Macau Investor Tries for 23% Mark-Up One Year After Buying on Sheung Wan Building

A consortium of Macao businesses is reportedly putting the Bonham Circus building in Sheung Wan on the market for HK$2.1 billion, a 23 percent premium over the price they paid for the property just one year ago.

Reports of an attempted sale of the building occupied by WeWork subsidiary naked Hub come two months after capital values for Hong Kong office assets fell for the first since the third quarter of 2013.

According to Hong Kong’s company registry, a company directed by Macao-based Lao Im Ha, took ownership of the building in February of last year. Lao is the wife of Sio Tak Hong, Chairman of Hong Kong-listed developer Capital Estate Limited.

A previous version of this story said Similan Group Chairman Lucas Lo was at the head of the consortium purchasing the property, taking as reference a January 2018 story published in Mingtiandi, which cited Sing Tao Daily as the source of that information. 

Investment values for office properties in the city are expected to continue on a downward trend, falling a further 5 percent in 2019, amid slower demand from mainland buyers, according to a January CBRE report.

Office investment volume in the last quarter of 2018 was HK$5.1 billion, 71 percent below the city’s HK$17.7 billion three-year quarterly average.

Should the consortium succeed in finding a buyer, the building would have changed hands three times in less than three years.  If the building goes for the asked for price, the consortium would be locking in a 23 percent jump in value over the price it paid in January 2018, even though market prices and transaction volumes in Sheung Wan slid in that same period.

Hoping for High Returns in a Slowing Market

Completing the deal would mean that Lao would have successfully swum against the tide in the area just west of Central. The average per-square-foot price for sales of over 1,000 square feet in Sheung Wan fell nine percent between the beginning of last year and the beginning of 2019.

There was an even more radical drop in the volume of properties sold in the area during the same period. In the past three months, only five transactions of over 1,000 square feet with a total value of HK$226 million were recorded in the district — a 79 percent drop compared to the period from October 2017 through January 2018, when 24 transactions worth a cumulative HK$1.12 billion were recorded.

The 70 percent markup the building achieved between August of 2016 and January of 2018 exceeded the average increase in value in the area, but was in line with the market’s direction, as prices in Sheung Wan increased by approximately 40 percent in that period, according to data from Hong Kong brokerage Midland Realty.

naked Hub’s Sheung Wan Home on the Market

The stiletto-shaped building is located at Bonham Strand, near the Sheung Wan MRT station and Des Voeux Road West. The tower is home to the first Hong Kong location of co-working operator naked Hub, which leased the lower 15 floors of the property in 2017 before being acquired by WeWork last year.

The grade B office block has a total floor area of 88,000 square feet (8,175 square metres), which puts the seller’s asking price at just under HK$24,000 per square foot.

The largest real estate deals in the Greater Central area, which includes Sheung Wan, the traditional business district of Central and Admiralty, in the fourth quarter of last year were the HK$1.1 billion sale of the 49th floor of The Center — around HK$46,648 per square foot — and the HK$1 billion sale of the 38th floor of Lippo Centre Tower 1 which traded at HK$ 55,294 per square foot.

Sheung Wan Asset Passed Along

Formerly known as the EIB centre, Bonham Circus was purchased for HK$1 billion in 2016 by Pamfleet, a private equity real estate firm led by British private equity veteran Andrew Moore. The Sheung Wan-based company renamed the building, leased half of the space to NakedHub, and spent an undisclosed amount replacing exposed walls, refurbishing the lobby, and performing other renovations.

Less than two years later, the private equity firm, known for repositioning commercial projects sold the rebooted tower to the Maraco consortium at an HK$700 million profit.