Members of the consortium that paid nearly $5.2 billion to purchase the Center on Hong Kong’s Queen’s Road in 2017 have been struggling in the city’s current market slowdown, but an announcement this week indicates that one of the wealthy investors was able to find a buyer right in her own office.
Yuzhou Properties has agreed to purchase the 58th floor of the Center from Kwok Ying Lan, the Hong Kong-listed developer’s vice chair, for HK$898.7 million ($114.5 million) according to an announcement to the bourse today, in a deal which values the property at just over HK$34,000 per square foot.
The transaction provides a convenient exit in an office market where deal volumes dropped nearly 25 percent from HK$71.9 billion in the period from January through June 2018 to HK$54.1 billion during the second half of the year, according to data from Cushman & Wakefield.
The investor consortium which purchased the Center financed the transaction with bonds yielding as much as 15.25 percent, with some of the investors having since struggled to find buyers quickly enough to reduce their interest burdens.
Deal Done at Arms-Length
Shanghai-based Yuzhou Properties said in its statement to the exchange that the company had entered into an agreement with Kwok, who is identified as a controlling shareholder in the company and is also the wife of Yuzhou’s chairman Lam Lung On, to acquire the 26,356 square foot (2,448 square metre) property after arm’s-length negotiations.
The statement, which was signed by Lam, indicated that Yuzhou would use the property for its own use or for rental purposes, and pointed to the high grade of the building and its location as being aligned with the developer’s primary business in real estate investment.
The company said that a report prepared at its request by an independent property valuer showed that the market value of the property as of January 7, 2019 was approximately HK$1.2 billion. Lam and Kwok, along with Lam Yu Fong, a daughter of the seller who also is among Yuzhou directors and Lin Conghui — a brother-in-law of Kwok who also serves as a Yuzhou director — all abstained from voting on the board resolution which approved the sale and purchase agreement for the property.
Investors Find Exits From the Center
After a team of ten investors made the Center the world’s most expensive building with the acquisition from CK Asset, the buyers, who were led by Shimao Property boss Xu Rongmao and local Hong Kong shell company queen Pollyanna Chu, divvied up the floors in the 73-storey tower and have each been pursuing their own exits amid the slide in office transactions.
Just last week consortium member Raymond Tsoi Chin-chung sold a room on the 22nd floor of the tower for around HK$36,800 per square foot, according to local news reports, after dividing his floor up into 12 pieces for separate sales. The investor consortium had paid an average of HK$33,000 per square foot, weighted by floor, to purchase the property.
In October, local investor Johnny Cheung Shun-yee sold the 49th floor of The Center to Hong Kong-listed builder Hopson Development for around HK$1.1 billion, achieving a price per square foot of between HK$41,331 and HK$45,689.
Cheung was reported in August to have already sold the 50th floor to the Hong Kong-listed arm of Malaysian developer Guoco Group for an undisclosed sum.
In addition to Cheung, two other investors have sold off floors in the tower, including Lo Man-Tuen, chairman of cassette tape manufacturer Wing Li Group, who in July last year reportedly sold the building’s 30th floor for around HK$1.07 billion.