Savills has launched a fresh tender for the sale of the China Evergrande Centre in Hong Kong, just two weeks after receivers appointed by the defaulting developer’s creditors seized the Wan Chai office tower valued at around HK$9 billion ($1.15 billion).
“The property’s proximity to the harbourfront, great accessibility, signature rooftop signage and being only one of a handful of headquarters standard en-bloc buildings with private, sole ownership on Gloucester Road make it a rare gem in the Wan Chai/Admiralty CBD,” said Raymond Lee, chief executive officer for Savills Greater China. “We expect the property to benefit from its coveted location and synergy with new Government development projects and renowned Grade A office buildings nearby.”
The tender is set to run through 31 October and comes after a sales exercise kicked off by Evergrande around mid-year failed to find a buyer for the 26-storey property which the developer purchased at a record-setting HK$36,232 ($4,615) per square foot in 2015.
On Wednesday of last week Savills had announced the successful sale of the Goldin Financial Global Centre in Kowloon East, another trophy office tower turned albatross, with that property reportedly selling at around 40 percent of its 2019 valuation after receivers had seized it from troubled mainland firm Goldin Financial Holdings.
While no target valuation has been announced for the tender, Savills’ Lee pointed to sliding values in Hong Kong’s commercial real estate market as making this a good time to invest at discounted rates.
“Referring to the Central’s Murray Road site acquired by Henderson Land in 2017, the price per square foot was around HK$50,000, and Site 3 of Hong Kong’s New Central Harbourfront project acquired in 2021, was sold at about HK$31,000 per square foot,” Lee said. “Therefore, the tender sale of The Property, with its panoramic sea views and Corner site, is not to be missed by investors regardless of long-term investment or consideration of redevelopment.”
In the tender commenced earlier this year, brokers for Cushman & Wakefield, which had been appointed to market the 345,000 square foot (32,051 square metre) grade A property, were said to be targetting a valuation of around HK$9 billion, or around HK$26,807 per square foot, for the property.
That valuation would have represented an approximately 28 percent discount to Evergrande’s 2015 acquisition price, with local media reports having indicated that Li Ka-shing’s CK Asset was in talks to acquire the building at 38 Gloucester Road.
Creditors Playing Offence
With Evergrande’s first reported attempt to sell its Hong Kong headquarters having made headlines in August 2021, the sale by creditors fits into a series of distressed assets sales by the company’s lenders and local authorities.
Records filed with Hong Kong’s Companies Registry shows that receivers from Alvarez & Marsal have been appointed to hold the China Evergrande Centre, without indicating which company had hired the consulting firm.
Evergrande in 2020 had promised its Hong Kong property to a lender consortium including China CITIC Bank, as collateral on HK$7.6 billion in loans, Companies Registry documents show.
Recent estimates put Evergrande’s debt at around $300 billion, with the company having been forced to part with a growing number of assets in recent weeks.
In early September a mainland court auctioned off Evergrande’s remaining 14 percent stake in Shenyang-based lender Shengjing Bank via an online platform for $1.1 billion, after the shares had been seized through judicial action. In August, local authorities in Guangzhou agreed to provide Evergrande with a $818 million refund after seizing a football stadium project which the developer had failed to complete.
Despite these recent liquidations, Evergrande continues to face a winding-up petition brought by disgruntled creditors in the courts of Hong Kong. The next hearing in that case is scheduled for 7 November.
Asset Sales Accelerate
Evergrande continues to generate the largest headlines, however, the tender of its Hong Kong office tower and other assets sales fit into an accelerating series of disposals as lenders lose patience and Chinese developers battle slumping housing markets at home.
Singapore’s United Overseas Bank recently moved to take full control of a HK$10 billion loan backed by Shimao Group Holdings’ Tai Wo Ping housing project in Kowloon after reaching an out of court settlement on the mainland developer’s default on that debt.
Last week mainland builder Mingfa Group sold its stake in a luxury residential project in Hong Kong’s Shouson Hill area for $82 million after the company saw its sales plunge 53 percent during the first six months of this year, compared to the same period in 2022.
Also this month, Shanghai-based CIFI Holdings agreed to sell its 60 percent stake in a project in Hong Kong’s Fortress Hill area with Wang On Properties to a joint venture of Wang On and Dutch fund manager APG for $170 million.