Wharf offloads underperforming Beijing property for HK$2.6b

PUBLISHED : Wednesday, 11 November, 2009, 12:00am
UPDATED : Wednesday, 11 November, 2009, 12:00am

Wheelock and Co says its 50.02 per cent-owned Wharf (Holdings) has agreed to sell its 87.5 per cent stake in an office-retail property in Xidan, a popular retail district of Beijing, for HK$2.58 billion.

As well as the equity stake in the 10-year-old property in the Beijing Capital Times Square, the purchaser had also agreed to buy an estimated HK$485.2 million shareholder loan, according to a group announcement.

'It will enable the group to replenish its acquisition strategy and to reinvest in some of the many interesting prospects for improving the overall return of its portfolio of investment properties,' the company said in a statement.

Paul Louie, the regional head of property research at Nomura, said Beijing Capital Times Square had underperformed, with a rental yield in the high single digits, compared with mid-teen yields at other projects, such as Wuhan Times Square and Chongqing Times Square.

'Cashing in on this ageing building will allow it to redeploy the money to other cities or projects with higher growth prospects,' he said.

Louie said Wharf bought the project in 1999 at an estimated valuation of HK$2.6 billion for its 87.5 per cent stake.

'It's a good deal, because the purchaser is also buying the HK$485.2 million shareholder loan,' he said.

Wharf's share of the floor area at Beijing Capital Times Square comes to 1.11 million square feet, of which 724,000 sqft were office space and 390,000 sqft retail.

Earlier this month, Wharf and Wheelock teamed up with China Overseas Land & Investment to acquire a mixed development site in Chongqing for 4.1 billion yuan (HK$4.65 billion).

The 2.85 million sqft site in Jiangbei city could be developed into residential, office and retail properties with a total gross floor area of 14.33 million sqft.

Ahead of the announcement, shares in Wharf rose 3.7 per cent to HK$45.20 and Wheelock gained 2.4 per cent to HK$26.10 yesterday.

Poor return

Rental yield in high single digits against mid-teens elsewhere

Wharf's share of the floor area at Beijing Capital Times Square, in sq ft: 1.1m