China CITIC Bank contributes to a £188,700,000 GBP loan for the Royal Albert Dock (RAD) Phase 1 Project (Linked to Record ID#89648, #92486, #92487, #92488, and #89394)

Project narrative

On October 24, 2016, China CITIC Bank International Limited signed a £70,000,000 GBP loan five-year shareholder loan facility agreement with RAD Phase 1 Devco LTD — a special purpose vehicle (SPV) — for the Royal Albert Dock (RAD) Phase 1 Project (captured via Record ID#89394). Then, on December 29, 2016, a syndicate of five Chinese state-owned banks — the Beijing Branch of China CITIC Bank Corporation, the Beijing Branch of China Construction Bank Corporation (CCB), the Industrial and Commercial Bank of China (ICBC), the Head Office Banking Department of the Agricultural Bank of China Limited, and the Beijing Branch of Bank of China (BOC) — signed a £188,700,000 GBP senior loan facility agreement with RAD Phase1 Devco Ltd for the Royal Albert Dock (RAD) Phase 1 Project. This loan facility carried a maturity of five years and a grace period of two years; the first two years were the drawdown period and the last three years were the repayment period. The loan facility's interest rate was based on LIBOR plus a 2.6% margin. A £30,000,000 GBP drawdown was made from this facility on November 15, 2017. All five banks were senior lead arrangers, while the Beijing Branch of China CITIC Bank Corporation served as a mandated leader arranger and onshore security agent and the Bank of China (UK) Limited served as a facility agent, initial account bank, and offshore security agent. This loan facility also featured several credit enhancements, including an 85% Beijing Company Guarantee, a 15% CITIC Construction guarantee, Beijing property security, a 40% borrower share charge, and 95% Sinosure insurance coverage. In addition to the other two loans, an intermediate parent company of RAD Phase1 Devco Ltd, private Chinese company ABP (London) Investment Holdings Ltd., provided a five-year £40 million GBP loan facility in June 2017 for the Royal Albert Dock (RAD) Phase 1 Project, a value that was drawn down in full in 2017. The total cost of Phase 1 of the Royal Albert Dock Project was £318,700,000 GBP. In addition to debt financing, CITIC Construction, Charoen Pokphand Group, and Strawberry Star were responsible for providing equity contributions to the Royal Albert Dock Project. Stanhope acted as the development manager. On December 13, 2016, RAD Phase1 Devco Ltd signed a £222 million GBP general contract with CITIC Construction (UK) Limited for Phase 1 of the Royal Albert Dock Project. Per the contract, CITIC Construction (UK) Limited agreed to serve as the project's contractor and Australia-headquartered Multiplex Construction Europe Limited agreed to serve as the principal sub-contractor. The Royal Albert Dock Phase 1 Project (RAD) is located in Newham, London, located near Canary Wharf, the Olympic Park, O2 Stadium and ExCeL London. The entire Royal Albert Dock Project was expected to consist of six phases over 35 acres of land. Planned by the City of London as ‘the third financial center of London’, RAD was expected to create approximately 20,000 job opportunities and 1,000 apartments for businesspeople. This project was reportedly the largest greenfield project independently developed in a Chinese developer in the United Kingdom. Phase 1 was often referred to as the ‘Asian Business Port’, an area to serve as headquarters for Asian enterprises in the British and European markets. Phase 1 had a construction 638,900 square feet and included the construction of 20 A-type office buildings, 1 B-type office building, and an energy center and the renovation of two protected historical buildings and auxiliary facilities. On May 29, 2013, ABP (China) Holding Group Limited and Greater London Authority (GLA) held a signing ceremony for the project that was attended by then-Mayor of London Boris Johnson. At the ceremony, Johnson said that the project would serve ‘as a beacon for eastern investors looking west’ and usher in tens of thousands of new jobs and billions of pounds in investment to the United Kingdom. On October 21, 2015, during Chinese President Xi Jinping's state visit to the United Kingdom and in the presence of Xi and UK Prime Minister David Cameron, the CITIC Group and Advanced Business Parks Global (ABP) signed the general contractor agreement for the project. Then, on October 22, 2015, CITIC, Sany Europe, and ABP Global signed the Investment Cooperation Agreement on Equipment Leasing Company, in which the three parties agreed to establish an equipment leasing company for the Royal Albert Dock Project and other projects to provide equipment leasing for its implementation. CITIC Construction (UK) Limited was the engineering, procurement, and construction (EPC) contractor, and the Royal Albert Dock Project reportedly represented its ‘first implemented project...to explore the developed market’. Multiplex served as the principal sub-contractor, alongside 23 other sub-contractors. On March 28, 2017, RAD Phase1 Devco Ltd. issued an order of commencement to CITIC Construction (UK) Limited. Per the contract, four weeks after the issuance of the order, implementation on the project began on April 25, 2017. The planned construction period was 98 weeks (98 weeks from April 25, 2017 being March 12, 2019). The project was ultimately completed on April 11, 2019 with the issuance of the acceptance certificate. However, this project has been plagued by controversy. After ABP was awarded the tender to develop the Royal Albert Dock, allegations of an improper tender process surfaced. London’s then Mayor, Boris Johnson, claimed that an internal audit process conducted in 2014 would clamp down on these rumors, but the London Assembly motioned for an independent investigation. Specifically, the London Assembly noted concerns about ABP's human rights record in China, which was not considered during the evaluation for the tender and potential corruption. Additionally, even at the planning stage of the project, concerns about its profitability existed, but hopes that a large supply of Chinese funds would be sufficient limited the extent of these concerns. Still, in November 2013, the head of ABP (London) Investment Ltd, property developer Xu Weiping, stated that ‘There's no need for me to prepare £1bn in cash’ because ‘[t]he market is quite good.’ However, by 2019, even Xu admitted the project's struggles, which he attributed to the uncertainty created by Brexit; at the time, ABP was reviewing the future of the Royal Albert Dock Project. By 2020, Xu was also blaming increased geopolitical tensions for increasing the wariness of Chinese investors, the COVID-19 pandemic for increasing risk in the real estate industry, and the delay in the Crossrail train service, stating that there had been letters of intent for over 70% of the space in RAD, as well as deposits for those spaces. In August 2021, GLA served ABP with a Final Termination Notice on the Royal Albert Dock Project due to a lack of progress on the Royal Albert Dock Project, stating that ‘no significant activity, lettings or investment has been undertaken by ABP’ since the completion of Phase 1. Additionally, Deloitte LLP was appointed as receivers over six companies within the group structure of ABP. As of February 2022, it was expected ABP would likely be removed from the project unless it complied with the contract and delivery schedule; at that time, ABP's guarantor, Dauphin Holdings Group, also controlled by Xu, had formally stepped into the project. ABP (London) Investment Ltd was still attempting to try raise money for the project, while another country involved controlled by Xu admitted in its accounts that it failed to make contracted repayments on a £99 million GBP bank loan. The entire project was perceived by the media to be in its death spiral, while what ‘was meant to be a jewel in crown for east London…[is] now a ghost town’ in the words of London Assembly member Unmesh Desai. This project's past association with the eventual Prime Minister of the UK, Boris Johnson, also garnered considerable media coverage.