Hong Kong’s Phoenix Bets on Sydney Luxury Market $186M JV

Following a series of Asia-wide property disposals in the past year, Hong Kong’s Phoenix Property Investors is betting on Sydney’s housing boom through a joint venture with Australian developer Abadeen which has already begun investing A$250 million ($186.3 million) in equity to develop boutique residential projects in the city over the next five years.

“Our strategic partnership with Abadeen is the realization of a long-considered investment thesis to build a scalable residential development business targeting boutique, quality and desirable apartment living for owner-occupiers in highly sought-after neighbourhoods in Sydney,” Phoenix head of Australian investments, Trent Winduss, said in a statement.

Since formalising the venture in June, Phoenix, which two years ago closed on $1.15 billion for its Phoenix Asia Real Estate Investment VI already has five projects underway via its Aussie partnership, according to a press release, with a sixth recently secured in the Crow’s Nest area of North Sydney.

The private equity company’s joint venture with Abadeen comes as property agency Knight Frank projects that Sydney’s prime residential prices will have increased 10 percent this year over their 2020 levels, with an additional 7 increase expected in 2022.

Heading Down Under

Phoenix, which opened up its Sydney office in 2017, established the joint venture in June with three “seeds assets” acquired by Abadeen prior to the partnership including Koyo in Crow’s Nest, Enso in Neutral Bay, and a 58-unit planned project in Naremburn, in Sydney’s lower North Shore area.

Of these assets, the partners have obtained development approvals for the first two projects, and have submitted a development application for the third.

The joint venture is expected to deliver more than A$1 billion in gross revenue across 15 to 20 projects and is targeting sites that yield between 10 to 50 apartments. The partners are favouring locations within 10 kilometres (6.2 miles) of the city’s central business district, with most projects to generate an average of about A$100 million in gross revenue once completed.

The six projects currently secured are expected to bring in over A$300 million in gross revenue, and will use up A$93 million of the capital raise, with A$157 available for future projects, the partners said.

“The relationship with Phoenix enables us to source high quality opportunities in a competitive environment, with a focus on amalgamations and sourcing off market transactions,” said Abadeen’s executive director Joseph Tack.

“Our latest acquisition involved the direct approach and amalgamation of 21 strata lots across 3 buildings, which has taken over seven months to negotiate,” Tack added.

The residential venture follows Phoenix’ announcement in October last year of a mixed-use joint venture project in Sydney with local developer Thirdi. The A$180 million residential and retail development, Balfour Place, will be built atop an existing supermarket site in Lindfield, Sydney, reported The Urban Developer.

Phoenix Still Seeking to Cash In on Asian Investments

Phoenix, which this month welcomed a new IWG flexible office facility into the former WeWork space in its Tower 535 in Hong Kong, had disposed of a number of Asian assets over the past year, including a pair of properties in Tokyo and Singapore, as well as a two-tower office complex in Seoul which it sold through a consortium for $449.2 million.

In May last year, the private equity shop was selling a commercial redevelopment project in Hong Kong’s Wan Chai at an asking price of HK$330 million ($43 million), just over a year after acquiring the 1974-vintage property which occupied the site.

Within the same month, a fund managed by Phoenix was also forced to restructure its financing for a 71,000 square metre office project in Shanghai before a November loan deadline, after the COVID-19 crisis undermined its funding plan at the time.

In February 2020, the firm sold a row of shophouses in Singapore’s Chinatown to Aberdeen Standard Investments for S$54 million ($38 million).

A month before that deal, the private equity shop sold an apartment building in Tokyo for JPY 20 billion ($180 million).

Just two months ago, Phoenix was reported to be struggling to fill a 10,318 square foot space across three levels of Tower 535 in Causeway Bay after drone maker DJI decided to look for a new home as the city’s retail sector continued to suffer during the pandemic.