CK Asset Selling Commercial Tower in Shanghai’s Jing An District to Hysan for $540M

Hysan Development will make its second foray into mainland China after agreeing to acquire a 24-storey commercial building in Shanghai’s Jing An district from CK Asset Holdings for RMB 3.5 billion ($540 million).

HKEX-listed Hysan plans to buy the recently completed City Link tower at 668 and 688 Xinzha Road from companies controlled by CK Asset, the development flagship of billionaire Li Ka-shing’s business group, according to a Friday filing with the Hong Kong stock exchange.

“Hysan has a strong conviction in the market potential of mainland China,” said Hysan chairman Irene Lee. “This acquisition marks a very important step for our long-term planning and development in Shanghai. We will continue to identify new development opportunities in Shanghai, the Greater Bay Area and other Tier 1 cities across China.”

The investment in the property tucked between Shanghai’s North-South Overhead Road and Suzhou Creek will give Hysan its first wholly owned commercial project on the mainland in an area where the government is actively promoting development of what has historically been an overlooked corner of one of the city’s prime commercial districts.

Ready for Office Tenants

The newly completed building has 50,000 square metres (538,196 square feet) of ready-to-rent office space and 18,000 square metres of retail space, meaning Hysan is paying roughly RMB 51,471 ($7,957) per square metre of above-ground gross floor area. The company will conduct asset enhancement work on the retail space, with completion expected by mid-2023.

The acquisition of City Link is expected to close by early 2022 and will be entirely funded by internal resources, Hysan said.

City Link sits just south of Suzhou Creek and east of the North-South Overhead Road in East Siwenli, a neighborhood of early 20th century shikumen rowhouses that has long been left out of the commercial bustle happening 1 kilometre (0.6 miles) south on West Nanjing Road.

Located within a five-minute walk of Hines’ One Museum Place project, Hysan’s new acquisition is convenient to the Shanghai Natural History Museum metro station served by lines 12 and 13. The project is also just across Suzhou Creek from Hanzhong Road metro station on Line 1.

Competing With West Nanjing Road

City Link is the major commercial element of a Shanghai government effort to redevelop the Siwenli area, which involves a total of 600,000 square metres of new floor space. Three large-scale projects adjacent to City Link are expected to launch for sale and development in the next few years, as set out in the Shanghai municipal government’s latest master plan.

“The project is a rare investment opportunity with immense development potential at a premium location in Shanghai,” said chief operating officer Ricky Lui. “The property enjoys advantages in commerce, connectivity and cultural heritage.”

As Siwenli develops, the company expects the high-end offices in the neighbourhood to command rents comparable to those on West Nanjing Road, where average office tariffs led the city in the second quarter at an average RMB 10.3 per square metre per day, according to Savills.

Hysan described the area as similar in character to the group’s Lee Gardens business district in Causeway Bay, with a diverse mix of high-rise and heritage buildings and a strong sense of local community and cultural flavour.

The project is Hysan’s second commercial investment on the mainland after it purchased a 24.7 percent stake in Hang Lung Properties’ Grand Gateway 66 project in Xujiahui in 2013.

Cross-Border Commitment

Hysan labelled the City Link acquisition a “strategic long-term investment” that significantly expands the scale of the company’s portfolio and diversifies its business.

The Lee family’s Causeway Bay kingdom includes Lee Gardens One, Two, Three, Five and Six and the Hysan Place shopping mall and office building. Hysan also owns properties elsewhere in Hong Kong.

In May, Hysan and joint venture partner Chinachem Group bested five other bidders to secure a commercial site near Lee Gardens on Caroline Hill Road at Leighton Road for HK$19.8 billion ($2.6 billion). Hysan holds a 60 percent stake in the JV and Chinachem owns 40 percent.

The 159,327 square foot (14,802 square metre) site — the first in Causeway Bay to be auctioned by the government since 1997 — is less than 50 metres (52 yards) from Hysan’s Lee Garden Six commercial tower on Leighton Road. The partners plan to develop a premium commercial building with community facilities at the location.

Before agreeing to cash out of City Link, CK Asset last month took a step towards replenishing its diminished project pipeline in Hong Kong by topping 15 rival bids to secure a residential plot in the New Territories for HK$716 million.

CK Asset executive director Grace Woo told the South China Morning Post that the developer plans to build low-rise luxury villas on the land, as the group controlled by Hong Kong’s richest man looks to boost fading city sales generated mostly by the remaining residential units of completed projects.