Angelo Gordon Plans Redevelopment of Hong Kong Industrial Building as Data Centre

New York-based private equity group Angelo Gordon could be on its way to building a 20-megawatt data centre in Hong Kong’s New Territories, having last month submitted a second redevelopment application in three months to the city’s Town Planning Board, said sources familiar with the matter.

The fund manager in May proposed to boost the maximum plot ratio of its Gemmy Development Industrial Building by 20 percent to 11.4, which could make way for redevelopment of the Tuen Mun building into a 169,628 square foot (15,759 square metre) data centre, according to the application document.

“There are limited en-bloc acquisition opportunities for both data centre investors and operators, due to stiff competition for industrial assets for long-term rental holding, conversions or redevelopment, and especially for new economy usage, such as self-storage, cold storage and data centres,” said Eric Chong, director of capital markets research at Savills Hong Kong. “As a result, we may see data centre investors and operators looking for redevelopment opportunities in traditional industrial areas like Fanling and Tuen Mun.”

Representatives from Angelo Gordon declined to comment on the application when contacted by Mingtiandi.

Turning to Tuen Mun

Angelo Gordon is reported to have purchased the 1979-vintage building that occupies the site from an unnamed seller for HK$500 million ($63.7 million) during the first quarter of last year. Should the fund manager win approval for its application and begin to redevelop the property, the industrial building could become Tuen Mun’s first en-bloc data centre, market sources told Mingtiandi.

The nine-storey building at 3 Kin Tai Street spans a 14,875 square foot site in the traditional industrial district of Tuen Mun, which is still in its nascent stages as a data centre market compared with server facility clusters such as Kwai Chung and Shatin.

Last year, Tuen Mun attracted fund managers such as SilkRoad Property Partners, which in September acquired Block C at the Hang Wai Industrial Centre — just doors down from Angelo Gordon’s Kin Tai Street industrial building — through a series of purchases totalling over HK$1.3 billion.

Two months before that deal, Tuen Mun was also the site of what ranked as Hong Kong’s largest industrial deal of 2021, when a unit of mainland conglomerate China Resources bought the East Asia Industrial building from Stan Group for HK$2.24 billion.

Industrial Sector Steady

From January to May this year, transactions for at least a 30 percent ownership interest in industrial properties totalled HK$9.49 billion, up 9.7 percent from HK$8.65 billion in the same five months of last year, according to Savills’ Chong.

The increase was driven in part by big-ticket deals such as Nuveen paying a reported HK$2.88 billion in April to acquire the Cargo Consolidation Complex in Kwai Chung, and China Resources Logistics buying a pair of warehouses from Kerry Properties for a total consideration of HK$4.62 billion in May, Chong added.

“Since 2019, there have been a total of eight applications submitted to the Town Planning Board for the redevelopment of industrial buildings into data centres, including Angelo Gordon’s, with a combined gross floor area of 2.01 million square feet upon completion,” Chong said.

Tom Ko, executive director and head of capital markets for Greater China at Cushman & Wakefield, expects industrial property owners to continue converting buildings for other uses, driven by industrial revitalisation policies that encourage redevelopment by charging standardised premiums for land-use modifications.

Asia Opportunities

Angelo Gordon’s latest redevelopment application came after it filed the official paperwork for its AG Asia Realty Fund V with the US Securities and Exchange Commission in April this year.

About three years before that filing, Angelo Gordon in September 2019 raised $1.3 billion for its AG Asia Realty Fund IV, the fourth in the company’s series of Asia opportunistic funds, which focus on development opportunities in Japan, South Korea and Greater China.

The firm, which has acquired $10 billion worth of properties in Asia since it began investing in the region in 2005, also submitted another redevelopment application in March to boost the plot ratio of its Edge industrial building in Kwai Chung by 20 percent.