Just two months after announcing a residential project with SC Capital on Ap Lei Chau Island, a Hong Kong redevelopment specialist on Thursday unveiled a joint venture with BentallGreenOak and Schroders Capital to develop a commercial project in Tsim Sha Tsui.
Together with its global fund manager partners, Lofter Group is paying over HK$1.5 billion ($190 million) to acquire a set of properties at 31-37 Hankow Road in the Kowloon shopping district, with plans to construct a 115,800 square foot (10,7589 square metre) project on the site, the company said in a statement.
“We are pleased to be partnering with BentallGreenOak and Schroders Capital on this strategic real estate acquisition in one of the most core commercial area in Hong Kong,” said Lofter founder and chairperson Carol Chow. “The partnership signifies an excellent synergy bringing together the global horizons of top-tier international private equity and asset management firms and deep local market knowledge and expertise of a reputable local developer.”
Lofter and its partners are acquiring the aging properties as Hong Kong’s pandemic restrictions have choked off the flow of visitors which had made Tsim Sha Tsui a shopping mecca. Hong Kong retail sales fell for a second consecutive month in March, according to government figures, and research by Savills shows that rents for shops and mall spaces fell by an average of 5 percent in the city during the first quarter.
Retail Value Emphasised
Before redeveloping the 9,650 square foot commercial site, which is currently occupied by a golf shop and other retail establishments, the three partners will have to gain full control of the buildings, with the announced purchase providing them with majority ownership of the properties.
“The attractive acquisition price can only be achieved by collective sale, which Lofter is very experienced in,” the group’s director of investment management Alvin Leung told Mingtiandi via email. “Our acquisition price is also way below the price of the nearby Ashley Road transaction in 2019,” he added.
Leung indicated that the group has acquired 97 percent ownership in the existing buildings, with a single unit remaining unpurchased. He added that the joint venture has applied for a compulsory sale of the remaining space in the building, which under Hong Kong law, would allow for owners of 80 percent or more in an aging property to force a tender at a market valuation.
“The site has a wide frontage of over 33-metre facing Hankow Road with high retail value,” Lofter said in the statement while indicating that the partners plan to develop a grade A commercial tower on the site, incorporating “cutting-edge technology and green and sustainable design features.”
The project is within two minutes’ walk of the Tsim Sha Tsui MTR entrance and sits half-way between Nathan Road and the Harbour City shopping complex just south of Kowloon Park.
The Tsim Sha Tsui area, which sits at the point of Kowloon peninsula closest to Hong Kong island has been hard hit by the pandemic, with US developer Hines having picked up the Butterfly on Prat Hotel for HK$925 million in November of last year.
That hotel, which is located four blocks east of the Hankow Road project had suffered from the same lack of visitor traffic which led Hong Kong’s Watsons chain of personal care stores to close its location next to the Star Ferry last October after more than 20 years in operation.
In February of this year a mainland investor walked away from an opportunity to acquire a building in Tsim Sha Tsui via compulsory sale, after values in the area had dropped well below levels anticipated when the sale was applied for in 2019.
Lofter Rolls On
For Lofter Group, which was set up 10 years ago and has taken on projects in the residential, industrial and commercial sectors, the Tsim Sha Tsui project marks the latest cooperation with major fund managers.
In February Lofter announced a joint venture with Singapore’s SC Capital to develop a project in Ap Lei Chau after acquiring more than 90 percent ownership of the properties occupying that site. The partners plan to build a 35,000 square foot residential project with a retail podium at the location.
In March of last year, Lofter tied up with local fund manager Alphalex Capital Management to buy up 57 properties on Ki Lung Street in Kowloon’s Prince Edward area for HK$1.1 billion. The partners plan to develop a 67,500 square foot commercial and residential tower on the site.
Pawara Laothamatas provided additional research for this story.