The newly renovated Wan Tau Tong Square mall will soon have a new owner
A unit of China Resources Group has picked up the group’s fifth major Hong Kong property over the past year with its purchase of a shopping complex in the New Territories from mainland investor Hugo Lam Chi-fung for a record HK$1.36 billion ($170 million).
China Resources Enterprises, a food and beverage subsidiary of the central government-controlled enterprise, has entered into a sale and purchase agreement to buy Wan Tau Tong Square in Tai Po, eastern New Territories and add 77,000 square feet (7,154 square metres) of retail space to its portfolio, Lam told Mingtiandi on Thursday.
Lam, who is best known as chairman of local retailer Best Mart 360, sold the asset at a 60 percent markup from the HK$810 million he paid to acquire the asset, plus another HK$40 million that he spent on renovations, after picking up the community shopping centre from Hong Kong-listed Link REIT in 2016.
The deal marks the largest transaction of a standalone Hong Kong shopping centre in five years, or since December 2017 when Fortune REIT sold the Provident Square mall in North Point for HK$2 billion.
Community Mall Sells at Office Yield
China Resources is paying around HK$17,662 per square foot for the shopping complex that generates a monthly rental income of about HK$4 million. This income translates to a 3.5 to 3.6 percent initial yield on the acquisition.
Hugo Lam has done a rare profitable trade of a retail asset
The mall, which was known as the Wan Tau Tong Shopping Centre before being renovated, is home to providers of basic necessities including grocery retailers and restaurants like Chinese fast food chain Fairwood and also includes 414 parking spaces. The property is part of the Wan Tau Tong Estate – a public housing complex of over 2,600 residential units – situated at 10 Hiu Wan Road near the Tai Po Market MTR Station.
With renovations completed and the mall fully occupied, the new owner is understood to be planning to hold the asset for long term rental income as well as to beef up a Hong Kong real estate portfolio that already includes Sugar+, a newly built 28-storey commercial building in Causeway Bay which is located around 40 minutes’ drive away from the mall.
China Resources is buying the asset at a yield more commonly seen in office or logistics transaction, despite a retail slump. The trade of the New Territories shopping centre shows the “defensive” nature of community retail assets according to Eric Chong, director of capital markets research at Savills Hong Kong, at a time that the broader market suffered suffered its toughest quarter since 2020 during the first three months of this year, according to the consultancy’s research.
Negotiations on the transaction went on for a year before it was finalized according to Tom Ko, head of capital markets for Cushman & Wakefield Hong Kong, who also noted that the 3.5 percent yield fetched was “fair” for a community shopping mall. Mingtiandi understands that the deal was an off market transaction conducted directly by the two parties, with the deal expected to be completed within a month.
“The retail rental is stabilizing but we can’t see the trend until the border opens,” said Ko, “It is a good signal to see long term investors back to the retail market.”
Extended travel curbs continued to torment the retail market in the struggling Asian financial hub this year, according to newly released government data, with the overall value of retail sales in the city dipping by 3.1 percent year on year in the four months to April while the average monthly retail sales index fell by 6.1 percent during the same period.
Mingtiandi reached out to China Resources and Lam for comment but did not get a response by the time of publication.
State-Owned Shopping Spree
China Resources’ purchase of the shopping centre marked the fifth Hong Kong asset the conglomerate has purchased within the last year, after the group’s logistics division agreed to buy two warehouses from Kerry Properties last month for a total of HK$4.62 billion.
Last year, China Resources Logistics also picked up two industrial buildings in the New Territories from the family of late “Shop King” Tang Shing-bor for a total of HK$2.9 billion.
It bought the 15-floor East Asia Industrial Building (Phase One) at 2 Ho Tin Street in Tuen Mun for HK$2.24 billion in July 2021 which was quickly followed by its HK$695 million purchase of the Mineron Centre at 35-37 On Lok Mun Street the following month.
Lam Rebounds
The shopping centre disposal makes Lam, a prolific mainland investor transplanted to Hong Kong, one of the rare players to profit from a retail asset sale in recent months and comes four years after he teamed up with Hong Kong-listed Asia Cassava Resources to purchase the Queen Central commercial building in Sheung Wan for HK$1.1 billion in May 2018.
That 2018 acquisition came less than a month after Lam had snapped up an industrial site at 41 King Yip Street in Kwun Tong for HK$1.6 billion.
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