The financial muscle of one of China’s largest financial institutions was on display today as Sun Hung Kai Properties confirmed earlier reporting by Mingtiandi that Ping An Insurance was buying into its West Kowloon commercial project by announcing the mainland group had agreed to pay a total of HK$11.27 billion ($1.45 billion) for a piece of the development.
A wholly owned subsidiary of Ping An Life is making Hong Kong’s biggest real estate investment thus far in 2020 in return for a 30 percent stake in the office portion of the 3.16 million square foot (294,000 square metre) commercial development, which includes a 25 percent take purchased from Sun Hung Kai and another 5 percent acquired from an entity belonging to the developer’s controlling shareholders, the Kwok family.
The investment comes five months after Hong Kong’s largest developer by market value had spent HK$42.23 billion to acquire the project above the West Kowloon high speed rail terminus, making it the largest commercial site ever sold in the city.
The Kwok family in December had purchased 25 percent of the office portion of the development from Sun Hung Kai for just less than HK$9.4 billion, in a move which SHK chairman Raymond Kwok called a vote of confidence in the site, the company and Hong Kong. At the time, Kwok made no mention of Ping An, or the potential for the mainland firm to invest in the project within a few months’ time.
Expecting Big Things in West Kowloon
The deal gives Ping An a slice of the West Kowloon project’s expected 2.8 million square feet of office space, at a price equivalent to HK$13,345 per square foot. In addition to its connection to the high speed rail station, the site has direct access to the MTR’s West line, Tung Chung line and the Airport Express link. The remainder of the commercial project will be developed as retail and hotel space.
In a statement, Sun Hung Kai indicated that Ping An Life had declared that its investment is motivated by a plan to establish the Hong Kong headquarters for the insurance group in the office project. Ping An Group had more than RMB 300 billion (then $43.74 billion) in assets under management in 2017, and had an estimated 190,000 employees that same year.
West Kowloon has been a focal point of developer activity in Hong Kong in recent years as investors bet on the high speed rail link attracting more mainland corporates to what has traditionally been a mid-range office location.
“The presence of major strategic investors for the project should act as a catalyst in attracting more multi-national corporations and leading financial institutions to move their operations to this landmark project, hence further strengthening the reputation and market position of this project and that of International Commerce Centre as a key business and finance hub both in Hong Kong and the Greater Bay Area,” Sun Hung Kai said in its statement.
The developer completed its nearby 2.9 million square foot ICC project in 2010, and occasional SHK ally Henderson Land Development currently has underway a one million square foot mixed-use project dubbed the Square Mile within the same vicinity.
With the total investment in the West Kowloon development expected to hit HK$65 billion to HK$70 billion, Sun Hung Kai had declared at the time that it purchased the land in November, that it would be searching of partners in the project.
Ping An Stays Steady Amid Crisis
Based on sources familiar with both Sun Hung Kai and Ping An, Mingtiandi had reported in January that Ping An would be investing in the West Kowloon development.
The mainland insurer is following through on its investment in the office project despite a COVID-19 powered downturn that saw real estate investment volumes decline by 74 percent in the first quarter of 2020, compared to the same period last year.
Even before the virus began afflicting Hong Kong’s real estate values, months of protests and unrest in the city had shaken developer confidence with the West Kowloon site having once been predicted to bring in as much as HK$100 billion.
Despite transacting at HK$42 billion, Sun Hung Kai’s purchase of the 643,000 square foot site still ranks as the largest sum ever paid for a single piece of land in Hong Kong.