Swire Properties has agreed to sell a pair of office buildings in Hong Kong’s Quarry Bay area to a little-known mainland investor for HK$15 billion ($1.9 billion), according to an announcement by the company on Friday to the Hong Kong stock exchange.
Under the terms of a sales and purchase agreement revealed to the bourse, the blue chip Hong Kong developer is selling 100 percent of its interest in the Cityplaza Three and Cityplaza Four office towers in its Taikoo Shing development to BVI-registered, Henglilong Investments Limited (恒力隆投資有限公司), a private investment holding company which is owned by mainland investor Chen Chang Wei (陳長偉).
The grade A office acquisition is the latest investment by Chen’s Hengli group, as the former Wanda Hotels and Wanda Commercial Properties executive quietly becomes a global player. The deal also allows Swire to take advantage of Hong Kong’s rising office values to dispose of what it may see as non-core assets.
Swire Books HK$509M Gain on Sale
Swire Properties is in line to gain approximately HK$509 million on the sale of the pair of early 1990’s vintage office towers, according to the statement. As of December 31st last year the buildings, which form the office part of the Cityplaza complex, which also includes a shopping mall, were valued at approximately HK$9,278 million by an independent valuer and the net asset value of the corporate vehicle holding the assets was listed as woth HK$14.491 million at the end of April, according to Swire.
In a research note distributed when the towers were first publicly put on sale last month, analysts with DBS Bank noted that, “Cityplaza Three and Four are located the furthest away from (Swire’s) Island East cluster. This implies there is less synergy with the other key buildings in the area including One Island East and the soon-to-be completed One Taikoo Place.”
Based on that location issue, as well as on the company’s less than full ownership of Cityplaza Three, the investment bank concluded that, “It would make sense for Swire Properties to realise the high value of the assets in this buoyant office property market if good offers are received.”
Former Wanda Executive Becomes Cross-Border Player
In December last year, Hengli Investments bought Lloyds Banking Group’s London headquarters for over £150 million from the British bank. Chen, identified by the media as the chairman of Hengli Investments, said at the time that the company would “continue to consider any remarkable property investment opportunities locally and internationally,” according to a CoStar report.
in addition to his British Virgin Islands-based vehicle, the low-profile investor is listed with the Hong Kong companies registry as the sole director of Hengli Investments, a corporate identity which intersects with the path of the since-privatised Wanda Commercial Properties and its successor, Wanda Commercial Management.
Chen served as chairman of Hong Kong-listed Hengli Commercial Properties (Group) Limited (now Wanda Hotel Development Company) from February 1, 2008 to July 03, 2013, according to Bloomberg. Wanda Commercial Properties took over Hong Kong-listed Hengli through a reverse merger in April of 2013, before de-listing again in 2016. Baidu and Google searches for images of Chen returned zero results.
New Landlord For Deloitte, Wells Fargo
Chen’s latest acquisitions are located in Quarry Bay, seven metro stops east of Central. Completed in 1992, Cityplaza Three is a 21-storey building which spans a gross floor area of around 448,000 square feet (42,000 square metres). The adjoining Cityplaza Four, built one year earlier, offers 556,000 square feet of space, and both towers are connected to the Tai Koo MTR station and to Swire’s Cityplaza mall by air-conditioned walkways.
The office towers house multinational tenants including Adidas, American Express, Deloitte, Wells Fargo Bank, Sony Pictures and Thompson Reuters. In March, US co-working giant WeWork leased a 54,000 square foot space in Cityplaza Three that will offer more than 1,000 desks.
Swire has full ownership in Cityplaza Four, while ten floors in Cityplaza Three project are owned by the Hong Kong government, according to Swire Properties’ latest annual report.
Swire Could Gain HK$20B From 2018 Office Sales
With the success of this Quarry Bay transaction, Swire’s proceeds from office disposals have exceeded HK$21 billion this year.
Last week, the blue-chip developer completed the HK$6.5 billion sale of a 25-storey tower in Kowloon East to Pollyanna Chu’s Kingston Financial Group, some two years after agreeing to sell the 555,000 square feet property.
In addition to the sale of the pair of Quarry Bay office towers, Swire is also putting its Taikoo Place Apartments on the market. Located in the company’s Taikoo Place community in Quarry Bay, the apartments’ sales launch is slated for later this year.