Swire in Talks to Sell Hong Kong Warehouse to GLP for $137M

Swire Properties is in talks to sell a warehouse in Hong Kong’s Tsing Yi area for a reported HK$1.08 billion ($137.5 million) this month, with local media accounts having identified the buyer as Asian warehouse giant GLP.

“Swire Properties intends to sell a property located at 8-12 Tsing Tim Street, Tsing Yi,” a company spokesperson told Mingtiandi. “The sale is part of our strategy to dispose of certain non-core assets and reinvest the proceeds into new opportunities, as well as our core projects,” a Swire spokesperson said in confirming the sale of 8-12 Tsing Tim Street in the port district, while declining to identify its partner in the discussions.

At the reported price, the Singapore-based industrial specialist would be paying HK$5,806 per square foot to acquire the DSL Warehouse, after trades of Hong Kong industrial properties jumped by 37 percent year-on-year in the second quarter to total HK$9.2 billion.

Should the deal be completed, it would mark GLP’s first investment in the city, according to brokerage sources familiar with the matter, and comes less than three months after GLP’s rivals at ESR secured a site for their first logistics project in the city.

Offloading Industrial

For Swire, the industrial disposal would follow a rough first half of the year, with the developer’s underlying profit having slid by about 8 percent year-on-year to HK$4.14 billion, as the company slowed its sales of non-core assets in Hong Kong, according to its 2022 interim report.

The 186,000 square foot (17,279 square metre) building, known as the DSL Warehouse, is currently leased to logistics provider DB Schenker at a monthly rent of HK$3 million, said analyst sources who spoke with Mingtiandi.

“With its existing lease, the industrial building provides a passing yield between 3.2 and 3.5 percent, subject to renewal negotiation with the existing tenant,” said Eric Chong, director of capital markets research at Savills. “The property (could be) converted into a cold storage facility or dangerous goods storage, which would achieve higher rentals,” Chong noted.

Occupying a 74,000 square foot site, the 5-storey building sits less than a 10-minute drive from both the Cheung-Tsing Highway and the Kwai Tsing Container Terminal 9.

Asking rents for industrial properties in Tsing Yi currently average HK$15 per square foot per month, according to Tom Ko, executive director and head of capital markets for Hong Kong at Cushman & Wakefield, who noted that average rates in the area have climbed 10 percent compared to the same period last year.

Hong Kong Debut

Having developed or acquired more than 77 million square metres of logistics properties, GLP would be making its entrance into the Hong Kong market after nearly doubling its APAC assets under management to $80.5 billion in 2021 to seize the top spot among real estate fund managers in Asia Pacific.

Despite that scale, the company would be making its Hong Kong shed debut a few months after regional competitor ESR, which has 42 million square metres of Asia Pacific assets. The Hong Kong-listed firm took on its first logistics project in the city in July when it won a site for a 138,000 square metre warehouse facility in Kwai Chung.

The company is now developing that project, which is located about 15 minutes’ drive east of Swire’s Tsing Yi facility, via a joint venture with local builder Chinachem.

Swire Steams Ahead

Swire’s Tsing Yi discussions come about six months after the company introduced a HK$100 billion ($12.8 billion) plan to boost its pipeline of projects in Hong Kong, mainland China and Southeast Asia. Half of the funds in that investment program have been allocated to the mainland market, with a focus on retail-led mixed-use developments in first tier and leading second tier cities.

Just last month, Swire chief executive Tim Blackburn signed a joint venture deal to develop a 600,000 square metre (6.5 million square foot) mixed-use project in Shanghai’s Pudong district, with the company having also recently broken ground on its second luxury retail project in Guangzhou, while pushing forward its Taikoo Li mall project in Xi’an.

In Hong Kong’s Quarry Bay, the developer expects to open its Two Taikoo Place within this year after securing Swiss private bank Julius Baer as an anchor tenant of the Grade A tower.