Singapore’s Mapletree Investments has reportedly received a HK$9 billion ($1.15 billion) offer from mainland China-based Zhongrong Holdings Group for its Mapletree Bay Point office building in Hong Kong’s Kowloon East area, according to market sources familiar with the negotiations who spoke with Mingtiandi.
Should the potential transaction for the recently opened Kowloon office asset reach a final agreement it would be the third en bloc purchase by a mainland Chinese buyer of a Kowloon East office asset exceeding $1 billion within the last year.
The potential sale, which would value the Kowloon East home of HSBC and WeWork at approximately HK$13,630 per square foot (HK$146,658 per square metre), comes just three months after another mainland buyer, Chongqing-based CC Land, led the HK$8 billion purchase of Nan Fung Group’s Octa Tower just 10 minutes walk from the Mapletree property.
Mapletree Develops and Sells in Hong Kong
The Temasek Holdings-backed property firm put the 19-storey Mapletree Bay Point office tower on the market this June, after originally purchasing Kwun Tong Inland Lot No.761 for HK$3.9 billion in 2014 to begin developing the 660,301 square feet (61,344 square metres) property as its first project in Hong Kong.
According to Mingtiandi’s sources, there are several other financial groups making offers for the Grade A office tower from the Singaporean property firm. But market sources cited by HKET pointed out that the offer from Zhongrong matches most closely with Mapletree’s asking price of HK$9 billion.
The HK$13,630 per square foot price of the deal would be some 10 percent lower than the HK$15,095 per square foot that Wharf’s waterfront 8 Bay East office property, which is just four minutes walk from Mapletree Bay Point, sold for in October last year. That project on Wai Yip Street sold to Shenzhen developer LVGEM for HK$9 billion building. Unlike 8 Bay East, due to zoning restrictions, Mapletree’s building can only be sold as a whole property, and strata title sales are ruled out.
However, Denis Ma, head of Hong Kong research at JLL, said that the price is reasonable compared to the HK$10,738 per square foot that the nearby Octa Tower sold for in May. “The unit rate of around HK$13,500 per square foot is largely in line with market expectations,” Ma told Mingtiandi by email.
Zhongrong Buys a New Home in Kowloon East
Mapletree Bay Point’s prospective buyer, Zhongrong Holding, is a financial conglomerate specialized in real estate development and financial investment.
According to a market source cited by HKET, the group established in 1992 is aiming to occupy the higher floors of the 660,301 square feet building to be its home office in Hong Kong, while majority of the lower and middle floors of the building has been leased out already. ”The underlying land grant does not allow the ownership of the building to be stratified, so it will likely have to be held for long-term investment purposes unless the new owner is willing to negotiate with the government in removing that particular restriction in the conditions of sale clause,” said JLL’s Ma.
According to the company’s profile, the Zhongrong Holdings also counts in its portfolio the Victoria Resort, a 11,000 square metre hotel and resort located in South Lantau island of Hong Kong.
Home for HSBC and WeWork
Mapletree Bay Point, which has 568,517 square feet of net lettable area, has already attracted big name tenants including HSBC, American apparel company VF Corporation, and US co-working giant WeWork to lease space in Kowloon East’s rapidly developing alternative business hub.
The Grade A office tower was completed last year and was 60 percent pre-leased by the time it was granted its occupation permit this April. HSBC became one of the building’s first major tenants in early June, leasing some 70,000 square feet across two floors in the building for a reported HK$35 per square foot.
Besides HSBC, VF Corporation also took up 10,500 square feet between the eighth and tenth floor for a reported HK$25 per square foot in this January. WeWork is said to be leasing its 36,000 square feet space in a lower floor at a monthly rent of HK$25 per square foot.
Kwun Tong Office Market Keeps Growing
As office rents in Hong Kong’s Central reached record highs of around HK$137 per square foot in the second quarter, according to Cushman & Wakefield, the Kowloon East office market has welcomed a growing number of international financial intuitions and professional firms including DBS, HSBC, and Citibank as they look for rent cost reductions of 50 percent or more by moving across Victoria Harbour.
Apart from Mapletree Bay Point, the Kowloon East also has several grade A office towers including Sun Hung Kai Properties’ Two Harbour Square, the Kingston Financial Centre owned by Kingston Financial Group and Hong Kong Pacific Tower developed by Hong Kong Pacific Investments.