New World Sells Off Shun Tak Centre Stake, Happy Valley Apartments for HK$3.6B

Hong Kong’s New World Development this week announced a pair of asset disposals with the development giant taking in HK$3.6 billion ($460 million) from the sale of properties in its home town.

The pair of divestments include the sale of a 45 percent interest in a company that owns a set of commercial assets in Sheung Wan’s Shun Tak Centre for a total consideration of HK$2.36 billion as well as the disposal of a serviced apartment complex in the Happy Valley neighbourhood for HK$1.21 billion.

The developer controlled by the family of the late billionaire Cheng Yu-tung described the dispositions as way to free up cash for fresh growth, with the pair of sales coming just over a month after New World sold a Sheung Wan commercial space for HK$500 million.

Shun Tak Takes Back Chunk of Sheung Wan Complex

“We are constantly looking for ways to further our market expansion in Hong Kong and across the Greater Bay Area,” New World CEO and executive vice-chairman Adrian Cheng said in a post on LinkedIn. The Cheng family scion termed the set of transactions as disposals of non-core properties that had helped New World take in HK$10 billion from sales of expendable assets in the fiscal year ending 30 June.

In the first of its disposals, New World is selling its nearly half stake in a company that holds 33 percent of the retail mall and a large chunk of the office space and parking facilities in the Shun Tak Centre.

New World is parting with its holdings in a company which holds 214,486 square feet of lettable area in the 655,000 square foot shopping arcade, 13,287 square feet of gross office area and 85 parking spaces in the B-grade waterfront landmark which houses the Macau ferry terminal. The buyer is Shun Tak Holdings, a company controlled by the family of the late casino tycoon Stanley Ho, which originally developed the commercial complex.

In a statement to the Hong Kong stock exchange, Shun Tak Holdings explained its investment rationale by noting its experience in leasing and managing the retail element of the Shun Tak Centre over the past 30 years and expressed confidence in its ability to maximise revenue from the assets.  “The Acquisition would therefore offer the Group an opportunity to capture a steady recurring rental income, as well as to capture long-term potential capital growth in retail properties located in a prime area of Hong Kong,” the company said in its statement.

New World in Cash Campaign

In its second asset disposal, New World let go of 139 units in the Eight Kwai Fong service apartment complex near the Hong Kong Jockey Club in Happy Valley.

At the transaction price of HK$1.21 billion, the company sold its holdings in the serviced apartment complex for the equivalent of HK$24,266  per square foot for the 49,863 square foot (by saleable area) commercial asset. The remaining 17 units in the building are said to be held by the Tung Wah Group, and reportedly are not for sale.

The sale in Happy Valley comes after New World in late May agreed to sell the podium floors of the Cosco Tower in Hong Kong’s Grand Millennium Plaza complex for HK$500 million. In late April the developer also put up for sale a Kowloon East commercial building at a price tag of HK$3 billion.

In another move to boost its liquidity, New World announced to the Hong Kong stock exchange today that it is selling $200 million in guaranteed senior perpetual securities at an initial distribution rate of 5.25 percent. In February of this year the developer had sold its ownership interests in a pair of mid-market Hong Kong malls to the city’s MTR Corporation for HK$3 billion.

Note: this story updates an earlier version to note that 17 of the units in the 8 Kwai Fong apartments were not part of this set of transactions. Mingtiandi regrets the error.