Hanison Construction Holdings has agreed to purchase an industrial building in Hong Kong’s Kowloon East area just five months after the city’s government said it would reboot a program to encourage redevelopment of workshops, warehouses and go-downs for new uses.
Hanison, which specialises in redevelopment of Hong Kong’s aging buildings, entered into a sale and purchase agreement to acquire the Hay Nien Industrial Building at 1 Wai Yip Street in Kowloon’s Kwun Tong area for HK$489 million ($62.29 million), according to an announcement by the company to the Hong Kong stock exchange.
Hanison, which is controlled by the Cha family that also owns a majority stake in developer Hong Kong Resort International (HKRI), is paying the equivalent of HK$7,776 per square foot for the 62,889 square foot (5,843 square metre) property, however, the new owners can be expected to redevelop the current structure.
Buying into Hong Kong’s New Commercial Hub
The developer’s new prize commands a prominent location at the intersection of Wai Yip Street and Tai Yip Street in Kowloon East’s Kwun Tong area, across the street from Hoi Bun Park and set back one block from the waterfront promenade along Victoria Harbour.
In its statement to the stock exchange, Hanison said that the company considers the property to be a valuable investment opportunity that will enable it to enhance its portfolio. Wai Yip Street has become a centre for redevelopment activity in recent years as the former industrial hub in Kowloon East transforms into a prime commercial district.
In 2013, Gaw Capital Partners had acquired the Cheung Fai industrial building at 133 Wai Yip Street, which it later renovated and now leases as office space, including three floors occupied by high-end co-working provider Spaces. Further up the road at 164 Wai Yip Street, Pamfleet in 2016 sold another former industrial building for HK$560 million, with that sale coming two years after the real estate fund manager had purchased the property and then converted it into a creative office project named The Mark.
Finding a New Use for an Old Building
According to records accessed by Mingtiandi, the current owner of the property at 1 Wai Yip Street is Hay Nien Co Ltd, a privately held local firm engaged in trading and manufacturing. As a condition of the sale, which is expected to close in May of this year, Hanison agrees to lease-back three floors of the building to Hay Nien until the end of this year.
During last year, Hay Nien had sought planning permission to convert part of the property for retail use, but to date there is no record of approval having been granted on this request.
Besides the outgoing owners, other occupants in the building, which is currently used for logistics purposes, are primarily third party logistics providers, with all current leases in the building expected to expire by 2022. Current monthly rental income for the property is HK$605,000 according to the stock exchange statement. The transaction is said to have been brokered by property consultancy Savills.
Hanison Adds to Redevelopment Portfolio
Grade A Office space in Kowloon East currently leases for an average of HK$36.2 per square foot per month, according to the Cushman & Wakefield research team in Hong Kong, and the district is already home to an increasing number of financial services companies, including JP Morgan and Citibank. The agency reports that rentals in the area rose 7.2 percent in 2018, with further growth of 2-4 percent expected this year.
In 2015 Hanison had purchased an aging building in Kowloon’s Cheung Sha Wan area for HK$998 million via a joint venture with HKRI, before renovating the project now known as PeakCastle into a grade A office block. In early 2018 the developer sold a 50 percent stake in that project to private equity firm PAG for HK$800 million.
In March of last year, Hanison had teamed with an unnamed partner to purchase a seven-storey industrial building in Kwai Chung, in Hong Kong’s New Territories, for HK$720 million ($92 million), one of a series of acquisitions of industrial properties by the firm. The company has also been disposing of assets, including in May of last year selling a commercial building in Sheung Wan that it had acquired together with its partners at Angelo, Gordon and Co and later renovated, to a joint venture between mainland investor Hugo Lam and Hong Kong-listed Asia Cassava Resources for HK$1.1 billion ($140 million).