APG in $590M Hong Kong Residential JV with Wang On

Wang On Properties is betting on rising demand in the Hong Kong residential market, as the Hong Kong-listed developer, together with its parent firm Wang On Group announced a joint venture with a fund managed by the Netherlands’ APG Asset Management to invest up to HK$4.6 billion acquiring residential properties in the city for redevelopment and future sale.

The joint venture company has agreed to invest HK$3 billion ($385 million) to acquire four seed projects from Wang On Properties and its parent company, and the joint venture partners say they will continue to acquire more projects to enlarge their portfolio.

In a statement Wang On said that its directors consider the joint venture with APG as “a good opportunity to leverage on (Wang On Properties) knowledge and expertise in property acquisition and project management and to partner with an experienced investor to expand its business.”

The announcement followed a 172 percent month-on-month surge in primary residential transaction volumes in September, with Hong Kongers purchasing 1,926 units for a total consideration of HK$21.3 billion, according to a Knight Frank report.

Betting on Hong Kong Housing

Having agreed to invest up to HK$2.3 billion each, the joint venture partners will “engage in the acquisition of residential properties in Hong Kong for development and redevelopment for sale”, according to the announcement.

The initial seed projects, which yield an aggregate gross floor area of about 250,300 square feet, comprise two Kowloon sites, and another two in Southern District’s Ap Lei Chau. Property consultancy Cushman & Wakefield is said to have advised APG on its investment in the joint venture, Mingtiandi has come to understand.

Among the Kowloon projects is a development on Ming Fung Street in Kowloon which Wang On acquired through a compulsory sale in August at a price of HK$1.3 billion, That residential redevelopment could yield more than 70,000 square feet (6,503 square metres) of new construction area, according to analysts from Savills who spoke with Mingtiandi.

Aside from the Ming Fung Street project, the joint venture has also taken on a development at 45 Fei Fung Street and 110 Shatin Pass Road in Wong Tai Sin which spans approximately 81,000 square feet of floor area.

In Ap Lei Chau, Wang On is selling to the joint venture a combined residential and commercial project at the junction of Wai Fung Street and Main Street measure about 38,600 square feet of gross floor area. The second project on the island along Hong Kong’s southern coast is located just less than 300 metres (328 yard) away, spanning the units from 120 to 126 Main Street, and provides another 37,000 square feet of floor space.

Beyond this initial portfolio, within its 7-year term the joint venture will target additional residential properties that fit the partners’ target criteria of involving sites of at least 3,500 square feet which can yield floor areas of more than 30,000 square feet.

Ready to Partner

Wang On noted in the announcement that the joint venture would enable it to tap into a bigger pool of funds to expand its portfolio, and help expand its property asset management business.

Having agreed to sell an office asset for a consideration of HK$515 million last month, the developer continued to focus on housing, with 348,600 square feet of projects already in its residential land bank.

Just a week before its purchase of the Ming Fung Street site in August, the developer sold 143 units at The Met.Azure in Tsing Yi, an island in the New Territories, priced between HK$3.89 million and HK$4.61 million, with 13 buyers bidding for every available flat, reported the South China Morning Post.

Last year in October, Wang On and Shanghai-based developer CIFI jointly acquired a pair of adjacent properties in Fortress Hill with plans to develop a HK$2.6 billion commercial and residential project, with Wang On taking a 40 percent stake in that joint venture.

Aside from its residential investments, Wang On in 2019 sold a 50 percent stake in a retail podium at the Ma On Shan shopping mall to private equity giant KKR for HK$180 million. The deal, which was part of a HK$653 million joint venture between the two parties, also marked KKR’s first reported investment under its Asia Real Estate Partners fund.

APG’s Residential Theme

APG, which made news in Asia earlier this year with a data centre investment, has made residential part of its investment thesis globally, including backing Greystar Real Estate Partners as the US multi-family specialist reached a $450 million first close of its first Asia rental housing fund in 2019.

The Dutch firm then went on to commit A$350 million ($255 million) to Greystar’s Australian residential venture in 2020, after having teamed with UBS Asset Management to set up a Japan residential investment venture in 2018, IPE reported.

In January of 2018, APG pursued its taste for residential in Europe by setting up a joint venture with US developer HInes to build a €450 million ($515.7 million) build-to-rent multifamily project in Dublin.