Manulife Biggest Investor in HK$9.8B Buy of Swire’s Cityplaza One in Hong Kong

Hong Kong’s biggest building sale of 2020 closed on one of the last days of the year, with sign-off on the trade of Swire Properties’ Cityplaza One in Taikoo also bringing to light the deal’s largest investor.

While a consortium led by funds managed by Gaw Capital Partners and Schroder Pamfleet had signed the agreement to acquire the 21-storey office building for HK$9.84 billion ($1.27 billion) in early November, Canadian insurer Manulife has now joined the deal as the biggest investor, through its participation in the Gaw fund, according to an announcement on 30 December.

“We are very excited to partner with Gaw Capital and other investors on this prime investment,” Manulife head of Asia real estate investments Kenny Lam said. “Despite some of the headwinds resulting from the pandemic, we are continuing to focus our expansion efforts on high quality assets across major markets in the Asia Pacific region, which are supported by strong long-term macro and demographic prospects.”

The acquisition, which was also backed by mainland insurer BOC Life, was one of the few major trades of commercial assets to be completed in Hong Kong during 2020, as the COVID-19 pandemic added to uncertainties regarding the world’s most expensive real estate market.

Downturn Bargain Hunting

Together the consortium members now have possession of the 628,785 square foot (58,416 square metre) tower after paying the equivalent of HK$15,609 per square foot to acquire the 1997-vintage building, as announced by Swire Properties.

“We are pleased to be part of the consortium partners, and joined hands with Gaw Capital and other investors in this acquisition,” said BOC Life chief executive Wilson Tang. “It is a great investment opportunity with high growth potentials in the long run.”

Tang, together with his partners from Manulife, Gaw Capital and Schroder Pamfleet, are making the acquisition despite a subdued outlook for office leasing in Hong Kong in the coming year. The amount of office space occupied in Hong Kong shrank by more than 2.5 million square feet in 2020, according to JLL estimates, although the eastern section of Hong Kong island, which includes the Taikoo area where Cityplaza is, proved to be among the more resilient locations.

Despite the comparatively durability of eastern Hong Kong east, Swire Properties is selling Cityplaza One for around 19 percent less than the price it was able to secure when it sold two other towers in the same complex, Cityplaza Three and Cityplaza Four, in 2018. Gaw Capital was also one of the investors in that transaction, with funds managed by the firm now owning stakes in all three towers in the development.

With its airline division, Cathay Pacific, having logged record losses in 2020, market analysts believe that Swire Properties corporate parent, Swire Pacific may have felt pressure to improve its cash reserves.

Manulife Gives Office Another Try

The deal for Cityplaza One was the sole major investment in an Asian commercial real estate asset of 2020 for Manulife, which had $1.3 trillion in assets under management as of 30 September, after the Toronto-based firm placed a pair of logistics bets in the region last year.

In July, Manulife had set up a RMB 1.7 billion (then $243 million) joint venture with Hong Kong-listed ESR to purchase a set of four stabilised logistics properties in China from a development fund managed by the warehouse specialist.

That China deal came less than one month after Manulife had established a $200 million joint venture with Singapore’s Alpha Investment Partners and Indonesian warehouse developer PT Mega Manunggal Property Tbk to develop logistics properties in Indonesia.

In early 2019 Manulife had joined mainland insurer China Life in a $1 billion joint venture with developer Shui On Land to invest in commercial properties in mainland China, including purchasing the Corporate Avenue 5 office building in Shanghai from Shui On.