New World Development has agreed to sell the podium levels of the Cosco Tower in Hong Kong’s Sheung Wan area for 45 percent less than the property giant had been asking for the commercial property just three months ago, according to a statement to the city’s bourse.
Hong Kong investment management firm Get Nice Holdings announced that it is acquiring the vacant four-storey commercial podium, which forms part of the Grand Millennium Plaza complex between Queen’s Road and Wing Lok Street, for HK$500 million.
“The acquisition is a good opportunity for the group to further invest in premium grade office and increase rental yield to the group,” Get Nice said in a statement, adding that, despite the current downward pressure on commercial property values triggered by Hong Kong’s economic downturn, it saw the acquisition as a long-term investment.
The developer led by billionaire Henry Cheng and his arts-loving son Adrian had been asking HK$900 million for the property at 181 Queen’s Road Central just three months ago, with this latest sale coming as the developer continues to shed non-core assets, after seeing a 20 percent drop in net profit after tax across Hong Kong and mainland China in 2019.
Setting Up a New HQ
Get Nice’s new prize is composed of three floors of retail shops capped by a single storey of office space, with the combined units spanning a combined gross floor area of 27,808 square feet (2,583 square metres). At the announced price, the company chaired by businessman George Hung Hon-man will be paying the equivalent of HK$17,989 per square foot for the property.
The listed firm said in its bourse filing that the acquisition, which is set to complete on 24 June, includes 19 parking spaces in the building between Queen’s Road and Wing Lok Street where Central fades into Sheung Wan.
Get Nice has already paid a HK$25 million deposit on the purchase, with a further payment of HK$25 million on the asset located two minutes walk from the Sheung Wan MTR station due to be paid 14 days from the date of the sale and purchase agreement.
The firm, which currently occupies a space on the tenth floor of the Cosco Tower, said it intends to renovate and occupy the top floor of the podium as its new head office, while retaining its former home on the tenth floor as an income-generating investment property. Get Nice’s Hung has served as both the chairman and CEO of the holding firm since 1988 and also holds a seat on the board of directors of the Hong Kong stock exchange.
Prior to Get Nice’s purchase, the most recent transaction in the Cosco Tower took place on 23 Dec last year when a mid-floor unit sold for the equivalent of HK$20,000 per square foot, or 10 percent more per square foot than New World’s sale of the podium.
Shedding Non-core Assets
The Sheung Wan sale is the latest move by New World to sell assets or list assets for sale as the COVID-19 pandemic has put a dent in its cash flow.
Last month, the company put a 12-storey commercial property in Kwun Tong on the market at a reported price of HK$3 billion, or nearly double the HK$1.6 billion the developer paid to purchase the 27,808 square foot converted industrial property from fund manager Pamfleet in 2014.
A month before listing that asset for sale, New World sold its ownership interest in a pair of mid-market Hong Kong community malls to MTR Corporation for HK$3 billion, in a move the company said was intended to generate cash flow for its core businesses.
Selling in a Property Slump
After suffering more than a year of disruption wrought by a trade war followed by a protest movement and now a viral pandemic, Hong Kong’s commercial real estate market bears little resemblance to its high point in 2018.
Against a backdrop of collapsing retail sales, average high street rents across Hong Kong fell by 10.3 percent during the first quarter of this year compare with the previous three months in 2019, according to property consultancy CBRE.
Commercial real estate investment has also taken a hit – falling to HK$7.5 billion in the first quarter, or 62 percent less than the HK$20.2 billion spent in the same three months of 2019.