SilkRoad Acquires Fifth Hong Kong Industrial Asset for Reported $167M

SilkRoad Property Partners is adding a fifth industrial asset to its Hong Kong portfolio after consolidating block C at the Hang Wai Industrial Centre in the New Territories through a series of transactions said to total over HK$1.3 billion ($167.1 million), according to reports reviewed by Mingtiandi.

Just months after acquiring a cold-storage building in Fanling for HK$321 million ($41 million), SilkRoad’s set of deals for the 19-storey property near the Tuen Mun MTR station at 6 Kin Tai Street in Tuen Mun district gives it full ownership of the 316,530 square foot (29,406.5 square metre) 99 year leasehold property as the investment manager continues to see promising returns from the city’s industrial sector.

“This acquisition will be our fifth logistics/industrial asset in Hong Kong,” said SilkRoad’s CEO Peter Wittendorp. “Current occupancy of the sub-portfolio portfolio is 100 percent.”

The purchase of the 40-year-old property takes SilkRoad into Tuen Mun, a traditional industrial district near Castle Peak Bay, as sales of whole-block industrial buildings in the city increased by 1.4 times last month compared to the same period last year, according to a report from Centaline Property Agency.

Industrial Asset Addition in Hong Kong

The investment manager acquired the Hang Wai Industrial Centre through a set of separate transactions including its HK$938.4 million (HK$2,965-per-square foot) purchase of all 17 leasable floors in the building from Capital Lake Property Limited, which had acquired the building in 2008, according to its website. Each floor in the 19-storey building yields 18,867 square feet.

The company also purchased 50 parking spaces on the second floor from the Hong Kong-based investment company while picking up another 187 car slots from another vendor, with those two transactions reportedly totalling another HK$429 million, according to market data and media reports.

SilkRoad’s latest Tuen Mun purchase represents a “structural tilt” in the manager’s portfolio, said Wittendorp. He added that the private equity fund manager’s strategy is aligned with the growing e-commerce boom and aided by a three-year extension of Hong Kong’s revitalization scheme 2.0, which is depleting the stock of industrial buildings by encouraging redevelopment of older workshops and warehouses for other purposes.

Connecting to Tuen Mun

A traditional industrial district in the New Territories, Tuen Mun, is expected to benefit from improved transport connectivity, including a $6.1 billion tunnel project which connects the area to Hong Kong’s international airport.

“We feel the area will be improving further as the Tuen Mun-Chek Lap Kok tunnel opened in December, which has improved accessibility [to the airport],” said Wittendorp. He added that Tuen Mun is also close to the busiest border crossing to Shenzhen and the Greater Bay Area.

In July, Tuen Mun was the site of what still ranks as Hong Kong’s largest industrial deal this year when a unit of mainland conglomerate China Resources bought the East Asia Industrial building from Stan Group for HK$2.24 billion.

SilkRoad Takes the Industrial Route

About seven months before SilkRoad’s recent acquisition, the investment manager in February added a fourth industrial asset to its Hong Kong portfolio, buying the Smile Centre in Fanling, an emerging hotspot for alternative investments, for HK$321 million.

SilkRoad in January had also announced the final closing of its real estate fund, Silk Road Asia Value Partners II (SAVP II), at $549 million, after closing on six investments for the vehicle in pandemic-resistant assets, including industrial and neighbourhood retail.

While office and retail spaces in Central and other upscale districts in Hong Kong have continued to struggle this year, some of the city’s less glamorous streets have become prime targets for international fund managers, with Blackstone having spent $36 million in July this year to buy a workshop in Fanling.

During that same month, Boston-based AEW agreed to buy a 50 percent stake in a eastern Hong Kong island warehouse from Hanison Construction for HK$305 million.