Hanison Construction Holdings is seeking a buyer for a newly refurbished commercial property in Kowloon valued at HK$370 million ($48 million) – more than double the price the company paid for the property in 2017.
Payson Cha’s Hong Kong-listed firm has put 99 Lai Chi Kok Road on the market after completely renovating the 15-storey property and rebranding it as The Edward, according to sole agent Savills.
The move to sell the asset comes four days after Hanison warned shareholders that its net profit attributable to shareholders for the year ended 31 March 2020 could be 65 percent lower than the corresponding period in 2019, as Hong Kong’s property market continues to take a battering after a year of disruption.
Capital and rental rates in the Asian financial hub have fallen by up to 25 percent from their mid-2019 peaks following anti-government protests and the coronavirus pandemic, with values expected to dip further before the year is over, according to market analysts.
Selling a Newly Renovated Building in Mong Kok
Located a five minute walk from the Prince Edward MTR station in Mongkok, Hanison is asking the equivalent of HK$13,037 per square foot based for the 28,380 square foot (2,637 square metres) property.
That price is around 55 percent more than what the investment firm paid to acquire the 15-storey building in the mid-market Kowloon neighbourhood in June 2017.
In that deal three years ago, Hanison paid HK$166.4 million for the property, buying it from the executors of the estate of private investor Li Yu Yee, who had owned it for 48 years.
Hanison had said at that juncture that it would spend HK$20 million to renovate the building, aiming to increase its rental potential from the HK$317,000 aggregate monthly rental income it generated at the time.
Targeting Retail Tenants
Currently vacant, Hanison is making the property available on an “as-is” basis, with Savills promoting the for potential use as a medical clinic, cosmetic facility, fitness club, or educational centre.
The property consultancy said rents for retail tenants in the building are expected to range from HK$38 to HK$45 per square foot per month, giving a potential monthly rent at full occupancy of HK$1.27 million – almost quadruple the monthly rent the property had achieved in 2017.
Office space could rent out at up to HK$38 per square foot per month, according to the property consultancy.
Hanison is looking to make a quick return on its project after carving out a niche for itself by buying up discounted properties, upgrading the assets and flipping them to new owners.
In August last year, Hanison and a fund managed by China Merchants Capital agreed to sell an industrial building in the New Territories town of Tsuen Wan for HK$1.1 billion. The developer resold the building at 57-61 Ta Chuen Ping Street after holding it for just fifteen months, earning a mark-up of almost 53 percent on the HK$720 million the joint venture had paid for the asset in 2017.
A month before that August deal, Hanison had agreed to sell the One Eleven serviced apartment building in Sai Ying Pun for HK$420 million – at a 66 percent markup over the price it paid for the property four years earlier.
In April this year, Hanison was identified as a potential buyer of the Travelodge Hotel in Central, with the company said to be offering HK$930 million before discussions on that prospective deal with private equity firm Pamfleet failed to result in an agreement.
Sliding Values in Hong Kong
Hanison has listed The Edward for sale as Hong Kong property values continue to take a pounding after more than a year of bad news in the city.
Goldman Sachs released a note last month following Beijing’s move to enact a security law in Hong Kong, with the investment bank predicting a slide in office and retail rental values this year of up to 30 percent from their peak in mid-2019.
Managing director of Vincorn Consulting and Appraisal Limited, Vincent Cheung, said last week that commercial property values in the core areas of Hong Kong had already fallen by up to 25 percent.