An ageing industrial building in Hong Kong’s Tsuen Wan district has changed hands for HK$1.23 billion ($157.5 million) – appreciating nearly 81,000 percent over the past 45 years – reflecting investor enthusiasm for the asset class as the city government mulls a reboot of the industrial revitalisation scheme that was discontinued earlier this year.
The price for the 23-storey Wong’s Factory Building equates to HK$4,300 ($551) per square foot for the 285,000 square foot (26,477 square metre), single-owner property. The book profit of HK$1.228 billion represents an 808-fold appreciation over the HK$1.52 million that the owner paid for the building in 1972, according to a report in the Hong Kong Economic Times.
Former Factory To Be Converted into Housing
The seller of the building is believed to be clothing maker Sweetmart Garment Works or affiliated individuals. Located at 368-370 Sha Tsui Road in the western New Territories, the site is zoned for conversion into a residential property spanning up to 86,000 square feet (7,990 square metres) under the Comprehensive Development Area scheme.
That would be 70 percent less floor space than the existing building, with a plot ratio of 4.5 for the 19,000 square foot site, a drastic reduction from the current plot ratio of 15. Seeking to relax the space constraints, the owner applied to rezone the site for hotel use in 2013, but the proposal was rejected.
Another Industrial Building Poised To Sell for $179M
This latest transaction comes after Hong Kong’s development secretary said in August that the government was considering relaunching a program to encourage the redevelopment of underused industrial facilities. An earlier such scheme which began in 2010 was suspended in March of this year.
Investors have taken note of the opportunity, with renewed interest in former warehouses and factories leading to at least one other major deal. According to the local media account, Grandeur Factory Building at 368 Kwun Tong Road is poised to sell for HK$1.4 billion ($179.3 million).
The 20,175 square foot site in the Kowloon East commercial area could be redeveloped into a 40-storey building with a maximum buildable area of 242,100 square feet, after modification of the entitlements. Although the property has been launched for tender with an asking price of HK$1.6 billion, or HK$6,600 per square foot, it is believed that a prospective buyer may have reached a deal to purchase the site at the lower price. The bidding process officially closes tomorrow (Thursday).