Building the Relationships That Drive the Deals Sponsored Feature

When Pioneer Global Group purchased a retail space in western Hong Kong for HK$648 million ($83.5 million) in September the GFA, price and other details of the Hong Kong-listed company’s acquisition were all made public in a statement to the local stock exchange.

Less readily visible were the market relationships and personalities that helped the company controlled by Hong Kong’s Gaw family acquire a property on the main shopping strip in the city’s up and coming Sai Ying Pun area that has ample potential for upgrades and adding value.

The sale of the retail platform in the Kiu Fat Building had as much to do with forging a strong relationship with the building’s owner as it did with offering an acceptable sum. While many investors believe cash is what talks, price alone is not always the deciding factor when an owner sells a property.

At the start of the year, the team at Colliers came up with a strategy, looked at stock throughout Hong Kong, checked out potential locations and made proposals for buildings we felt strongly about, including the Kiu Fat space. As the team got to know the owner of the property in the city’s up and coming Sai Ying Pun district, it was clear he wanted to partner with someone he could trust after appointing another property agent a few years prior only to see the public tender fail.

The owner was still heavily involved in the day-to-day operations of the retail space and his family was actually the original developer of the project in 1974. Our team would take the time to have tea with him or drop by simply to see how he was doing. It was vital he understood we weren’t looking to force him out and line our pockets in the process.

Of course, there has to be a buyer who feels comfortable about the deal as well. In the case of the retail space at the Kiu Fat Building, there were both positives and negatives that meant some investors would gravitate towards it while others would pass on it.

One notable aspect of the development is that it was a value-add project in an up and coming neighbourhood known for its popular restaurants and bars. It is also a location relatively free of modern developments which is part of the area’s appeal. Additionally, the site is a short walk from the nearest Metro station, whereas in the past Western was seen as difficult to get to.

This is not to say it was a project for everyone. The retail space already had long-term tenants in place and required a plan. The Colliers team approached companies who understood this and showed them the potential of the project and area in general. By looking at ways to find the right tenant mix and improve the physical state of the building while maintaining its rustic charm, these projects have the potential to be lucrative for developers.

Pioneer Global, which counts the Gaw family among its directors, understood the strategy along with the fact that timing was key to completing this deal. They had no issues taking a long-term approach on the property with the confidence that they would be able to add value to the existing structure.

At the end of the day, the key to deals like this one is direct conversations with potential buyers and the owner of the site. This communication ensures expectations are managed and both parties have a level of trust. Since families or long-time landlords own a lot of these buildings, working with a broker who has established community relationships can be more efficient than approaching them directly with an offer.

Antonio Wu is Deputy Managing Director at Colliers International Hong Kong and has been with the firm for 16 years. He is a Member of the Royal Institution of Chartered Surveyors (MRICS).