Hongkong Land

Australian fund closes in on King's Road tower

PUBLISHED : Tuesday, 07 March, 2006, 12:00am
UPDATED : Tuesday, 07 March, 2006, 12:00am

Australian investment fund Allco has emerged as the front runner to buy Hongkong Land Holdings' grade A office building at 1063 King's Road in Quarry Bay, according to sources.

It is understood the investment fund and the developer reached a preliminary agreement last Friday.

Allco, formed in Sydney in 1979, has strong experience in property acquisition, fund creation and innovative financing techniques. 'It is probably the fund's first major foray into Hong Kong,' a source said.

With the latest market estimate of more than $5,000 per square foot, the 30-storey building would be worth about $1.5 billion to $1.6 billion.

If the deal goes through, it will be the biggest property transaction in the city this year.

'The building currently leases at about $28 per square foot. The rental yield will be lower than 5 per cent if the building is sold for $1.6 billion,' the source said.

The building has also attracted other suitors such as Macquarie and several local investors, on the back of strong upside potential of office rentals.

Both Hongkong Land and Allco declined to comment last night.

According to one source, the asking price of the building was $1.8 billion, or $8,000 per square foot, as of the middle of last year.

Compared with a transaction price of $4,529 per square foot for PCCW Tower in 2004, property consultants said Hongkong Land's asking price for the King's Road building was higher than market expectations.

The building on the site of the former Crown Motors Building was Hongkong Land's first office building outside Central, where it holds an office and retail portfolio of six million square feet.

The firm bought the site for about $815 million from Pacific Century Group. It spent $1.5 billion on its redevelopment.