By Emmanuelle Khoo
All photography – Anparasan Photography
Lee Kum Kee Group is one of many Chinese companies keeping faith in the UK market, seeing the attraction and potential benefits of striking prominent deals and investing in UK properties despite Brexit and Beijing’s clampdown on capital controls. The Chinese group not only has a finger in UK’s commercial property pie but also in familiar food chains, retail and more.
When President Xi Jinping made his state visit to UK and met ex-Prime Minister David Cameron in October 2015, his visit marked the dawn of a “golden era” – the beginning of a stronger bilateral relationship. In 2016, China became UK’s fourth largest trade partner, right behind Germany, the US and the Netherlands. Soon, China seemed to have solidified its position, set to provide as much as 7% of UK’s electricity through developments such as Hinkley Point power station. However, following the appointment of Prime Minister Theresa May’s and the UK’s impending withdrawal from the EU, this “golden era” between the UK and China may have lost its lustre. But is this scepticism merited?
Faced with the uncertainties of Brexit and China’s slowdown in outward investment, one would assume Chinese investments in the UK would slow down overall. However, according to the latest research by Grant Thornton, Chinese-owned companies in Britain have enjoyed a triple-digit growth. The UK is still a favored destination for acquisitions by Chinese companies, especially when investing in the real estate sector, followed by the consumer sector, financial services, oil and gas, and healthcare. It is true that commercial property values have fallen considerably since UK has voted to leave the EU, but the Hong Kong and mainland Chinese investors have shown no sign of being deterred so far. Six months leading up to the Brexit vote, Chinese buyers poured in £1.3bn into London commercial property market. At the very least, it suggests Brexit may not spell doom and gloom for inward Chinese investment.
Lee Kum Kee Group, the inventor of the oyster sauce and producer of more than 200 types of our favourite condiments, is one of many Chinese companies which still finds the UK commercial property market attractive. The Hong Kong-based company recently bought London’s “Walkie Talkie” tower for £1.3bn. Designed by Rafael Viñoly Architects, the sixth-tallest building in London has 1.4 million square feet of office, retail and commercial space and features the famous Sky Garden, one of the city’s most popular tourist attractions.
Lee Kum Kee Group isn’t the only Chinese company investing in iconic London buildings:
CC Land, a Hong Kong-listed company controlled by Cheung Chung-kiu bought Rogers Stirk Harbour + Partner’s Leadenhall Building, a.k.a. the “Cheesegrater” for £1.15bn, the second-biggest ever sale of a UK building.
Beijing Capital Development Holdings, a state-owned group offered more than £200 million for 30 Crown Place, a 16-storey office building in London EC2, close to Liverpool Street station.
Asian Growth Properties (AGP), a investor and developer of commercial, retail and residential properties in Asia, bought 20 Moorgate for £154m, where they are as good as neighbours with Standard Chartered Bank, Bank of China Limited, Union Bank UK, Santander and others.
Chen Hongtian’s Cheung Kei Group made a £410m acquisition of 20 Canada Square, a 12-storey office building at London’s financial district, Canary Wharf, making this the biggest real estate deal in the area since 2014. This building was designed by Skidmore, Owings & Merrill.
It comes as no surprise that investing in the UK property market appears to be more economical to a Hong Kong or mainland Chinese investor, be they state-owned enterprises, corporations or ultra-wealthy individuals. With a weaker pound, London property is now more affordable than before. According to Thomas Lam, Head of Valuation & Consultancy at Knight Frank, there are comparatively few premium Grade A office buildings in Hong Kong going for less than HK$20bn (£1.95bn). An attractive rental yield is another factor for the Chinese investors who favour the low borrowing costs which currently prevail in the UK. Speaking for the Hong Kong investors, Denis Ma of Jones Lang LaSalle (JLL) said, “the yield on a prime office building in London is typically 3.5%, compared with just 2.9% in Hong Kong…While local investors are looking to exit the UK market because of softening rents, Hong Kong investors remain upbeat on the market.”
It isn’t just the iconic London buildings that are getting snapped up by Chinese property tycoons. On a smaller-scale, Chinese investors either have outright ownership or controlling interest in many of UK’s most familiar names such as Barclays, Weetabix, Pizza Express, Thames Water, House of Fraser, Thomas Cook Group and more (according to The American Enterprise Institute/The Heritage Foundation). A few of China’s self-made billionaries have been investing in Britain’s football clubs as well. Lai Guochuan, controlling shareholder and director of Yunyi Guokai (Shanghai) Sports Development Limited completed a £175m takeover of West Bromwich Albion F.C. from Jeremy Peace in 2016. The same year, Xia Jiantong, head of the Recon Group, snapped up Aston Villa.
The UK-China relationship may be tested further as the article 50 negotiations conclude and UK adapts itself to a new trading environment. Either way, the UK has managed to secure billions worth of infrastructure and property schemes thanks to the “golden era”, and this is likely to continue, since both countries aim to deepen capital markets and strengthen economic ties. Only time will tell how far these arrangements favour Chinese investors. For now, London properties remain attractive and the “golden time” may still prevail a little more for Chinese property tycoons.