Defaults, Walkouts And Sales: Chinese Developers Feel The Heat On UK And U.S. Projects

One of the largest development schemes in London has gone into administration, the UK version of Chapter 11 bankruptcy, the latest in a string of schemes in which Chinese developers have been hit by debt issues, had rows over payments or were forced to sell out once-grand visions. 

Administrators from Deloitte were appointed to the 700K SF first phase of the Royal Albert Dock scheme in east London being built by developer ABP, React News reported.

Big Chinese names, including R&F, Greenland Group, Shimao and Oceanwide, have also been in the news recently regarding schemes outside of their home market. Some of these troubles predate the liquidity crunch precipitated by the Evergrande crisis; in other cases, overseas sales were precipitated by trouble at home.

Here are the situations to watch.

ABP

Last year Bisnow revealed that ABP, the developer behind the 4.7M SF, £1.7B multiphase Royal Albert Dock office scheme, was forced to bring in £60M in new funding from Hang Seng bank to refinance part of a construction loan on the first phase of the scheme, which was due to mature. The first phase was largely completed in summer 2019, but it is almost entirely empty.

ABP has fallen out with joint venture partner and lender Citic, React said. Now Hang Seng has brought in administrators from Deloitte in order to take control of the first phase of the scheme. Savills has been appointed to sell six office buildings in the first phase, totalling 133K SF. 

R&F

Construction workers on the One Nine Elms scheme being built by Chinese Giant R&F walked off the site this week, with work on the scheme having stopped for as long as three months.

Construction News reported that R&F failed to make payments to principal contractor Multiplex. It said a joint announcement from the two companies was expected. In the meantime, R&F said in a statement: “Work is continuing at One Nine Elms while we discuss a set of issues with Multiplex to ensure a successful completion of the development.”

One Nine Elms, near Vauxhall in south London, comprises two towers of 56 and 42 storeys that will include 730K SF of residential apartments and a 173-room luxury hotel. 

In January, R&F agreed a payment deferral on $725M owed by its Hong Kong division, a move that put it in “selective default,” S&P said. The Telegraph reported in November that R&F had sold fewer than 1 in 15 of the flats at another of its London schemes, Nine Elms Square. R&F said it sold 1 in 3 of the properties that had been marketed.

Shimao

Hui Wing Mau, the chairman of Shanghai-based developer Shimao Holdings, is in talks to sell a vacant 303K SF London office building previously leased to Goldman Sachs for £340M, React News reported.

Shimao announced in January it had defaulted on a domestic loan after missing a $101M payment. It denied media reports it was selling a major office complex in Shanghai, but it said it was looking at the potential disposal of other assets to repay debt. 

Hui Wing Mau bought the Christchurch Court office building in London for £270M in 2015, at which point Goldman had five years left on its lease. The bank moved into a new HQ in 2019, and the owner has undertaken a refurbishment of the property while it has been vacant. React said it was in talks with both a tenant to lease the space and a potential buyer. 

Greenland Group

Chinese developer Greenland Group is selling one of its major London residential development sites and seeking to cut back on the affordable housing at another in an effort to make a bigger profit.

EG reported in April last year that Greenland had appointed Knight Frank and CBRE to sell the second and third phases of the redevelopment of the former Ram Brewery site in Wandsworth, south west London, for £40M. The phases have planning consent for 375 flats. 

In Docklands, it is seeking to cut 96 of the 156 affordable units it agreed to build as part of the 896-flat Spire residential tower. The Spire is supposed to be one of the UK’s tallest towers, but despite receiving planning consent in 2016, it remains a hole in the ground. 

In a letter to Tower Hamlets council, Greenland said that if it built the affordable homes, it would make a profit of £8.8M, much lower than expected. Greenland said if it did not, it would make a profit of £50M. 

Oceanwide

The travails of Chinese developers abroad are not limited to the UK. In January Bisnow reported Oceanwide had defaulted on a $175M loan secured against a site in the South Street Seaport area of lower Manhattan earmarked for a mixed-use skyscraper. Oceanwide had been trying to sell the site for three years. In October, lenders took over a semi-completed but stalled project in San Francisco.