One of China’s biggest developers has sold a flagship London project, in the latest sign that Beijing’s squeeze on the real estate sector is triggering a sell-off of assets beyond the country’s borders.
Shanghai-headquartered Greenland Holdings touted a £ 600mn development opportunity when it purchased the Ram Brewery site in south-west London in 2014 for about £ 140mn, its first investment in the UK. The deal was agreed during a push by then Prime Minister David Cameron and then London Mayor Boris Johnson to encourage Chinese investment.
Greenland is now backing away from the scheme having sold more than 300 homes. It has sold the remainder of the project to British housebuilder Berkeley Group for about £ 40mn, according to two people close to the deal.
Greenland, which confirmed the sale on Thursday, is the latest Chinese developer to abandon its once-grand UK ambitions in order to raise capital to repay debts. The sector has been hit by a liquidity crisis and the collapse of Evergrande.
Almost half of China’s 30 biggest developers including Greenland were in breach of at least one of Beijing’s recently introduced rules on property sector leverage, according to a Financial Times analysis.
Other Chinese developers have defaulted on loans and stopped paying bills on London projects as Beijing cracked down on the highly leveraged sector. One of the largest projects – the Royal Albert Dock development owned by Beijing-based Advanced Business Park – is on the brink of collapse after creditors appointed administrators to recover unpaid debts last week.
Greenland’s other London project – an undeveloped site in Canary Wharf originally intended to be western Europe’s tallest residential tower – has been stalled for years.
Last week, Shanghai-based Shimao sold a £ 370mn office complex, close to St Paul’s Cathedral in the City of London, to Goldman Sachs, which had previously leased the building, according to React News. Shimao bought the complex in 2015, its first purchase in the UK, for about £ 270mn. Shimao said in January it had defaulted on a domestic loan and would consider selling more assets “in order to reduce the indebtedness of the group”.
“With the fallout from Evergrande, they have to divert resources to make sure home buyers and home banks are looked after and deficits are repaired,” said the head of real estate at a large UK law firm.
The retrenchment is a major shift for Chinese developers, which plowed £ 3.5bn into UK commercial and residential property between 2013 and 2018, according to Real Capital Analytics.
“Chinese and Hong Kong investors were about 25 percent of the commercial market five years ago; that’s just stopped, ”said Andrew Hawkins, international partner at Cushman & Wakefield.
Meanwhile, Guangzhou R&F, a Chinese developer that was placed in restrictive default last month, has failed for months to pay workers on one of its largest projects, One Nine Elms, according to a person close to the matter. All major construction work at the £ 900mn site in Battersea was suspended last week by contractor Multiplex.
In a joint statement, R&F Properties and Multiplex said they “remain fully committed to jointly and successfully completing One Nine Elms”.
R&F is developing four London projects collectively worth about £ 2bn through its subsidiary R&F Properties.
Hang Seng, a lender to the sprawling Royal Albert Dock office development, appointed administrators over part of the project this month after it defaulted on loan payments. In 2013, ABP was awarded a contract to develop the empty site in east London into offices, homes and shops in a £ 1.7bn flagship deal by Johnson when he was still mayor.