Hong Kong Tycoon Sells Floor in the Center for $126.5M as Downturn Drags On

With tenants continuing to hand back offices in Hong Kong’s traditional business district, a local tycoon has sold off a floor in the Center on Queen’s Road after marketing the commercial asset for two years, according to market sources.

David Chan Ping-chi, known locally as the King of Cassettes, has sold the 48^th floor of the landmark office tower for HK$980 million ($126.5 million), according to sources familiar with the transaction who spoke to Mingtiandi.

The deal, which is Chan’s second disposal of an asset in the Center within the past three months, comes as vacancy in Hong Kong’s Central district rose to 6.8 percent in September, according to JLL, providing fresh impetus to sell properties before the market declines further.

Office Prices Slide in 2020

Chan, who made his fortune manufacturing and selling magnetic media, has struggled to attract buyers for his portion of the Center after joining a consortium of local buyers in purchasing the 73-storey tower from Li Ka-shing’s CK Asset in late 2017 for $5.15 billion.

While many in the group had envisioned quick returns from selling off individual floors in what was then the red-hot market for strata title office assets, an extended period of tightening mainland credit policies, social unrest and more recently the viral pandemic, has seen asset owners come under pressure to sell their properties at discounts.

Chan is selling the 25,695 square foot (2,387 square metre) 48^th floor for the equivalent of just less than HK$38,140 per square foot – a price which is around 20 percent less than the HK$48,000 per square foot that the investor had reportedly been asking for the asset in 2018. The investment consortium, which also included Shimao Holdings chairman Hui Wing-Mau and Kingston Financial Holdings boss Pollyanna Chu, had paid an average of HK$33,000 to purchase the tower in three years ago.

In August, Chan had sold his 70 percent stake in the 42^nd floor in the building to Kingston’s Chu, who held the other 30 percent share in the asset, for the equivalent of HK$27,100 per square foot, according to local news reports. The manufacturing kingpin has also recently sold a retail space in the New Territories for HK$23.5 million, according to a report in the Hong Kong Economic Times on Friday. In September Chan was reported to have sold residential units in Hong Kong’s Happy Valley area at a discount.

Chan’s buyer in this latest sale is said to be a unit of Guangzhou-based developer Hopson Development Holdings, which had paid HK$1.1 billion to purchase the 49^th floor of the tower from a company controlled by local investor Johnny Cheung Shun-yee in October 2018.

Hopson’s latest acquisition comes at around 11 percent less than what the developer had paid two years ago for an asset of the same size. Hong Kong-listed Hopson has yet to make an announcement regarding the transaction to the bourse.

Mainland Buying Streak

With confidence in Hong Kong’s property market continuing to wane, Hopson’s purchase continues a trend of mainland buyers being among the few investors willing to bet on real estate in the city this year.

In September top-three mainland developer China Evergrande announced that it was moving forward with a residential development in the New Territories after agreeing to buy the 400 villa project from Henderson Land for HK$4.7 billion in July.

Kaisa Group Holdings has also been active in Hong Kong, with the Shenzhen-based builder starting off the year with a purchase of a 600,000 square foot residential site for HK$3.5 billion at a government auction in January. Kaisa is also confirmed to be the buyer of a residential plot on the former Kai Tak airport site which Goldin Financial Holdings sold for HK$7.04 billion in May of this year.

On the commercial side, China’s Ping An Insurance in April committed just over HK$11 billion to purchase a 30 percent stake in Sun Hung Kai’s West Kowloon commercial project above the high speed rail terminus.

Mainland investors have been among the few players willing to put down cash for assets in a Hong Kong market which continues to be gripped by uncertainty, as shown in a JLL report released last week.

Office tenants reduced their lettings of grade A office space in Hong Kong’s Central district by 243,500 square feet in September. That figure is up from the 147,500 square foot contraction in August and marks the fourteenth straight month that occupiers have reduced their footprints in Hong Kong.

Overall grade A office vacancy rose to 8.3 percent across the city last month as the coronavirus and economic hardship combine to dampen business confidence.