Just over one week after its airline division cut 6,000 workers, the property development business of Hong Kong’s Swire Group says it is in talks to dispose of an office building on Hong Kong island.
Swire Properties announced to the Hong Kong exchange today that it has entered into discussions for the sale of Cityplaza One, a 21-storey office tower in the city’s Taikoo Shing area, with market sources indicating to Mingtiandi a potential sale price of HK$10 billion ($1.29 billion).
The potential asset disposal was also announced by the developer’s parent firm Swire Pacific Ltd, which lost a record HK$5.48 billion during the first six months of this year, as its Cathay Pacific division burned through HK$2 billion per month due to the coronavirus pandemic.
In July, Swire Properties had sold off a pair of office buildings in Miami for $163 million and earlier this month unveiled a plan to sell a set of parking spaces in Hong Kong as part of what the developer termed a “strategy to dispose of certain non-core assets.”
Aging Asset on the Market
Market rumours indicate that the prospective buyer for Cityplaza One, which leases 628,785 square feet (58,416 square metres) of office space to clients including MSIG Insurance and HP, is Hong Kong-based private equity firm Gaw Capital Partners. Mingtiandi was unable to confirm any involvement by the private equity firm in the transaction, and inquiries to Gaw Capital went unanswered at the time of publication.
Gaw is well familiar with Cityplaza One, after the fund manager took a 49 percent stake in the $1.9 billion acquisition of Cityplaza Three and Cityplaza Four, the other two office blocks in the Cityplaza commercial complex in 2018.
Completed in 1997, Cityplaza One was 99 percent occupied as of the end of June, but is one of the oldest properties in Swire’s portfolio. Standing above the six-storey Cityplaza shopping mall, the tower on King’s Road connects directly to the Taikoo Shing MTR station.
Should the tower be sold at the rumoured HK$10 billion price, it would translate into a HK$15,903 per square foot transaction, or around 19 percent less than the rate that Swire achieved when it sold Cityplaza Three and Four to Gaw and mainland China’s Hengli Investments Holding Group in 2018.
Selling Amid a Downturn
The decrease in value for Swire’s office asset in eastern Hong Kong is a reflection in part of the souring leasing market in the city, which saw rents for desk space fall by an average of 1.3 percent city-wide in September, compared to the previous month, according to JLL.
September was also the fourteenth straight month that the total amount of office space leased in Hong Kong declined, with 243,500 square feet being returned to the market.
Long known for having the world’s highest property values, Hong Kong’s commercial market has begun to show signs of stress recently with local tycoon David Chan Ping-chi selling a floor in the Center on Queen’s Road in Central this month for HK$980 million.
Chan sold that space for around 20 percent less than he had reportedly been asking when he put the office floor on the market in 2018.
Swire announced its plan to sell off parking spaces in Taikoo Shing, a residential development neighbouring Cityplaza, on 14 October. The company said it would sell 227 car spaces and 62 motorcycle spots in total. Should the sale plan succeed, the developer could raise at least HK$690 million from the asset sale.