Wheelock Properties could be on its way towards developing a HK$2 billion ($254.7 million) commercial project on Hong Kong Island, after having applied for a compulsory sale this month to acquire the remaining pieces of an aging industrial building in the city’s Wong Chuk Hang area, according to sources familiar with the matter.
The Hong Kong developer controlled by billionaire Peter Woo is acquiring the Ha Lung Industrial Building – currently valued at HK$1 billion – with analysts expecting Wheelock to build a Grade A office building of up to 117,450 square feet (10,911 square metres) in size after it gains full ownership of the plot. At the valuation, Wheelock would be paying about HK$8,514 per square foot of the property’s maximum permissible area, according to Alex Leung, senior director at surveying firm CHFT Advisory and Appraisal.
The developer was said to have purchased the entire first floor in the industrial building from the city’s “King of Cassettes” David Chan Ping-Chi for HK$82.8 million last year. That buy boosted its ownership share beyond 80 percent, which made Wheelock eligible to apply for the sale that could give it full ownership of the property under Hong Kong’s compulsory sale law.
The compulsory sales regime, which aims to encourage the redevelopment of properties 50-years–old or more, has seen a rebound in applications this year, as relaxation of COVID-19 restrictions have encouraged developers to push forward with projects.
Wong Chuk Hang Hub
The application for redevelopment of the Ha Lung Industrial Building, which is located on 52 Wong Chuk Hang Road, brings Wheelock a step closer to adding another project in the southern Hong Kong island industrial hub.
With the area being transformed into an alternative commercial district, Wheelock in April of last year won the rights to build 750 apartments atop the MTR Wong Chuk Hang station on the South Island Line., which is less than a 500-metre (546-yard) walk the Ha Lung building.
The industrial property is also about 4 minutes’ walk from One Island South, a 29-storey office tower Wheelock had completed in 2011, and the developer could build a new industrial project on the site, or pay a premium to build another office building in the area, according to Tom Ko, executive director and head of capital markets at Cushman & Wakefield.
Average prices for new offices in Wong Chuk Hang fall between HK$13,000 and HK$15,000 per square foot of gross area, said Leung.
On the leasing side, Grade A office rents in the Wong Chuk Hang area currently average between HK$25 and HK$40 per square foot per month, said Vincent Cheung, managing director at brokerage firm Vincorn Consulting and Appraisal.
As a sign of Wong Chuk Hang’s ongoing transformation, CHFT’s Leung noted that, apart from the Ha Lung Industrial Building, there are six ongoing redevelopment projects in the area, which will represent 1.4 million square feet of new office supply when completed.
Also in Wong Chuk Hang, Sino Group in January this year announced the leasing launch of its 256,957 square foot commercial project, Landmark South, which was developed under a 60:40 joint venture with the Walter Kwok-founded Empire Group. The project is set to welcome tenants by the third quarter of this year.
Auctions On the Rise
In the year to date, eight compulsory sale applications have been submitted to the Lands Tribunal, according to Martin Wong, head of research and consultancy for Greater China at Knight Frank.
“There could be 16 to 20 applications for the whole year, which implies a potential increase of around 20 percent compared to 2021, which (recorded 16 applications in total)”, said Wong.
The increase is due in part to the improving COVID-19 situation in Hong Kong, with the government having announced further relaxations to social distancing measures in the beginning of May, as well as a gradual economic recovery that is making developers more optimistic about market prospects, and more likely to submit their auction applications.
This month, local giant New World Development was also said to have submitted a compulsory sale application to acquire full ownership of three adjacent properties in Hong Kong Island’s Causeway Bay, bringing it closer to developing a HK$14 billion commercial project in the city’s busiest shopping district.