Chinese conglomerate Citic Group is in advanced talks with developer ABP to buy a 20% equity stake in its £3bn Royal Albert Dock scheme, E16.
It will pay £100m for the stake in the 4.7m sq ft scheme. The cash will be used alongside £400m of other equity to help fund the £1.7bn build cost. The remainder of the construction fees will be funded using debt, the exact level of which will be dependent on cash raised from the forward sale of elements of the mixed-use development.
It is understood that Citic Construction is also in talks to acquire a UK construction company as it seeks to gain a foothold in the European development market, allowing it to bid for work tendered under Official Journal of the European Union rules. The contractor on the Beijing Olympics’ Bird’s Nest stadium will not, however, be involved in the procurement process for the Royal Albert Dock scheme.
State-run Citic is one of the largest companies in China and owns more than £35bn of assets. Formerly the China International Trust and Investment Corporation, it has more than 44 subsidiary companies, including Citic Construction, China Citic Bank and the Guo’An Football Club in Beijing.
The acquisition comes at a disconcerting time for the roller-coaster Chinese economy, which has seen the renminbi devalued dramatically, curtailing Chinese companies’ spending power overseas. However, investments by Chinese conglomerates into major overseas projects such as Royal Albert Dock diversify their interests away from domestic activities.
Citic is the second investor to buy an equity stake in the scheme, which ABP wants to become “London’s third financial district”.
Earlier this year, Singapore-based residential developer Strawberry Star took an 8% stake in the scheme for £40m, essentially buying 50% of the residential component. ABP is understood to be considering selling more shares in the scheme, although it wants to retain a majority stake.
Royal Albert Dock covers 35 acres and will provide 3.3m sq ft of office space, 936,000 sq ft of residential, and 480,000 sq ft of shopping and leisure facilities. ABP signed a deal with the GLA, which owned the land, to develop the site in November 2013.
So far, 13 companies have signed up to occupy office space in the first phase of the scheme, including Savills, Globe Group, David Tang & Co Solicitors, German Pool, New Zhong Yuen Group, CDL Group and China Insurance Consultants – a subsidiary of China Taiping Insurance.
