Nine months after attempting to sell off a Cheung Sha Wan building by public tender, Hanison Construction surprised the market with the HK$800 million ($102 million) sale of a 50 percent stake in the PeakCastle commercial building in Hong Kong.
Hong Kong-listed Hanison sold a half-interest in a subsidiary that owns the office tower in Cheung Sha Wan, Kowloon to Hilux II Cayman Ltd., the company said in a filing to the Hong Kong Stock Exchange. The buyer is reported by local media to be a subsidiary of private equity firm PAG. A representative of the Hong Kong-based alternative investment firm declined to comment on the company’s reported role in the deal when reached by Mingtiandi.
PeakCastle Stake Sells After Seven Percent Price Cut
Hanison, which is controlled by HKRI boss Payson Cha, attempted to auction put the 23-storey property at 476 Castle Peak Road up for public tender in the second quarter of last year, with a reported asking price of HK$1.72 billion ($221.99 million). However, the tender’s June deadline passed with no transaction being reported.
This week’s stake sale values the property at HK$1.6 billion and represents a 7 percent drop from the asking price nine months ago.
The property was said to be 82 percent occupied in mid 2017, with a mix of trading, textile, and information technology tenants. JLL, the sole agent for last year’s public tender PeakCastle said in May that they expected a steady increase in office rental income for the property over the next three years, driven in part by demand for office space in the area and by development of new transportation infrastructure. Average rental rates in the building were said to be HK$30 per square foot per month as of May.
Hanison said the current market presents a good opportunity for the company to unlock part of the value of the asset, according to the statement.
Originally built in 1984 as an industrial building and later converted for commercial use, PeakCastle was remodelled by Hanison last year. The property also has a retail component on the ground floor.
Rising Office Supply in Cheung Sha Wan
PAG’s reported purchase of The PeakCastle stake comes as the Cheung Sha Wan area in western Kowloon gains in popularity as a commercial hub, with at least two new office towers being completed in the neighbourhood this year. China Shipbuilding Tower at 650 Cheung Sha Wan Road, which was developed by Hong Kong-based First Group, is set to be completed in April. Another office tower, The Agora at 55-57 Wing Hong Street developed by Kailong and Rykadan Capital, will be completed by year-end.
The future commercial space supply in the area is also assured thanks to upcoming projects on sites sold in recent years. New World Development alone bet HK$15 billion ($1.92 billion) in the Cheung Sha Wan market by picking up three commercial sites in 2017. In August the Hong Kong heavyweight developer outbid eight contenders in purchasing a commercial site in the area for HK$2.97 billion ($380 million), the third acquisition for the developer in Cheung Sha Wan last year.
Cheung Sha Wan Deal Follows Hanison/PAG Industrial JV
Hanison’s Cheung Sha Wan stake sale comes less than three months after a Hanison/PAG joint venture sold off the Success Centre industrial building in Kwai Chung for HK$1.4 billion. After buying the New Territories workshop in February last year the developer/fund manager team was able to earn a $30 million profit on the asset disposal in December.
Hanison Construction is chaired by Payson Cha, who also controls Discovery Bay developer Hong Kong Resorts International (HKRI). Known for its redevelopment projects, Hanison purchased a 1995-built Ovolo serviced apartment complex in Sheung Wan last month for $65 million. It is expected the company will redevelop the property, as it did with another Ovolo branded hotel it purchased in 2015.