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What uncertainty? Chinese giant cites London’s “great potential” as it moves on £131m Docklands buy

By James Buckley - Tuesday, April 19, 2016 16:21

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Loss-making Chinese conglomerate HNA Group today said it was turning to the UK's capital to help turn its fortunes around, confirming it was advancing a £131m acquisition in Canary Wharf and adding that now is “a good time to seize the opportunity to explore the London property market”.

HNA, the owner of China-based Hainan Airlines, confirmed it had agreed a sale and purchase agreement with Brian and Mary Patricia O’Donnell’s Vico Capital to buy 17 Columbus Courtyard, E14, for £131m, plus around £9m in transaction costs.

The group yesterday paid a deposit of £13.1m to secure the deal, 50% of which it will lose if the deal does not complete by 1 September.

HNA will fund the acquisition through proceeds raised from a £246m rights issue last November and said it will complete its purchase by September, conditional on approval from shareholders and the Hong Kong Stock Exchange.

HNA said it had been “in a state of loss-making in recent years” and, as a result, has been attempting to diversify its business to include property investments in Hong Kong and overseas, including the UK.

In a note to its stock exchange, HNA said: “The Board considers it a good time to seize the opportunity to explore the London property market as London has become an attractive destination for overseas investors and the company considers that London will be a market with great potential.”

The news will come as a welcome shot to the arm for the London market which has suffered a lull in deal volumes so far this year, in part brought about by Brexit fears. Last week, Fubon failed to obtain regulatory approval to buy Cannon Place for £500m after Taiwanese regulators grew uncomfortable that Fubon’s portfolio was becoming increasingly weighted to London. However, the move was variously misreported as a sign of waning investor confidence in London.

Vico Capital instructed Knight Frank to sell the Canary Wharf office last October for £133m, reflecting a net initial yield of 4.75%.

The 195,443 sq ft 17 Columbus Courtyard, which was developed in 1999, is let to Credit Suisse until November 2024 at a rent of £6.4m with a tenant option to renew for a further 15 years.

Deloitte Real Estate is advising HNA.

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