Hanison Selling Hong Kong Building Stake to AEW as Disposal Streak Continues

Hanison Construction Holdings has agreed to sell a half-stake in an eastern Hong Kong Island logistics asset and its full ownership in a Kowloon East industrial building for a combined HK$933 million ($120 million).

Hanison, controlled by the Cha family of developer Hong Kong Resorts International, announced Saturday that it would sell a 50 percent interest in 18 Lee Chung Street, a property in the Chai Wan area, to a fund managed by US-based private equity firm AEW for HK$305 million.

The same day, the HKEX-listed developer disclosed that it would sell 1 Tai Yip Street, located in Kowloon’s Kwun Tong area, en bloc to Horman Investment Ltd, a company controlled by shipping magnate Charlie Lee, for HK$628 million.

The transactions bring Hanison’s assets sales in Hong Kong to over HK$1.1 billion this year following the death of the company’s chairman and family patriarch Payson Cha in November 2020. Hanison, which focuses on redevelopment projects in Hong Kong, said the disposals would enable the firm to unlock the value of the assets, maximise returns to shareholders and reallocate capital into future investment opportunities.

Class of 1980

The 1980-vintage property at 18 Lee Chung Street, formerly known as the Minico Building and now called Minibox Tower, is a vacant 16-storey structure undergoing redevelopment with a potential gross floor area of 96,264 square feet (8,943 square metres). AEW is paying roughly HK$6,337 ($815) per square foot of GFA on behalf of the firm’s closed-end Value Investors Asia IV fund.

Minibox is a provider of personal storage units in Hong Kong. In 2019, Hanison bought the company from a pair of funds managed by US private equity giant Blackstone for HK$735 million.

The property at 1 Tai Yip Street, known as the Hay Nien Building, has a total GFA of 62,889 square feet, meaning that Lee, who holds the titles of president and chairman at Hong Kong-based logistics firm Hecny, is paying about HK$9,986 ($1,284) per square foot.

The building, also completed in 1980, is occupied by tenants whose leases will expire during the period between February 2022 and July 2023. The aggregate monthly rent of the existing tenancies is HK$967,000.

Hanison expects to recognise gains on disposal, before costs and expenses, of HK$35.6 million for the Minibox Tower stake and HK$106.2 million for the Hay Nien Building.

Pairing With Fund Managers

Now chaired by Payson’s younger brother Johnson Cha, Hanison has a habit of offloading half-stakes in its properties, typically as a means to enter a joint venture with an outside fund manager.

In April, Hanison announced that it had sold a half-stake in a development parcel at 57A Nga Tsin Wai Road in Kowloon to New York-based real estate fund manager Angelo Gordon for a total consideration of HK$160.5 million. Around the same time, the Hong Kong firm sold a half-stake in a 67,314 square foot site at 121 Tong Yan San Tsuen in the New Territories to local developer Nan Fung Group for HK$67.5 million.

In May 2018, Hanison and Angelo Gordon sold the Queen Central commercial building they owned in Sheung Wan to a joint venture between mainland investor Hugo Lam and Hong Kong-listed Asia Cassava Resources for HK$1.1 billion — up from HK$600 million when the pair purchased it in 2016.

A few months later in 2018, Hanison began selling on a strata-titled basis a 23-storey office tower in Cheung Sha Wan co-owned with Hong Kong fund manager PAG. The developer started by putting the 9th and 19th floors on sale with prices ranging from HK$22.7 million to HK$28.4 million.

In August 2019, a joint venture of Hanison and a fund managed by China Merchants Capital agreed to sell a Kwai Chung industrial building to “shop king” Tang Shing-bor for HK$1.1 billion. The JV flipped the building after holding it for 15 months, earning a markup of almost 53 percent on the HK$720 million price the joint venture had paid for the asset.