Hong Kong’s ITC In Talks to Sell Wan Chai Office Tower as Losses Widen

Hong Kong’s ITC Properties is in talks to sell an office tower in Wan Chai as the developer and property investor continues to divest assets amid mounting losses.

The HKEX-listed builder is in discussions to offload 250 Hennessy, a commercial building on Hong Kong island, to an undisclosed mainland investor, according to market sources who spoke with Mingtiandi. Local media accounts indicate that the asset is being sold for HK$608 million ($78 million), although some market analysts cast doubt on the viability of that valuation under current conditions. Listed contacts for ITC could not be reached for comment.

ITC is discussing the sale of the asset after recording a net loss attributable to shareholders of HK$645 million for the fiscal year ended 30 March. That shortfall, which followed a HK$147 million loss booked a year earlier, was largely driven by sliding valuations for the firm’s investment properties in Hong Kong and an impairment loss on its interest in the Rosedale Hotel in Beijing.

“The Group is facing a challenging business environment, primarily influenced by elevated geopolitical tensions, persistent high interest rates, and financial pressures on the property developers,” ITC Properties’ chairman Cheung Hon Kit said in the company’s latest annual report. “In the absence of encouraging catalysts, Hong Kong’s property market, especially commercial property, is grappling with declining rents and rising vacancies. In response to such market conditions, the Group has been continuously reviewing its business model and adjusting agility.”

String of Divestments

At the reported offer price, ITC would be selling the 31-storey tower for HK$10,931 per square foot, which represents a 23 percent decline from the HK$14,160 per square foot which the company paid to acquire the asset from local developer Cheuk Nang in 2015.

Also known as the ITC Building, the 1994-vintage property is situated a four-minute walk from the Wan Chai MTR station at 250 Hennessy Road, near the junction with Johnston Road. ITC had reportedly spent HK$90 million to renovate the 55,621 square foot (5,167 square metre) office block, which also includes 25 parking spaces.

250 Hennessy would be ITC’s latest divestment after the company ITC reported just HK$24.7 million of cash and equivalents as of 31 March, compared to total borrowings of HK$1.4 billion.

Last month, the company sold its half-stake in the 499-key Westin Bayshore hotel in Vancouver to joint venture partner and investor Hui Kau Mo for a consideration of C$18.5 million, with the sale coming ahead of the October maturity of a C$175 million bank loan that had been taken out by the asset’s holding company. ITC said it would have been required to make a “significant” capital injection should a portion of the loan fail to be refinanced.

In April, ITC agreed to sell its headquarters on the 30th floor of the Bank of America Tower in Admiralty to an entity linked to Hong Kong-based Sino Group for HK$260 million, with ITC continuing to lease the strata-titled floor from the new owner.

In January, the company sold its 49 percent interest in a vehicle which holds a half-stake in the 380-key Renaissance Shanghai Caohejing Hotel for HK$50 million.

Those disposals came after a joint venture between ITC and Shaw Holdings in 2022 sold the Rosedale Hotel in Kowloon to rental housing operator Weave Living and US fund manager PGIM Real Estate for HK$1.37 billion.

“Looking towards the future, the Group anticipates persistent business challenges, influenced by external macroeconomic factors such as high interest rates and intensifying geopolitical tensions,” Cheung said in the annual report. “These uncertainties in the global business environment could potentially slow economic growth. Thus, as a property developer, the Group faces tough challenges in the coming year amid these conditions.”

Office Pain Continues

ITC is seeking to sell 250 Hennessy after mid-year market data from JLL showed that average grade A office rents in the Wan Chai and Causeway Bay areas had plunged 35.4 percent from their 2019 peaks.

Capital values of grade A offices in Hong Kong have plummeted 41.6 percent over the same period, with weak leasing demand and oversupply driving average vacancy in July to a record high of 13.7 percent across the city and 10 percent in Wan Chai and Causeway Bay, according to the consultancy.

Hong Kong’s property market slump has weighed on the profitability of some of the city’s biggest office landlords, with Jardine Matheson-controlled Hongkong Land having booked a total attributable loss of $833 million during the first half of the year while HKEX-listed Swire Properties saw a 19 percent year-on-year drop in attributable profit over the same period. Both developers reported negative rental reversions and valuation markdowns within their Hong Kong office portfolios.

Last week, tycoon David Chan Ping-chi, also known as the “King of Cassettes”, sold his remaining two floors in the Center office tower in Central district to DBS after valuations for space in the 73-storey tower plummeted by more than half since 2017.

In August, receivers for creditors of defaulted mainland property firm Cheung Kei Group fielded offers for the East Tower of the One HarbourGate office complex in Kowloon’s Hung Hom area after the asset lost nearly two-thirds of its value over the past two years.