A company controlled by the family of Hong Kong secretary for justice Teresa Cheng is jumping into the city’s industrial property boom with a HK$585 million ($75.2 million) purchase in the New Territories, according to an announcement this month to the Hong Kong Stock Exchange.
Analogue Holdings, a Hong Kong-based engineering firm majority-owned by Cheng’s 81-year-old husband, Otto Poon, has agreed to purchase a 12-storey tower from Emperor International Holdings, the property division of local conglomerate Emperor Group.
The engineering firm, whose owner last year sold part of its business in New York after Cheng was sanctioned by then-president Trump, this month announced its en-bloc acquisition of the Toppy Tower in Kwai Chung, an industrial hub in the New Territories.
The Analogue acquisition took place as sales of whole-block industrial buildings this year reached 17 transactions during September, representing an increase of 1.4 times compared to the same period last year, according to a report from Centaline Property Agency.
Emperor Offloads Another Industrial Asset
Just six months after it sold a Kowloon East industrial building to Blackstone for HK$508 million, Emperor International Holdings is selling its Toppy Tower to the company controlled by Otto Poon, the husband of Cheng who earlier this month made an official blog post to praise China’s “impressive achievements” in recent decades.
Toppy Tower, which occupies a 99-year leasehold site at 45-51 Kwok Shui Road, is currently subject to four existing tenancy agreements, including one with co-working operator Fusion Hub, with leasing periods that range from one to three years.
Emperor International Holdings, controlled by local tycoon Albert Yeung, purchased the property in 2014 for HK$418 million. The company had planned to redevelop the property, following an announcement of a new revitalization scheme in the 2018 Policy Address which allowed a relaxation of the maximum permissible plot ratio for some non-residential redevelopment projects of up to 20 percent.
In March of last year Emperor International received permission to boost the property’s plot ratio from 9.5 to 11.4, allowing for the potential redevelopment of the existing 124,555 square foot (11,571.5 square metre) property into a 22-storey project that would yield a gross floor area of 162,502 square feet.
Should Analogue build a new structure on the site at the maximum allowed area, it would have paid the equivalent of around HK$3,600 per square foot of built area for the project, based on the purchase consideration.
In a recent filing to the Hong Kong Stock Exchange, the company noted that given the conditions of the property market and a selling price which is about 40 percent above what it paid to acquire the property back in 2014, the disposal would “improve the financial position of the group,” and support its future investment opportunities.
For Analogue Holdings, which provides engineering services for the Goldin Financial Global Centre and Two IFC, the acquisition is expected to provide a “consolidated location” for its staff, and reduce disruptions to business operations caused by relocations due to the expiry of property leases.
Industrial Sector Outperforms
The whole-block sale of Toppy Tower came as Hong Kong’s industrial sector recorded a 20 percent quarter-on-quarter growth in transactions in the three months that ended September, according to a Colliers International report.
During the third quarter Hong Kong’s industrial properties also outperformed commercial and residential properties on the leasing side, with warehouse rents seeing a 1 percent quarter-on-quarter increase, while vacancy edged down 0.2 percentage points to 3 percent, compared to the preceding three months, noted CBRE.
Among major industrial transactions in Hong Kong during recent months was SilkRoad Property Partners’ en-bloc buy of the Hang Wai Industrial Centre in Tuen Mun, which reportedly changed hands for HK$1.3 billion.
In July, China Resources bought the East Asia Industrial building from Stan Group for HK$2.24 billion, marking the city’s largest industrial deal this year.
Within that same month, Manhattan-based fund manager Blackstone also acquired a six-storey industrial building in Fanling for HK$282.6 million.