Neighbour's sale sheds light on Lane Crawford bidding
Tight market for office and retail space boosts seller's hopes of a higher price
Bidding for Lane Crawford House, whose tender closes today, may be at the high end of expectations if the recent sale of the Entertainment Building is a guide, according to BNP Peregrine Paribas head of property research Adrian Ngan Wai-hung.
Market observers expected the department store building in Queen's Road Central owned by Wheelock & Co would command $11,000 to $12,000 per square foot.
'The transaction of Entertainment Building cannot be strictly compared with Lane Crawford House, but it would set a benchmark for Lane Crawford,' he said.
Mr Ngan said the sale of the Entertainment Building for $2.7 billion by Hysan Development, close to $13,000 per square foot and yielding a return of about 3.5 per cent to 4 per cent, was a good result for the seller.
More than 30 per cent of the floor area of Lane Crawford is for retail usage, which commands a higher price than comparable office space, further bolstering interest in the sale.
From the basement to the sixth floor the building boasts a gross retail floor area of 89,500 sq ft.
Mr Ngan also said the valuation of Great Eagle's Citibank Plaza was around $9,000 per square foot in June, and the price of the Entertainment Building reflected the fact that many companies' property valuations were relatively low.
Another analyst said the Entertainment Building transaction would not be a benchmark for Lane Crawford House. 'Lane Crawford House may be seen as a retail property rather than a pure office building, so it may not be strictly comparable with the Entertainment Building,' he said.
The analyst conceded the yield, which was around 3 per cent - close to the rental yield - reflected that the price was somewhat aggressive.
Kenny Tang Sing-hing, associate director at Tung Tai Securities, said that the transaction indicated the office rental market might rise further.
'There wasn't too much prime office space available after the IFC filled up, and the market expects rentals to go up by 20 per cent next year,' he said.
Even though Hysan sold the Entertainment Building for almost $1 billion less than it paid in 1996, Mr Tang said the sale price was at a premium on the current market value, bringing a positive impact to the company.
