Gaw Buying Hong Kong Office Tower From Swire JV for HK$4.75B

Gaw Capital Partners has lined up the latest of its value-add real estate deals with the Hong Kong private equity firm agreeing to buy an office building in its home city from a joint venture between Swire Properties and China Motor Bus Company.

Through a vehicle owned by its Gateway Fund VI, Gaw Capital says it will pay HK$4.75 billion ($605 million) for 625 King’s Road, a 26-storey commercial tower in Hong Kong’s North Point area, according to announcements yesterday by Swire Properties and its partner.

The purchase of the 1998-vintage tower comes just over three months after the fund manager agreed to buy a Singapore office building completed the same year, and six month after Gaw took a 49 percent stake in a $1.9 billion buyout of Swire’s CityPlaza Three and CityPlaza Four, a pair of circa 1992 projects in Taikoo Shing.

Selling Old Buildings for New Cash

At the stated acquisition price for the 301,065 square foot (27,969 square metre) property, the Gaw fund is paying the equivalent of HK$15,780 per square foot for the office building and the 84 parking spaces tucked away in its two basement floors.

In its filing to the Hong Kong Stock Exchange, China Motor Bus indicated that the disposal of the property followed an unsolicited offer from the purchaser, which it identified as a “a special purpose vehicle of Gateway Real Estate Fund VI.”

The seller is a 50-50 joint venture between Swire Properties and China Motor Bus, a former transport operator which now seems to derive much of its income from working with Swire to redevelop its former bus depots into commercial and residential towers.

In the notice to the exchange, Swire Properties said that it has agreed to sell its 50 percent interest in the project for HK$2.375 billion, while China Motor Bus will simultaneously sell its half-stake for the same amount.

Partners Teaming Up for More Deals

In October last year Swire and China Motor Bus won a permit to convert a former bus facility in Chai Wan into a pair of 36 and 38-storey residential towers, and in April last year the duo topped out South Island Place, a 28-storey office tower in Wong Chuk Hang.

Swire, which turned a portfolio of former sugar refinery sites, shipyards and other facilities into one of Hong Kong’s most valuable commercial property portfolios, said this latest disposal will enable it to realize cash from its investment in the asset, and that the proceeds will be applied towards the company’s general working capital requirements.

The property in Hong Kong island’s eastern district is about 350 meters from the Quarry Bay subway station and currently leases for an asking rental of HK$38 per square foot per month, according to a property listing by JLL.

Both Swire and CMB expect to recognize a gain from the disposal of approximately HK$965 million each, with CMB citing an independent property valuer as indicating that the tower has a book carrying value and fair value of approximately HK$2.82 billion.

Gaw Takes on Latest Office Project

Gaw’s purchase of the Grade A asset in Hong Kong’s North Point comes just over six months after the firm took a 49 percent stake in a $1.9 billion buyout of Swire’s Cityplaza Three and Four, with that investment also managed under its Gateway Real Estate Fund VI.

The firm, which got its start in when founder Goodwin Gaw purchased and subsequently renovated Los Angeles’ Roosevelt Hotel, followed up in February by acquiring Robinson 77, an office building in Singapore’s Tanjong Pagar area, from a fund managed by CLSA Capital Partners for a price said to be approximately S$710 million ($526 million).

The company has yet to make a public statement regarding its plans for 625 King’s Road.