China’s CIC in £245 million RE deal

China’s SWF has reportedly bought the London headquarters of investment bank Deutsche Bank for £245 million, weeks after a CIC subsidiary bought a $724 million stake in Heathrow Airport.

China Investment Corporation (CIC), the PRC's $480 billion sovereign wealth fund, has completed its first direct office acquisition in London, according to reports in the UK national and property press.

CoStar News reported that the $480 billion state fund and joint venture partner Invesco Real Estate completed the purchase of Winchester House in the City of London for £245 million (€307.45 million; $391.88 million) from German open-ended fund manager KanAm.

The deal for the 310,000 square foot office occupied by Deutsche Bank, the investment bank, is understood to have reflected an initial yield of 5.6 percent. It is also believed to have been been an all equity structure with the majority coming from CIC.

According to the Financial Times, the property produces an annual rent of £14.3 million although it is subject to a break clause in 2018 when Deutsche Bank could relocate.

In October, a subsidiary of CIC acquired a 10 percent stake in Heathrow Airport Holdings (HAH), the UK airports operator formerly known as BAA, for $724 million, sister-publication Infrastructure Investor reported.

While CIC does invest indirectly, the state fund prioritises direct investments via ventures whereby it takes controlling positions. For more about its strategy, click here.

For KanAm’s part, the sale forms part of a strategy to exit its central London portfolio of prime assets with a view to focusing on European markets. The fund manager has already sold offices nearby at 90 High Holborn and at One Exchange Square.

It is also looking to sell 20 The South Colonnade in Canary Wharf, coincidentally where most of CIC’s exposure to London offices currently is. The state fund is one of the largest shareholders in Songbird Estates, which owns the majority of the Docklands office community.