Hong Kong’s Cassette King Sells Two Floors in The Center to DBS for $169M

Hong Kong tycoon David Chan Ping-chi is offloading his remaining holdings in Hong Kong’s fifth tallest building with the sale of his last two floors in the Center, after valuations for space in the 73-storey office tower plummeted by more than half since 2017.

The chairman of local tape and film manufacturer Acme Group, also known as the “King of Cassettes”, has agreed to sell floors 66 and 75 in the skyscraper at 99 Queen’s Road Central to Singapore’s DBS Bank, with market sources indicating the assets are changing hands for a combined HK$1.3 billion ($169 million).

At just under HK$26,000 per square foot, the blended transaction price represents a decline of 54 percent from the HK$55,854 per square foot price achieved in the sale of the 79th floor of the building in 2017, the same year that Chan had teamed up with a consortium of investors to acquire the tower from Li Ka-shing’s CK Asset Holdings.

“The Center has recently seen a rise in strata transactions, as some of the owners are facing financial challenges,” said Alex Leung, chief surveyor at Hong Kong-based CHFT Advisory and Appraisal.

DBS Boosts Footprint

The blended transaction price represents a 22 percent discount from the average HK$33,000 per square foot price paid by Chan, who was part of a consortium of mainland and Hong Kong investors which collectively acquired 75 percent of the space in the tower in late 2017 from CK Asset, in what was Hong Kong’s largest transaction of a single property asset that year.

With plans to flip the tower piecemeal in what was then a raging market for strata commercial assets in Hong Kong, the consortium, which also included Shimao Group chairman Xu Rongmao, Hong Kong’s late “Minibus King” Ma Ah-muk and Hong Kong businesswoman Pollyanna Chu, paid HK$40.2 billion ($5.2 billion) for the property and financed the purchase with bonds yielding as much as 15.25 percent.

Market sources told Mingtiandi that DBS is paying roughly HK$24,000 per square foot for the 66th floor and HK$28,000 per square foot for level 75 of the tower situated in Central district, adding to the set of nine floors in the building already owned by the lender, including levels 10 through 18, 50, and 73, some which are occupied for self-use. The building does not include 13th or 14th floors.

Level 66 has a floor area of 26,967 square feet (2,505 square metres) and is currently leased by flexible office provider Regus through October 2026, while China Unicom is occupying the 23,901 square foot 75th floor on a rental contract set to expire in June 2027.

In 2021 Chan had used the pair of floors as collateral for loans from Singapore’s UOB and Taiwan’s Shin Kong Commercial Bank, according to local media accounts.

Asset Sales

Chan, who held full or partial interests in at least eight floors in the Center, initially profited from his strata strategy in early 2019, when he sold the 38th floor to Shenzhen-based developer Kaisa Group for HK$42,000 per square foot, while he sold subdivided units on level 39 at prices ranging from HK$42,000 per square foot to over HK$48,000 per square foot.

Those valuations began falling by late 2019, when social unrest triggered a slump in Hong Kong’s commercial property market that worsened through the pandemic. By 30 June capital values for grade A offices in Hong Kong had plummeted 41.6 percent from their 2019 peaks, according to JLL.

In December, Chan sold the 67th floor for HK$27,811 per square foot, after selling the 25th floor for HK$27,022 per square foot in 2021. In 2020 the tycoon sold off his interests in levels 48 and 42.

Said to be facing liquidity challenges, Chan has also since last year offloaded a string of properties across Hong Kong, including disposing of a unit in the Shun Tak Centre in Sheung Wan; a floor in a Quarry Bay industrial building; shops and retail spaces in Sai Wan, Mong Kok, and Kwun Tong; and a shopping centre in Kwai Chung.

Other members of the Center’s investor consortium have also taken haircuts to dispose of their holdings in the landmark tower. Shimao’s Xu sold the 63rd floor in May for just under HK$28,000 per square foot and is said to still be seeking buyers for the 31st and 32nd floors. In 2021, “Minibus King” Ma sold the 20th floor to relatives of former Hong Kong chief executive Tung Chee-Hwa for around 24 percent less than he had paid to acquire the asset four years earlier.

Some defaulted mainland developers who had bought slices of the skyscraper are also selling or attempting to sell their floors. Entities linked to Kwok Ying Lan, chairwoman of bankrupt developer Yuzhou Group, have reportedly cut their asking price for the 21st floor by 14 percent from when they first put the asset on the market last November, while Kaisa sold the 38th floor to mainland investment firm Shandong Hi-Speed Financial Group to settle an outstanding loan, just two years after buying it from Chan.

Asset Sales

The disposals by Chan and other investors comes as grade-A office vacancy in Hong Kong reached a record high of 13.7 percent at the end of July amid weak leasing demand and oversupply, according to JLL.

Rents in Central have plunged 40.5 percent from 2019 through the end of June, while vacancy in the district hovered around 12 percent in July, according to the consultancy.

Over in Admiralty district, the Bank of America Tower has also seen a series of strata sales amid the downturn, including local developer ITC Properties’ disposal of the 30th floor in April and the sale of the 23rd floor last October by creditors of defaulted mainland apparel firm Shandong Ruyi Technology Group.