China Taiping Insurance is rumored to have won the race to acquire the One Harbourgate East Tower in Kowloon with a bid of HK$4.5 billion ($579.6 million), marking another foray by mainland financial services companies into the Hong Kong property market. Should the deal for the soon to be completed office development in Kowloon’s Hung Hom area, which was reported in the Sing Tao news portal today, be confirmed, it would be the latest in a series of money-spinning sales for Hong Kong developer Wheelock & Co.
One Harbourgate East Tower was put on the market in late 2015 soon after Wheelock sold two other buildings in the four building complex to China Life in November of last year. The East Tower was first rumored to have been sold to a Chinese company in April this year after seven mainland enterprises, including Bank of Communications, Industrial and Commercial Bank of China, Fosun and HNA International had reportedly expressed interest in the project.
Deal Valued at Over $2K Per Square Foot
Today’s report indicates that China Taiping has submitted the highest bid and that the final details of the transaction are being resolved, and that an announcement is imminent.
At the reported price of HK$4.5 billion ($579.6 million), the deal for One Harbourgate East breaks down as approximately HK$16,000 ($2,060) per square foot, exceeding the estimated HKD 14,900 ($1,919) per square foot paid by China Life for the neighboring One Harbourgate West Tower and an adjacent retail building, which was a record at the time.
Hong Kong Developers Selling Assets to Mainland Giants
The deal marks the third of a series of sales of Hong Kong office developments by Wheelock that has netted the company an estimated HK$15.8 billion ($2.04 billion). Wheelock had previously sold two blocks at its One Harbourgate West complex for HK$5.86 billion ($755 million) to China Life Insurance in November 2015, and sold the 21-storey East Tower in Kowloon to Citigroup for HK$5.43 billion ($697 million) in July 2014.
This latest transaction also continues the trend of mainland financial services firms shaking up Hong Kong’s property market with big ticket purchases. In addition to China Life’s One Harbourgate deal, finance firm China Everbright spent HK$10 billion ($1.29 billion) to acquire the Dah Sing Financial Centre in Wan Chai in February 2016, and mainland developer Evergrande set a new Hong Kong price record in November last year by acquiring the Mass Mutal Tower in Wan Chai for HK$12.5 billion.
Through its asset management affilliate, China Taiping, which is considered one of the mainland’s “big five” insurers, also invested $229 million in a Manhattan luxury development during 2015.
While Chinese firms may favor a greater footprint in Hong Kong for political reasons, a look at prevailing yields in the harbour city indicate that the pay-off from investments in office assets is comparatively weak. Savills’ estimates of effective yields for Hong Kong (2.37 percent) are the lowest among ten major urban markets globally and, except for Taiwan, the lowest of any major business centre in Asia, according to its World Office Yield Spectrum.