New World Said Closing In on $1.2B Sale of Kowloon Mall to China Resources

A unit of state-run China Resources is in talks to acquire a Tsim Sha Tsui shopping complex from Hong Kong’s New World Development as it continues to expand its retail footprint in the Asian financial hub.

China Resources Longdation is in late stage discussions to purchase the K11 Art Mall, with the property investment and management arm of the Shenzhen-based conglomerate said to have offered HK$9 billion ($1.2 billion) for the asset, according to market sources who spoke with Mingtiandi.

The impending sale, which was first reported by local media outlet Sing Tao, comes after HKEX-listed New World had earlier vowed to increase its disposals of assets for the fiscal year which closed 30 June from HK$6 billion to HK$8 billion, as part of a multi-year effort to reduce leverage and boost liquidity.

The transaction could potentially see New World retaining a stake in the asset, the sources said, while the company has yet to make a statement regarding its intentions. “We do not comment on market rumours,” a New World spokesperson told Mingtiandi. China Resources Longdation had not responded to Mingtiandi inquiries by the time of publication.

Heart of Tsim Sha Tsui

At the reported offer price, China Resources Longdation would be paying just under HK$26,500 per square foot for the 340,000 square foot (31,587 square metre) mall situated at 18 Hanoi Road in the bustling shopping district.

Opened in December 2009, the seven-storey mall connects underground to both Tsim Sha Tsui and East Tsim Sha Tsui MTR stations and has five above-ground levels and two basement floors, along with a two-storey basement parking lot.

The asset constitutes the retail element of the 64-storey Masterpiece tower, which also houses a 381-key Hyatt Regency and 345 residential units. The project was developed by New World together with Hong Kong’s Urban Renewal Authority, with the partners having invested HK$3 billion for the K11 Art Mall portion.

According to New World’s latest interim results, the mall was nearly 100 percent occupied as of 31 December and recorded a 29 percent year-on-year increase in sales for the six months ended 31 December, with footfall having reached record highs that month. The property generates HK$40 million in monthly rental income, according to local media reports.

Betting on a Retail Recovery

Should the deal take place, K11 Art Mall would mark at least the third Hong Kong retail property to be purchased by China Resources Longdation this year after Cusson Leung, general manager of the company’s asset management division, expressed optimism in January about the city’s retail outlook.

Last month, China Resources Longdation took possession of the Greenwich Village retail podium in Tseung Kwan O from a joint venture of Hong Kong developers Lai Sun Development and Empire Group for HK$540 million. That purchase of the retail element of the Alto Residences condo development came after the company in January acquired the KF88 retail podium in Kwai Fong from local investor Francis Law Sau-fai for HK$310 million.

According to market sources, China Resources Longdation had also bid for New World’s D-Park shopping centre in Tsuen Wan, with New World ultimately selling the asset to local developer Chinachem for HK$4.02 billion in March.

Formerly known as China Resources Property, China Resources Longdation operates independently of HKEX-listed developer China Resources Land, with both being subsidiaries of China Resources Group. Media reports late last year indicated that China Resources Longdation was weighing a Hong Kong REIT listing by 2025, however, no official statements have been made regarding a potential IPO.

China Resources Longdation’s portfolio also includes the China Resources Building office tower and the Brim 28 retail podium, both located in Wan Chai, the St. Regis Hong Kong and other residential and hotel assets in Hong Kong and mainland China, as well as the All Seasons Place commercial complex in Bangkok.

The company also owns property management firm Synergis, which manages the Elements mall in West Kowloon and other commercial and residential properties in Hong Kong and Macau, as well as jewelry and handicraft retailer Chinese Arts & Crafts.

New World Downsizing

The sale of K11 Art Mall would mark the continuation of a New World selling spree as the company seeks to cut its net gearing ratio to the “mid to high” 30 percent range by June 2027 from 49.9 percent as of December.

The developer has divested HK$59.6 billion of assets in the last three fiscal years, including the D-Park mall, the 695-key Pentahotel in Kowloon, and a 51 percent stake in a Cheung Sha Wan office project. Those disposals also include the sale of a majority stake in NWS Holdings, New World’s HKEX-listed infrastructure and construction unit, to CTFE.

Earlier this week, New World completed the RMB 1.44 billion sale of its 30 percent stake in the north tower of the Shenzhen Qianhai Chow Tai Fook Finance Tower in the city’s Nanshan district to Chow Tai Fook Enterprises, an entity ultimately owned by the Cheng family which also controls the listed developer.

New World is preparing to offload K11 Art Mall after retail assets accounted for 45 percent of total commercial property investment in Hong Kong during the first half of the year, according to a report last month from JLL.

Average rents for prime shopping centres in Hong Kong have plunged 38.4 percent from 2019 peaks through 30 June, but ticked up 0.9 percent in the first half after increasing 2.7 percent in 2023 on a year-on-year basis, according to the consultancy. JLL expects rents to grow by up to 5 percent in the second half of the year.

“We expect the rents of high street shops and prime shopping centres to grow by up to 5 percent in the second half of this year,” Oliver Tong, head of retail at JLL Hong Kong said in a release last month. “However, the market is under pressure as the decline in domestic consumption is anticipated to intensify during the summer and Christmas holidays and it will take time to see a full recovery in tourist spending.”