Hong Kong’s New World Selling New Territories Mall to Chinachem for $514M

New World Development is selling a shopping centre in Hong Kong’s Tsuen Wan area to Chinachem Group at a one-third discount from its reported asking price, as the Hong Kong-listed builder continues to pare its investment portfolio as part of a multi-year campaign to reduce debt and maintain dividends to shareholders.

The company controlled by tycoon Henry Cheng and his family has signed an agreement to offload the D-Park mall to privately-held Chinachem for HK$4.02 billion ($514 million), according to a joint announcement on Friday. The HK$6,381 per square foot value represents a 33 percent discount to New World’s reported asking price of HK$6 billion (HK$9,524 per square foot) when it put the asset up for sale in July 2022.

“New World Development has been continuously optimising its assets portfolio while also seeking suitable investment opportunities to further boost shareholder returns,” New World said in the announcement. “New World Development will continue disposal of non-core assets to recycle capital for the development of its core businesses.”

The Hong Kong property giant has offloaded HK$59.6 billion of assets in the last three fiscal years, including a majority stake in NWS Holdings, New World’s HKEX-listed infrastructure and construction unit which was taken private in November 2023 by a vehicle controlled by the Cheng family.

Asset Sales Continue

The sale, which New World expects to complete in April, comes as the builder raised its target for non-core asset disposals in the fiscal year ending June to HK$8 billion from HK$6 billion as part of a multi-year effort to cut its net gearing ratio to “mid to high” 30 percent by June 2027 from 49.9 percent as of December.

In addition to the NWS privatisation, in late 2022 New World sold the 695-key Pentahotel in Kowloon to Angelo Gordon for $260 million and sold a 51 percent stake in a Cheung Sha Wan office project to Ares Management for $392 million.

Located a 16-minute walk from the Tsuen Wan MTR station at 398 Castle Peak Road, the D-Park shopping centre constitutes the retail podium of New World’s Discovery Park development in the New Territories and is home to about 140 stores, including a location of jewelry retailer Chow Tai Fook, which is also controlled by the New World chairman Henry Cheng.

The acquisition by Chinachem includes the three-storey mall, which spans about 630,000 square feet (58,529 square metres) of floor area, as well as 1,000 parking spaces.

“Chinachem believes that the acquisition of this premium regional mall will create synergy with its investments in Tsuen Wan including Nina Mall 1 & 2, Nina Hotel Tsuen Wan West and Nina Park,” Chinachem said in the announcement. “Chinachem is confident about Hong Kong’s long-term economy and property market, and intends to hold the D-Park mall as a long-term investment.”

In addition to asset disposals, New World has trimmed capex and operating expenses, bought back some $630 million of bonds and perpetual instruments, and slashed its dividend by 57 percent in an effort to shore up its financial position.

All-Time Lows

The sale comes a day after New World announced its interim results for the six months ended December 2023, which saw the company’s revenue decline 25 percent from the prior period to HK$17.1 billion.

The builder achieved HK$1.5 billion in net profit from continuing operations, representing a 16 percent year-on-year increase, but booked a net loss of HK$5.8 billion on realising a HK$8.3 billion loss on its NWS disposal.

The announcement of the D-Park disposal was not well received by investors, with New World’s stock closing down 6.8 percent on Friday. The company’s shares are currently hovering near all-time lows and have slumped 22 percent so far this year, the steepest decline among Hong Kong’s top five listed developers.

With capital values of high street shops in Hong Kong now averaging 35 percent below year-end 2019 levels, regional shopping centres in the city have begun to stir investor interest.

In the first two months of the year, China Resources Longdation acquired the Greenwich Village retail podium in Tseung Kwan O for a reported HK$535 million ($68 million) and the KF88 retail podium in the Kwai Fong area for HK$310 million ($40 million).