Only a few weeks after selling two buildings in its One Harbourgate complex in Kowloon for a record HK$5.86 billion ($755 million), Hong Kong developer Wheelock and Company is said to be putting the second office tower in the project for sale for HK$4 billion ($516 million), according to an account by Bloomberg.
The proposed sale of One HarbourGate East Tower would be the latest in a string of en bloc commercial property transactions in Hong Kong, that have helped send values for office space to record levels.
Many of the buyers of Hong Kong commercial buildings in recent years have been mainland Chinese financial institutions, and several mainland investors are said to be interested in bidding for the unfinished 254,000 square foot (23,600 square metre) structure.
List of Potential Buyers Still Unrevealed
While no potential buyers have yet been named for the 15-storey East Tower, Wheelock is said to be expecting a sale within the next two to three months. Wheelock representative Eva Ho was quoted by Bloomberg as stating, “We understand from property agents that East Tower attracts great interest in the market.”
In January of 2015 the developer revealed that it expected to sell at least part of One Harbourgate in 2015, before finally selling the West Tower and a linked retail structure to mainland insurer China Life earlier this month. If sold at the reported asking price of HK$5.86 billion, Wheelock would be receiving HK$16,000 per square foot for the project in Kowloon’s Hung Hom area nearly seven percent more per square metre than it received from China Life for the first two buildings in the project.
China Life’s HK$4 billion purchase of the West Tower was only one of two blockbuster mainland acquisitions in Hong Kong’s office market this month with China’s Evergrande Real Estate setting a new record market record by purchasing the Mass Mutual Tower in Wanchai from Joseph Lau’s Chinese Estates for HK$12.5 billion ($1.61 billion).
Mainland Buyers Eager to Build an International Presence
In addition to the two purchases this month, three of China’s four giant state-owned banks have all acquired or built their own office towers in Hong Kong’s Central district in recent years, with a range of smaller banks and insurers said to be eager to buy their way into Hong Kong. Owning their own footprint in the Hong Kong market typically allows these mainland players to both diversify their asset bases away from the their home markets, and also raise their stature internationally by developing a substantial presence in a global financial centre.
While buying Hong Kong buildings may be rewarding in terms of soft power, some analysts question the financial soundness of some recent acquisitions, as investment yields on Hong Kong properties have continued to shrink, despite the city having some of the highest office rental rates in the world.
Evergrande’s deal for the Mass Mutual Tower has been estimated to provide a mere 1.7 percent yield, and the company’s stock skidded nearly 4 percent on the day after it made the record acquisition.
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