Is Pamfleet Betting on a Retail Rebound with Reported HK$600M Kowloon Deal?

Hong Kong real estate investment manager Pamfleet has agreed to acquire a commercial building in Hong Kong’s Tsim Sha Tsui on behalf of its Pamfleet Fund II for a price approaching HK$600 million, according to sources familiar with the pending transaction who spoke with Mingtiandi.

The purchase of the Good Results Building at 176 Nathan Road is a bet that Hong Kong’s much-maligned retail sector has hit a bottom, offering the potential for upside in the heart of the traditional Kowloon shopping district.

The purchase, which is expected to be finalised within the coming weeks, would be the fourth acquisition under the $400 million Pamfleet Fund II, after the value-added real estate investment specialist purchased an office building in the city’s Sheung Wan district during the second half of 2016. Sources at Pamfleet contacted by Mingtiandi declined to comment.

Refurbish, Reposition and Back on the Market Next Year

The en-bloc purchase would give the fund the opportunity to refurbish, reposition and remarket the 11-storey building located at the intersection of Kowloon’s Nathan Road and Hillwood Road. Planning for the refurbishment is said to be already underway, with the repositioned building scheduled to reopen in its new form during the first quarter of 2018.

Key to the transaction is the 26,400 square feet of retail space in the Good Results Building’s four-storey retail podium. The upper seven floors of the building are for residential use, which the new owners plan to market as co-living space.

Pamfleet Fund II would be purchasing the circa 1971 asset from its original developers – a local Hong Kong family which has already owned the property for two generations. Mingtiandi spoke with a senior member of the investment and sales division for Hong Kong at Savills, who confirmed that his team had advised on the transaction. Sources from the property consultancy declined to comment further.

Betting on Hong Kong as a Retail Power

While the Nathan Road building has both residential and shop space, Hong Kong’s recent retail hardship may provide more opportunity for value-add from the shops in the retail podium than from the apartments above.

Hong Kong’s retail sector has been taking a pounding in the last two years as a decline in visits from Hermes-hungry mainland visitors has caused some pain for high end luxury retailers. In November, retail sales in the city were down by 5.5 percent in value from the same month a year earlier – the 21^st straight month of falling receipts for shopkeepers.

The building’s new owners appear to be expecting a turnaround in the city’s retail fortunes. “Hong Kong is still a top sales location worldwide for major brands. On a global basis it’s better than London or New York,” sources familiar with the deal told Mingtiandi.

Mid-range retail aimed at local consumers has proved more resistant to the downturn than luxury, which could provide opportunities for investors looking to buy assets during a retail dip. “Shopping in Hong Kong is shifting from the Gucci bag to the Adidas rucksack,” was how one source described the new owner’s thinking about the future of the city’s retail.

Pamfleet Hopes to Cash in on Renovation Experience

Pamfleet is known in the Hong Kong market for redeveloping existing properties, and has also been expanding aggressively into Singapore. In October last year the 17-year-old firm acquired its first mainland project in Shanghai’s Xuhui district for RMB 82 million.

Also last year, Pamfleet sold The Mark, an office development in Hong Kong’s Kowloon East area, to a local listed company for HK$560 million ($72 million). That asset disposal came just two years after the company acquired and began renovating the former industrial building.

Since its founding in 2000, Pamfleet has originated and asset managed over 3.8 million square feet of properties and investments worth in excess of US$1 billion, according to its website.