Hongkong Land

Record offer for Alexandra House brings no joy

PUBLISHED : Wednesday, 01 August, 2012, 12:00am
UPDATED : Wednesday, 15 August, 2012, 10:47pm


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Hongkong Land, the biggest landlord in Central, has reportedly rebuffed a record-breaking offer of HK$15 billion for its Alexandra House office building in Central.

An investor offered that amount, which works out to HK$45,041 per square foot, for the building in Des Voeux Road Central through an investment bank, a Chinese-language newspaper reported.

The offer surpasses the HK$27,100 per sq ft Agricultural Bank of China paid for 50 Connaught Road Central, a new office building, in May.

A spokesman for Hongkong Land declined to comment on the report yesterday and said the company still owned Alexandra House.

A person familiar with the company said it is unlikely to sell the building.

'They own 12 commercial properties in Central, and Alexandra House is one of the important ones,' he said. 'It is located in the heart of their Central portfolio and Hongkong Land's pedestrian bridge system.

'Also, they just rebranded the shopping space at Alexandra House, The Landmark, Chater House and Prince's Building as a a luxury retail brand called 'Landmark'.'

Alexandra House is surrounded by the other three buildings. The 37-storey grade A office tower with a retail podium was built in 1976 and has a floor area of about 370,000 sq ft.

The retail podium is fully occupied and has been leased to well-known international brands such as Prada, Burberry, Dolce & Gabbana and Ermenegildo Zegna.

Property agents said most of the office space is leased, with only one small unit available at present.

Lee Wee Liat, head of property research at BNP Paribas Securities (Asia), said it was a good offer but the buyer would get a rental yield of only 3 per cent.

'I don't think Hongkong Land will sell Alexandra House. It is like the jewel in the crown of the developer's portfolio,' he said.

'I think the landlord is looking for long-term investment. The building is very precious. The site in the core Central area is very rare.'

One property agent said the offered price might not be that attractive given the retail podium of the building was so valuable.

Despite the outlook for the office market being uncertain, Gary Fok, senior director at property consultant Cushman & Wakefield, said investors are still interested in acquiring office buildings in Central because of the tight supply in the area.

'There will be a lack of new supply of commercial sites in Central in the near future,' he said.

Grade A office rents in Central softened in the first half owing to the weak global economy. Fok said grade A office rents in the area have dropped 10 per cent so far this year, the sharpest decline among the city's main business areas.

His firm expects office rents to drop a further 8 per cent by the end of this year as the demand for space continues to fall.

Lee also holds a pessimistic view regarding the market outlook for office properties.

'There will be more investment banks such as Royal Bank of Scotland surrendering their office space in Central,' he said. 'The vacancy rate in Central will increase to more than 10 per cent. It will lead to a fall in office rents as a result.'

He expects Central's office rents to drop 10 per cent a year from this year to 2014.

However, retail rents will continue to rise, he said.