wrote in a client note. LKK, which sells Chinese herbal medicines, paid a 13 percent premium to book value for the property even as Land Securities’s shares trade at a 26 percent discount, he said.

Asian investors have poured into London’s office market in the year since the Brexit vote, capitalizing on the weak pound to buy towers for record-high prices. Hong Kong real estate developer C C Land Holdings paid 1.15 billion pounds for the Cheesegrater tower in May.

The Walkie Talkie sale, at a 3.4 percent yield, “crystallizes the significant value we have created,” Land Securities Chief Executive Officer Rob Noel said in a statement. The U.K.’s largest real estate investment trust said it plans to return about 475 million pounds to shareholders from the 641.3 million pounds it expects to raise from the sale.

The 37-story tower at 20 Fenchurch Street cost 474 million pounds to build and the sale price therefore reflects a “truly remarkable” 167-percent profit on the development cost, Leckie wrote.

Canary Wharf Group originally instructed CBRE Group Inc. and Eastdil Secured to sell a 50 percent stake in the property in March. LKK, which was advised by broker Cushman & Wakefield Inc., subsequently agreed to buy the entire building. The company is acquiring the property through its Infinitus Property Investment (Hong Kong) Ltd. unit, which owns real estate in China and Hong Kong.

LKK Health Products Group was founded by the Lee Kum Kee family, whose main business sells a variety of condiments, in 1992. The original founder of the Lee Kum Kee group is credited with inventing oyster sauce. LKK plans to hold the building for the long-term, the firm said in a statement. Land Securities said it expects the unconditional transaction to be completed next month.

Separately, Gerald Ronson’s U.K. property company plans to sell its stake of about 33 percent in the City of London office building at 110 Bishopsgate, a person with knowledge of the matter said, as overseas investors pay record values for properties in the financial district.

SOURCE: Bloomberg


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