Hong Kong’s Kwun Tong district has chalked up another landmark transaction, with Wheelock subsidiary Wharf Group selling a waterfront office tower project to mainland developer LVGEM for HK$9 billion ($1.2 billion), in one of the biggest real estate deals in Asia this year.
Shenzhen-based LVGEM is paying around HK$15,095 ($1,936) per square foot for the still under-construction 8 Bay East redevelopment project, setting a record high price per square foot for a commercial building in the Kowloon East business hub.
The deal is this year’s second-largest real estate transaction in Hong Kong after Henderson’s acquisition of the Murray Road car park site in Central for HK$23.3 billion ($3 billion) in May, and comes in the same week that Hong Kong’s Laws Group snapped up an ageing industrial building in Kwun Tong for redevelopment into a commercial property for HK$1.39 billion ($178.1 million).
Wheelock Sells Another Building to a Mainland Firm
Located at 123 Hoi Bun Road, a short walk from the Ngau Tau Kok MTR station, 8 Bay East is designed as a 23-storey office tower with a retail podium, spanning a gross floor area of about 55,390 square metres (596,213 square feet). The project, which is scheduled for completion in 2019, is rising on the site of the former Wharf T&T Square, a 1991-vintage office complex that the Hong Kong firm demolished for redevelopment.
Hong Kong-listed property and logistics group Wheelock and Company, which owns 61.6 percent of Wharf, told the stock exchange that it expects to see a net gain of HK$2.8 billion from the sale. Wheelock indicated that the cash generated from the sale of the investment property will “put the Group in a strong position to continue its major investment programmes.”
Under the terms of the agreement, a Wharf subsidiary will continue to serve as project manager and will complete the construction and fitting-out of the development.
Wheelock Marks Latest Kowloon East Milestone
The deal marks another Kwun Tong milestone for Wheelock, which has now sold more than HK$20 billion in Kowloon East projects over the last three years.
The developer broke the record for the biggest sale of a single office building in Hong Kong ever in June 2014 when it sold the East Tower of its One Bay East development up the street from 8 Bay East for HK$5.43 billion ($700 million) – or HK$10,596 per square foot. Wheelock had sold off the West Tower of the same waterfront complex to Manulife for HK$4.5 billion ($580 million) in April of the same year.
The developer also disposed of two blocks of its One HarbourGate West complex in Hung Hom, Kowloon to China Life Insurance for HK$5.85 billion in November 2015, and sold the One HarbourGate East Tower in the same complex for HK$4.5 billion ($579.6 million), reportedly to China Taiping Life, in May last year.
LVGEM Takes on Second Hong Kong Project
For Wheelock’s partner in the sale of 8 Bay East, “the Transaction as a whole represents a strategic step for the Group to create a meaningful presence in the Hong Kong property market,” LVGEM said in its own statement to the Hong Kong exchange.
LVGEM is betting on the resilience of Hong Kong’s property market and the site’s potential for rental income and long-term capital gains. The group also cited the project’s connectivity to the Kwun Tong MTR line and the future expansion of the MTR system via the under-construction Shatin-Central Link.
“In view of the potential growth of the property market in Hong Kong, the Group has been actively identifying properties for property development to expand its commercial development business segment,” the statement adds.
Founded in 1995, LVGEM has traditionally focussed on residential developments in its home city of Shenzhen and elsewhere in Guangdong province, but is looking to ramp up its presence in Hong Kong. The property group currently has one other project in the city, a residential development that will yield 116 waterfront villas in the New Territories area of Lau Fau Shan.
In addition to urban renewal projects and office and retail properties under its NEO and Zoll Centre brands, the group has also tried its hand at hospitality management, with a hotel in Shenzhen and – in a rare overseas foray – the 258-room Vanllee Hotel under construction in Los Angeles County, California.