Hong Kong developers Henderson Land and Lai Sun have reached an agreement to sell 8 Observatory Road, a vertical retail building in Hong Kong’s Tsim Sha Tsui area for HK$4.1 billion ($522 million), according to market sources who spoke with Mingtiandi.
The development duo are said to have exchanged contracts with a consortium of local Hong Kong investors eager to buy the 18-storey tower just a quick Star Ferry ride across Victoria Harbour from Central, as rising demand for commercial space in the Asian financial nexus boosts the value of the old school retail neighbourhood.
Sources at Henderson and Lai Sun did not respond to requests for confirmation before time of publication. Local media reports put the transaction value at HK$4 billion.
Hong Kong Development Duo Sell Project Two Years After Completion
Billionaire Lee Shau-kee’s Henderson jointly developed the 183,000 square foot (17,000 square metre) Ginza-style retail building as a fifty-fifty effort with Lai Sun after buying up smaller properties to create the site just across Chatham Road South from the Hong Kong Museum of History. The project was completed in 2015.
The 18-storey building is located about five minutes walk from the Tsim Sha Tsui East station on the MTR’s West Rail line and primarily features food and beverage tenants on the second through seventh floors with office tenants occupying the upper reaches of 8 Observatory Road.
A listing on the project’s website specifies that the entire seventh floor of the tower is currently available for lease at the rate of HK$45 per square foot per month, while occupants are said to pay average rents of HK$50 per square foot per month to be in the building which has floor plates of between 9,000 and 11,000 square feet.
Lai Sun’s most recent annual report indicated that the project was fully-leased and had brought the developer rental proceeds of HK$55 million for its 50 percent stake in the 2016-2017 fiscal year. The reported sale price would value the building, which achieved a Silver rating under the BEAM Plus New Buildings standard, at just over HK$22,400 per square foot.
Tsim Sha Tsui Comes Back in Fashion
Long a haven for out-of-town shoppers and grade B office buildings, Tsim Sha Tsui has begun to see more investor activity this year as demand for commercial space continues to drive up rents.
Henderson rival New World Development has paid over HK$700 million since 2016 acquiring just over half of the space in a 59-year-old building at 45 Hankow Road in Tsim Sha Tsui as it seeks to establish a redevelopment opportunity near Nathan Road.
Veteran retail real estate investor Tang Shing-bor has also been active, buying a commercial building at 80 Kimberly Road, just two minutes walk from 8 Observatory Road, for HK$330 million in May.
Henderson Goes into Overdrive in 2018
While Henderson has made major headlines in the last year with its $3 billion purchase of a site on Central’s Murray Road and subsequent acquisition of a pair of Kai Tak residential projects from HNA for $2 billion, the developer has also been disposing of assets.
The development giant sold a site in the New Territories town of Tuen Mun for $844 million in January and sold a hotel in North Point to Shun Ho Property for HK$1 billion in February. News of the impending 8 Observatory Road sale first surfaced in May.