PAG, Hanison Sell Hong Kong Workshop to Tang Shing-bor for HK$1.04B

Hong Kong chief executive Carrie Lam announced in early October that government bureaus are developing new policies to revitalise old industrial buildings for non-industrial use, but the city’s real estate investors have already begun buying up aging workshops and warehouses for conversion into offices, hotels and other commercial structures.

On Thursday, one of the city’s most prolific investors, “Shop King” Tang Shing-bor bought the 29-storey, Success Centre, in the New Territories from a company jointly owned by Payson Cha’s Hanison Construction Holdings and a Cayman-registered company controlled by Hong Kong-based private equity firm PAG for HK$1.04 billion ($132 million), according to an announcement to the Hong Kong stock exchange dated December, 27th.

The transaction occurred less than one year after the joint venture had purchased the 240,485 square foot industrial building at 26 to 38 Ta Chuen Ping Street in Kwai Chung for HK$800 million ($102 million), representing a $30 million profit for the property’s most recent owners in return for holding the asset since February.

Converting Buildings and Earning Cash

The key to enhancing value of the Kwai Chung property appears to have been securing permission for conversion to commercial use, with the property now approved for use as office space, restaurants and shops.

The aging workshop’s new lease on life was sufficiently enticing to have one of its former owners repurchase the structure. Tang, who is best known for buying up retail shops around Hong Kong, had previously owned the Success Centre before selling it to another investor for HK$750 million ($96 million) in 2013, according to an account in the Hong Kong Economic Times. Cushman & Wakefield had been marketing the property on behalf of its owners.

Industrial Buildings Back in Vogue

While workshops such as the Success Centre have long been available, the government is showing a new degree of flexibility regarding the fees and procedures required for converting these industrial spaces for commercial use. Hong Kong’s soaring office rents have also encouraged developers to search for opportunities for creating new commercial space.

According to a survey published last month by property consultancy Cushman & Wakefield, Hong Kong’s office rents are now the most expensive in the world, outpacing even London and Tokyo as the priciest place to put your staff. Grade A space in Central, which is home to many of the city’s financial firms, averages US$27,432 per workstation per year, according to C&W — up by 5.5 percent compared to a year earlier.

High Rents Give New Life to Old Factories

Those rising rents, along with the government policies have led to a surge of industrial acquisitions in Hong Kong in recent months.

Early in December, Billion Development and Project Management bought a workshop in Tsuen Wan from Wing Tai Properties for HK$2.16 billion, which set a new record for the priciest industrial building transaction in Hong Kong. Also this month, Billion Development purchased the Grandeur Factory in Kowloon’s Kwun Tong area for HK$1.32 billion.

At least nine industrial building in Tuen Mun, covering a total gross floor area of 1.42 million square feet, have been purchased recently by local developers including VCC Land founder and socialite Vivien Chan and Emperor International.

Another four industrial buildings at Sai Kung, the tourism site in Hong Kong, has reportedly also been purchased to redeveloped into residential sites and private schools. Located in the industrial area of Sai Kung Town Centre, the properties have a gross floor area of 250,000 square feet.