Regional real estate investment house Pamfleet has sold The Mark, an office development in Hong Kong’s Kowloon East area to a local listed company for HK$560 million ($72 million), according to an announcement filed on Friday with the Hong Kong stock exchange.
High Point Properties, an investment holding company belonging to Pamfleet Real Estate Fund sold the 70,000 square foot (6,500 square metre) office block at 164 Wai Yip Street in Kowloon’s Kwun Tong area to leather goods maker Sitoy Group Holdings, with the manufacturing firm stating that it intends to use the property as its own headquarters, as well as leasing out office space to commercial tenants.
Pamfleet Real Estate Fund, which is managed by Pamfleet, and specialises in acquiring and refurbishing existing commercial and industrial properties, had acquired the former industrial building in January 2014 from a private investor for approximately HK$385 million ($49.6 million).
The developer, which converted the property to commercial use under the auspices of a Hong Kong government scheme encouraging the adaptation of underused former industrial facilities in Kowloon, then spent another HK$50 million and about one year’s time renovating the property, according to a study of the project published on the ANREV website. The Mark began leasing as prime office space at Chinese New Year of 2015, according to sources familiar with the project.
Buying, Renovating, Leasing and Reselling in Just Over Two Years
Pamfleet took in HK$4.2 million in revenue on the property near the site of the former Kai Tak airport in Kowloon last year, according to Sitoy’s statement to the stock exchange. The company holding the office block had an unaudited consolidated total asset value and net asset value of approximately HK$573 million andHK$288 million respectively, as of March 31st of this year, the statement indicated.
The two sides expect to complete the transaction in by 30 June of this year.
Pamfleet targetted the Mark at start-ups and small and medium-sized businesses that would be attracted by its compact floor plates, in the range of 3,500 square feet (325 square metres) per floor. The developer made a virtue of the building’s small footprint in an area dominated by larger buildings, by marketing the property to smaller tenants that would otherwise have to settle for a small slice of a floor in larger buildings in Kowloon East.
At the Mark, these smaller occupiers could have a full or half-floor unit, with 90 percent of the occupied space leased as full-floor units.
Average effective rentals at the property were approximately HK$22 per square foot per month and the building was around 60 percent leased at the time of the transaction, according to parties familiar with the leasing who spoke with Mingtiandi. “With just a simple formula, Pamfleet was able to bring rents up from around HK$6-8 up to around HK$22 after renovation,” a source familiar with the project told Mingtiandi. At the time of acquisition of the Mark, industrial space in the area had been leasing for HK$6-8 per square foot per month.
Innovative Marketing Helps Pamfleet Move the Mark
In retrofitting the property near the Kwun Tong and Ngau Tau Kok MTR Stations, the value-added real estate specialists also included a specially-designed floor that gives a nod to flexible, co-working strategies, featuring WiFi-enabled hot desks, high tech meeting rooms, and storage space for tenants of the building. “For some of the SME clients, having free meeting rooms available in the building allowed them to maximise use of space in their own units,” a source familiar with the Mark’s design told Mingtiandi. The project, which boasts views of the Kai Tak Cruise Terminal and the eastern harbour also enticed clients with networking events, valet parking and even free coffee.
The developers also took the unusual step for a small project of employing property consultancy JLL as exclusive leasing agents for the project. JLL, which typically focuses on larger scale projects, assigned a team led by senior broker Gavin Morgan to lead the marketing of the property.
Hong Kong’s government has been encouraging development in the former industrial centre of Kowloon East as part of a scheme to develop a new business district as an alternative to traditional centres on Hong Kong island. The Mark was Pamfleet’s second project in the Kwun Tong area after it had earlier developed the KOHO building on Hung To Road.