Blackstone Buys Industrial Building in Hong Kong’s New Territories for $36M

Following a path to a town near Hong Kong’s border with Shenzhen which has already welcomed traffic from some of the region’s biggest fund managers this year, Blackstone has acquired a six-storey building in Hong Kong’s Fanling area for HK$282.6 million ($36.2 million), according to a filing with the Hong Kong stock exchange.

The US private equity giant purchased Yip’s Chemical Building at 13 Yip Cheong Street in the investment hotspot as its second major industrial acquisition in Hong Kong this year after purchasing a 10-storey industrial building in Kowloon East for HK$508 million during April. Blackstone representatives declined to comment on this latest deal.

The transaction for the 63,897 square feet (5,936 square metres) asset took place as Hong Kong’s industrial investment activity continued to pick up after reaching HK$6.8 billion in the second quarter, which was an increase of 88 percent over the level recorded during the previous three months, according to CBRE’s Marketview.

While Blackstone has not commented on its intentions for the 1990-vintage shed, the property is located around 3 minutes’ walk from another site in Sheung Shui town which Singapore’s Mapletree Investments said in February it would use for development of a data centre facility after buying the site a month earlier.

In July, Sun Hung Kai Properties’ SUNeVision Holdings data centre unit said that it was leasing a Fanling warehouse from its parent firm and intends to develop a hyperscale data centre in the building. That property at 11 On Chuen Street in Fanling is around four minutes’ walk from Blackstone’s new prize.

Emerging Hotspot

“The disposal is considered to be an opportunity for the group to realise its investment in the target Company and is in line with the Group’s strategic development plan and allows it to streamline its business structure and resources,” Yip’s Chemical chairman Tony Ip Chi Shing said in a statement to the Hong Kong exchange announcing the transaction.

Occupying a 12,895 square foot site, Yip’s Chemical Building has ground-level clearance heights of about 6.5 metres and ceiling heights of approximately 3.5 metres (11.4 feet) on the upper floors, which could accommodate the 48U racks used in contemporary data centres, which typically stretch over 2.13 metres.

Yip’s Chemical had been headquartered in the building before relocating to Fortis Tower in Wan Chai. The chemical trading firm had first put its facility on the market in 2015 through a tender managed by joint-sole agents Savills and Colliers. The tender failed to result in a transaction.

The company then made the asset available again in March last year at a reported asking price of HK$250 million, or HK$3,912 per square foot. The sale of the building was announced last month by CBRE after having closed in July.

Industrial Roots

“Fanling has always been perceived as a traditional industrial zone and most of the en-bloc industrial buildings in the area are occupied by logistics operators or utilized as warehouses,” said ​​Jonathan Chau, CBRE Hong Kong’s executive director and head of investment property and private office in the capital markets team.

Driven by the government’s industrial revitalisation scheme, which encourages redevelopment by charging standardised premiums for land-use modifications, districts such as Kwun Tong and Cheung Sha Wan were renovated into commercial hubs, Chau said.

“Under (these circumstances), genuine warehouse occupiers and end-users tend to move to the traditional industrial zones in the north like Fanling and Tuen Mun to continue their operations,” he added.

Strong Foothold in Asia

In Blackstone’s earnings call in July, its president and chief operating officer, Jonathan Gray, announced that the group had raised more than $5 billion for its second Asia fund and planned to raise a third real estate fund in the region.

That fresh batch of capital was arranged after the Manhattan-based fund manager had earlier this year closed on a $1.1 billion industrial real estate investment in Guangzhou — less than one hour from Hong Kong by high-speed rail.

In June, Blackstone made one of its biggest-ever capital commitments to China real estate by agreeing to buy Soho China, one of the country’s largest developers, for HK$23.7 billion ($3 billion). The deal would give Blackstone rights to the developer’s portfolio of nine office properties in Shanghai and Beijing.

Rising Industrial Demand

As one of the few remaining traditional industrial areas in the city, and with its direct connections to Shenzhen, Fanling is becoming a popular spot for industrial investment.

Aside from Blackstone’s purchase of Yip’s Chemical Building, mainland conglomerate China Resources bought the Mineron Centre from the family of late “Shop King” Tang Shing-Bor for HK$695 million last month.

In February, SilkRoad Property Partners bought Smile Centre, a six-storey cold storage building, for HK$321 million, the fourth industrial addition to the group’s Hong Kong portfolio.

Since last year’s opening of the Heung Yuen Wai Control Point between Hong Kong and Shenzhen, Fanling has become one of the main connection hubs for Hong Kong and the mainland’s Greater Bay Area, helping to stimulate industrial transactions in the area, Chau said.