China Taiping and Friends Buy HK Office Tower From Henderson for $1.3B

Henderson Land Development has signed an agreement to sell an office tower in Hong Kong’s North Point for HK$9.95 billion ($1.27 billion), to mainland-backed firm Fans Group Limited, according to media accounts. The reported deal would set a new record for the largest office transaction in the district of eastern Hong Kong Island.

The buyer, Fans Group, is a wholly owned subsidiary of China Create Capital, with the Shenzhen-listed financial service company said to be backed in the acquisition by a unit of mainland financial giant China Taiping Insurance Group.

The deal is the latest in a series of acquisitions of Hong Kong office properties by mainland firms and values the recently finished project at HK$30,170 ($3,859) per square foot.

Henderson Books Profit of HK$5.4B on Newly Finished Project

Tycoon Lee Shau-kee’s Henderson Land was able to sell the 329,800 square foot (30,639 square metre) office tower without needing to lease it out, thanks in part to rising demand for office space that has made Hong Kong the most expensive place in the world to accommodate a company. Henderson had purchased the former industrial site in 2005 for HK$620 million, before paying a land-use modification premium of HK$2.2 billion to convert it for office use last October.

The transaction price of HK$9.95 billion for the 22-storey tower fell short of the HK$11 billion that the project was previously rumoured to be selling for. Henderson is estimated to have invested a total of over HK$4.6 billion ($590 million) to develop the property overlooking the eastern Hong Kong waterfront, including construction and land premium costs, with the sale thus representing a book profit of about HK$5.35 billion for the top-five Hong Kong developer.

Taiping Picks Up Second Major Hong Kong Property

The Taiping Group acquisition comes 19 months after the mainland financial titan had purchased the One Harbourgate East Tower in Kowloon from Henderson’s competitor Wheelock and Company for HK$4.5 billion ($579.6 million) in May 2016.

The company is investing together with Shenzhen-based China Create Capital which is involved in wealth management, industrial funds and fintech.

Taiping is best known for its flagship China Taiping Insurance branch, which reported premium income of over RMB 100 billion ($15 billion) in the first half of 2017. The finance group is said to have made the investment through its wholly owned subsidiary, Taiping Trustees.

Mainland Investors Continue to Buy Up Hong Kong

With Hong Kong’s Central district renting for as much as HK$200 ($25.63) per square foot per month, the core business area was named as the most expensive place in the world to rent an office less than two months ago. This market enthusiasm, and China’s outbound investment trend may have helped persuade Taiping and China Create Capital to make this latest bet by mainland investors on the city’s commercial property.

Just two months ago, Li Ka-shing’s CK Asset Holdings sold The Center, a 73-storey office tower on Queen’s Road in Central, for HK$40.2 billion ($5.15 billion) to CHMT Peaceful Development Asia Property, a BVI-registered entity said to be backed by a consortium of mainland and Hong Kong investors. The deal was crowned as Asia’s biggest sale of a single property in 2017.

That transaction came one month after Shenzhen-based LVGEM (China) Real Estate Investment agreed to purchase a waterfront building in the Kwun Tong area of Kowloon East from Wheelock & Company for HK$9 billion ($1.2 billion).

In early 2016, another mainland financial heavyweight, China Everbright, agreed to buy the Dah Sing Financial Centre in Wanchai district for HK$10 billion ($1.29 billion), just blocks away from where Evergrande Real Estate had purchased the Mass Mutual Tower in Wanchai from Chinese Estates a few months earlier for HK$12.5 billion.