Hong Kong property

Brokers test market appetite for 50pc resale premium, even before ink dries on The Center’s price tag

Property brokers send feelers to gauge a new price benchmark for the tower

PUBLISHED : Friday, 03 November, 2017, 7:15am
UPDATED : Friday, 03 November, 2017, 9:56am

Brokers are testing the market to see if property buyers are willing to fork out a 50 per cent premium for office space at The Center, just a day after Hong Kong tycoon Li Ka-shing sold the city’s fifth-tallest tower in the world’s most expensive property transaction of a single building.

On Wednesday, the C.H.M.T Peaceful Development Asia Property consortium agreed to pay HK$40.2 billion (US$5.15 billion), or HK$33,000 per square foot, for the entire building. Each floor of the 73-storey The Center, with a standard area of 26,000 sq ft (2,415 square metres), would cost about HK$1.3 billion, almost a steal compared to the prevailing market price for commercial property.

A day after the sale was announced, brokers are already hawking the same space at HK$50,000 per sq ft, according to two different agencies familiar with the offers.

They are actively testing the market if there’s enough interest in the premium, which they can use to convince the four Hong Kong businessmen who together own a 45 per cent minority stake in the consortium that bought the tower.

“The new owners will meet later to discuss what they will do,” said Daniel Wong, a director at Midland I.C. & I, a commercial property agency, adding that his firm had received feelers from some minority members of the consortium about reselling part of the space in the building. “Nothing is confirmed at the moment.”

Still, three of the four minority shareholders of C.H.M.T said in separate interviews with the South China Morning Post that they had no intention for an immediate sale.

“We have no plan to resell the space,” said Raymond Tsoi, founder of Asia Property Agency, on Thursday. “It is a rare product in Central.”

Li Ka-shing sells The Center in US$5.15 billion record deal to trim his flagship’s Hong Kong assets

Tsoi, however, believes he has gotten The Center at a bargain, and expects a massive return on his investment, because a HK$50,000 per sq ft benchmark had been set in May through the city’s first tender of commercial space in 20 years.

“This building is completed and is just HK$33,000 per sq ft,” Tsoi said. “It is a good price for us.”

Another investor, Lo Man-tuen, chairman of Wing Li Group (International), said no decision had been made as yet.

“There is no such thing at this stage, the majority of directors are saying that we would not sell it yet … We have not even met yet, we will meet tomorrow.”

Robert Ma Kiu-sang of Koon Wing Motors confirmed his family was among the investors in C.H.M.T, but claimed they only held “a very small stake.”

“We are eyeing some rental returns from the investment in the long term,” Ma said, declining to elaborate.

Read: China’s state oil behemoth gets a marquee Hong Kong address after buying Li Ka-shing’s building

Most mainland China buyers who’re investing in Hong Kong’s commercial offices are looking for sites for their headquarters and long term investment, said Denis Ma, head of research at JLL.

“While prices appear high, they actually make sense when compared against the prices being achieved in the government land sales market,” he said.

The shortage of developable land in Hong Kong’s core urban areas and the growth of mainland demand means that long term prices will always be well supported, Ma said.

Marcos Chan, CBRE head of research for Hong Kong, southern China and Taiwan, said The Center’s transaction has set a new benchmark for en-bloc office deals not only for Hong Kong but also markets across the globe.

“This transaction, the biggest sale of a single building in the world since 2005, certainly has sent a very positive signal to the office investment market in Hong Kong,” Chan said.

Additional reporting by Tony Cheung