Kailong Buying New Territories Industrial Building From Tang Family for Reported $55M

Fund manager Kailong Group has agreed to acquire ownership of 90 percent of the space in a New Territories industrial building from the family of Hong Kong’s late “Shop King” Tang Shing-bor, according to sources familiar with the deal.

Kailong Group is buying its piece of the Wing Shing Industrial Building for a reported HK$433 million ($55.1 million), as the Tang family sells its 20th major asset this year, according to Mingtiandi’s tally.

Should it succeed in buying out the remaining rooms in the strata title complex, Kailong would be set to redevelop the property into a new industrial facility spanning up to 209,000 square feet (19,416 square metres) of floor area, which analysts predict would be worth as much as HK$2 billion upon completion.

The deal also represents the Tangs’ second disposal of an industrial asset in Kwai Chung over the last month, following Australian developer Goodman’s agreement to purchase a building in the same area for a reported HK$520 million from Stan Group, which is controlled by Stan Tang, the youngest son of the late patriarch.

Kailong in Kwai Chung

The Wing Shing Industrial Building, which covers 11 storeys on 26 to 30 Wing Kei Road, is located less than 10 minutes’ drive from Kwai Fong MTR station.

With the Tang family in 2020 having applied for a compulsory sale of the remaining space in the 43-year-old building under Hong Kong rules which encourage redevelopment of ageing buildings, Kailong is now in line to take full ownership of the property near Hong Kong’s primary container port should the sale be approved.

With the project located five kilometres (3.1 miles) drive from Kwai Chung Container Terminal 3, Kailong may also apply to boost the property’s maximum gross floor area by 20 percent, as permitted under the government’s industrial revitalisation policy, said Alex Leung, senior director at CHFT Advisory and Appraisal.

The amount Kailong is agreeing to pay for its Kwai Chung asset represents an accommodation value of about HK$2,318 per square foot, based on 100 percent ownership of the property, Leung said.

“That transaction price is on the low side,” said Leung, who pointed to recent sales in the area including the Tangs’ disposal of the Chuan Kei Industrial Building to Goodman for at least HK$3,000 per square foot.

Shifting Focus

Kailong is buying in the New Territories industrial hotspot after sales of workshops, warehouses and go-downs in Hong Kong reached HK$9.2 billion in the second quarter, which was a 37 percent leap from the same period a year earlier, according to a report published by Colliers last month.

With market prices coming down Kailong has jumped into action, including announcing a HK$917 million joint venture with EC Healthcare two months ago to develop a medical building in the Tsim Sha Tsui commercial district anchored by the local clinic operator.

With the city’s investment market expected to remain slow and full-year transaction volumes projected to slide by 5 percent to HK$70 billion in 2022, Kailong is buying up the industrial asset while marketing its Hong Kong island portfolio amid falling office rents and capital values.

Between May and June this year, Kailong put five commercial assets on the market worth a total of HK$2.37 billion.

Industrial Hotspot

As a traditional Hong Kong industrial hub, Kwai Chung continues to see big-ticket transactions, including logistics giant ESR besting two competing bids to win a site in Kwai Chung on Container Road for a price of nearly HK$5.26 billion.

In April, fund manager Nuveen acquired the Cargo Consolidation Complex at 43 Container Port Road for a reported HK$2.88 billion.

Unit rates for industrial assets are the cheapest among different asset classes, continuing to drive demand for the sector, said Tom Ko, executive director and head of capital markets for Greater China at Cushman & Wakefield.

In Kwai Chung, selling prices for older flatted factories currently average HK$4,000 per square foot of saleable area, Leung said.