Hong Kong “Shop King” Tang Shing-bor has entered into a sale and purchase agreement with a joint venture between Hanison Construction Holdings and a fund managed by China Merchants Capital to buy a Kwai Chung industrial building for HK$1.1 billion ($140 million), according to a stock exchange announcement.
Payson Cha’s Hanison, which had teamed up with the private equity unity of Shenzhen-based China Merchants Group to buy the property last year, is flipping the building after holding it for fifteen months, earning a mark-up of almost 53 percent on the HK$720 million price the joint venture had paid for the asset.
Tang Shing-bor is buying the industrial property from the Hanison-China Merchants joint venture just over one month after the current owners had won approval to convert the property to commercial use and expand the maximum floor area for the project.
Redevelopment Plans Approved
Under the terms of the agreement, Tang Shing-bor is buying the property known as Central Industrial Building for an aggregate consideration of HK$1.08 billion which may be readjusted according to the property’s final consolidated net asset value, with the total consideration capped at HK$1.1 billion.
Built in 1971, the property occupies a 24,337 square foot (2,261 square metre) site in an area of the New Territories close to Hong Kong’s largest port facility.
Plans for redevelopment of the site into a 28-storey office project were approved by the Town Planning Board, on 5 July, including a request to increase the permitted plot ratio from 1:9.5 to 1:11.4, and convert the property from industrial to commercial use.. The government approval allows Tang to add just over 2 percent to the building’s current area, paving the way for construction of a 283,478 square foot office building on the site.
Based on the redevelopment area, the Hong Kong retail real estate tycoon is paying HK$3,880 per square foot for the property.
Parallel Deals with PAG
Hanison had established the 50-50 joint venture with China Merchants capital last March, purchasing the Kwai Chung workshop with the intention of redeveloping the former textile factory into an office project.
In its statement to the Hong Kong exchange, however, the developer said that the Hanison said that the sale of the property at 57-61 Ta Chuen Ping Street represented an opportunity to hasten the return on its original investment, adding that the disposal offered a more efficient use of capital.
The value-add specialist said in its filing to the bourse that Hanison’s share of the profits in the joint venture is forecast to be HK$167.3 million before costs, expenses and taxes relating to the disposal.
Hanison has had previous dealings with Tang Shing-bor, including selling the Success Centre, another industrial asset on Ta Chuen Ping Street, to Tang in 2017 for HK$1.04 billion. Hanison had invested in the Success Centre through a separate joint venture with private equity firm PAG.
Billionaire Tycoons Continue to Shop Amid Unrest
The transaction is the latest in a series of trades in aging buildings by Hanison, which is controlled by magnate Payson Cha, with the listed developer keeping up its sales and acquisitions of properties around Hong Kong despite a downturn which saw investment transactions in the city drop by over 40 percent during the second quarter.
The announcement of the Kwai Chung transaction comes less than two weeks after Hanison confirmed talks to acquire the 55-room Citadines Mercer apart-hotel at 29 Jervois Street from Singapore’s CapitaLand for HK$800 million.
And just last month, Hanison had agreed to sell a 26-unit service apartment property at 111 High Street in Hong Kong’s Sai Ying Pun area for HK$420 million, earning Payson Cha’s firm a 66 percent mark-up on a property which it purchased less than four years ago.
On 16 July, Hanison announced that it had agreed to pay HK$735 million to acquire storage provider Minibox from companies controlled by Blackstone Real Estate Partners VII and Blackstone Real Estate Partners Asia.
Uncle Bor Gets Busy During Hong Kong Downturn
For Tang Shing-bor, who gained fame through his acquisitions of Hong Kong shopfronts, the current downturn in the city’s property market has turned into one of his busiest seasons.
Just one day after Hanison announced Tang’s Kwai Chung acquisition, news reports revealed that the veteran investor had purchased an industrial property in the Kwun Tong area.
In the emerging commercial district of Kowloon East, Tang was reported in local media accounts to have acquired Wong’s Building at 33 Hong To Road for HK$49.5 million. At the reported price, Tang would be paying the equivalent of HK$5156 per square foot for the 9,600 foot industrial asset.
Through his Stan Group, Stan Tang, the investor’s young son announced a blockchain initiative to tokenise Hong Kong’s real estate market in June, and snapped up a hotel property in the Yau Ma Tei for HK$1.1 billion eight months ago.
The retail tycoon is also said to have bought the second phase of the Brilliant Cold Storage facility at 11-15 Wing Yip Street in Kwai Chung for HK$1.6 billion in June last year, paying HK$5,517 per square foot for the 13-storey property with 293,850 square feet of floor area.