New World Development sells Tsuen Wan shopping mall to rival Hong Kong developer Chinachem for US$510 million

Move is part of NWD’s plan to reduce its gearing over the next three years year as high interest rates pressure financing costs
The city developer is letting go of the retail portion of D-Park in Tsuen Wan, which has a total area of 630,000 square feet and 1,000 parking spaces

Hong Kong property

Peggy SitoandYulu Ao

Published: 2:07pm, 1 Mar 2024

Why you can trust SCMP

New World Development (NWD) has agreed to sell its shopping centre and associated parking spaces in Tsuen Wan to rival Hong Kong developer Chinachem Group for HK$4.02 billion (US$510 million) in a fresh effort to reduce its debt and financing costs.

NWD, controlled by tycoon Henry Cheng Kar-shun of Hong Kong’s third-richest family, is letting go of the retail portion of D-Park in Tsuen Wan, which has a total area of 630,000 square feet and 1,000 parking spaces, the companies said in a joint statement on Friday. The transaction is expected to be completed in April, they added.

The shopping centre, built in 1997, is located about 10 minutes’ walk from the Tsuen Wan MTR station. NWD bought the other half-share in the project from its partner HKR International in 2010 for HK$1.37 billion and spent HK$700 million in 2012 to refurbish the property.

13:00

How Hong Kong's housing market became among the world’s most unaffordable

The asset sale came after NWD reported a 13 per cent drop in earnings to HK$502 million from continuing operations in the second half of 2023, after selling all its shares in infrastructure group NWS Holdings in a reshuffling of assets within the family-controlled groups.

NWD has set an ambitious target of reducing its gearing ratio to below 40 per cent by 2027, from the current level of around 50 per cent. Net debt of HK$118.9 billion as a percentage of equity rose to 49.9 per cent in December from 48.7 per cent in June last year, despite measures to trim capital spending and administrative costs.

“We see NWD is operating in a very tough macro environment” due to the still elevated debt burden, Ken Yeung, an analyst at Citigroup, wrote in a report on February 29. “We believe this is not enough for offshore cash flow on expected weak Hong Kong property sales and continuous high offshore bond and interest payment.”

NWD has pledged to keep selling noncore assets to raise as much as HK$8 billion of cash this year by optimising its investment holdings, according to the joint statement. The developer is also seeking suitable investment opportunities to further boost shareholder returns, according to Friday’s statement.

NWD’s shares fell 6.8 per cent to HK$9.20 on Friday, bringing the loss this week to 5.3 per cent. The Hang Seng Properties Index, which tracks 10 of the biggest developers on the bourse, declined 1.3 per cent for the week.

NWD to tap improved sentiment by bringing property launches forward

The developer is bringing forward some of its housing projects to the market by launching 2,500 flats in the coming six months, CEO Adrian Cheng said. The move is to meet an expected surge in demand, after Hong Kong scrapped many of its decade-old curbs on home purchases and financing earlier this week.

NWD expects to generate HK$2.63 billion of sales in Hong Kong and 9.8 billion yuan in mainland China from its projects in the second half of 2024, according to its latest interim report to shareholders.

Meanwhile, Chinachem said it was buying a premium regional shopping centre, which will create synergies with its other investments in Tsuen Wan. They include Nina Mall 1 and Nina Mall 2, Nina Hotel Tsuen Wan West, and Nina Park, according to the joint statement.

Post