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<\/p>\nIn the\u00a0City of London, 10 Fenchurch Street is the sort of nondescript office building you walk past without looking twice, its fa\u00e7ade grubby, no lights showing in the windows.\u00a0<\/p>\n
But its story comes with intrigue. The 78K SF office building is the latest to be subject to an asset freezing order from the UK government after its owner was hit by sanctions.<\/p>\n
That means it cannot be sold and must get special permission to collect rent.<\/p>\n
Commercial buildings in the City once valued at well above \u00a3500M have been subject to asset freezes over the past 15 years due to the actions of their landlords, be they individuals or governments.\u00a0<\/p>\n
Another\u00a0\u00a3100M in properties are owned by someone\u00a0on the UK sanction list due to family ties to the leader of Belarus but are not currently under freeze orders.\u00a0<\/p>\n
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\n Bisnow\/Mike Phillips\n <\/p>\n
\n The entrance to Jardine House, which is owned by a sanctioned government\n <\/p>\n
On a grey, rainy December day, the sort that reminds you why tourists make jokes about London weather,\u00a0Bisnow\u00a0toured some of the major office buildings that are frozen, and those with a sanctioned owner, to find out what happens when a commercial property is hit by such an order.\u00a0<\/p>\n
Britain, infamous for its history of stealing wealth and assets from around the world,\u00a0remains adept at offering refuge\u00a0to those who still do so. That often comes in the form of\u00a0money laundering via\u00a0commercial property.\u00a0<\/p>\n
An asset freeze on\u00a0a commercial building is more complex than one that involves intangible financial assets like shares or bonds. A building is a physical asset that requires maintenance, and its value derives entirely from rent paid by tenants.\u00a0<\/p>\n
It is the landlord entity that is subject to an asset freeze, which is put in place by the UK Treasury, Lucy Thomas, a Hogan Lovells\u00a0senior\u00a0associate for real estate disputes,\u00a0told\u00a0Bisnow.<\/p>\n
The freeze is indefinite, lasting as long as the sanctions do.\u00a0A building owned by a landlord subject to an asset freeze cannot be sold by that landlord. In theory, the government could sell a seized property, but that would open up legal challenges.<\/p>\n
That means it is common for frozen assets to sit in limbo for decades.<\/p>\n
If the sanctioned landlord wants to collect income or spend money on a building, they\u00a0must apply to the Office for Financial Sanctions Implementation for a license.\u00a0<\/p>\n
They might receive this license if they meet a basics needs test, proving that the money being received or spent is used to maintain the value of the building or keep the landlord entity solvent.\u00a0<\/p>\n
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\n Bisnow\/Mike Phillips\n <\/p>\n
\n 10 Fenchurch Street\n <\/p>\n
\u201cIn principle, they want to operate on the basis that they are preserving value in these assets, so that if or when the sanctions are eventually withdrawn, the effect of the sanctions is basically reversible,\u201d Thomas said.<\/p>\n
The goal is to generate just enough income to preserve the asset so it can be repatriated to the relevant country when sanctions are released.<\/p>\n
If the landlord doesn\u2019t have that license, then a tenant isn\u2019t allowed to pay rent, Thomas said. And even if the license is in place, tenants might see a reputation risk in paying money to a sanctioned entity and choose to either withhold rent or vacate the building.\u00a0<\/p>\n
The 10 Fenchurch Street office building is owned by a British Virgin Islands company linked to Cambodian national Chen Zhi. In a statement in October, the UK government described Zhi as the leader of a \u201cnetwork that operates illegal scam centres, which trick victims across the world out of substantial sums of money and torture their trafficked workers.\u201d<\/p>\n
Zhi and his associates built at least 10 compounds across Cambodia from where they ran online scams and to which workers were trafficked.<\/p>\n
They also accumulated a 19-property London portfolio with\u00a010 Fenchurch Street and some\u00a0residential assets.<\/p>\n
<\/p>\n
\n Bisnow\/Mike Phillips\n <\/p>\n
\n The lobby of 10 Fenchurch Street\n <\/p>\n