Hong Kong tycoon Victor Li makes first major move as boss with revamp of Hutchison House tower
Analysts say the value of the building could triple to some US$3 billion as Li looks to emerge from the shadow of his famous father, Li Ka-shing
Victor Li Tzar-kuoi has embarked on his first major project since taking over the reins of Hong Kong conglomerate CK Hutchison from his billionaire father Li Ka-shing with the planned redevelopment of the 44-year-old Hutchison House office tower in the city’s Central district.
Three people familiar with the plan said that CK Asset Holdings, the conglomerate’s property arm, had given tenants six-months’ notice to vacate the 22-storey building under a sale and redevelopment clause in their rental contracts.
The plan, which analysts said could triple the value of the building, marks Victor Li’s emergence from the shadow of his father, a Hong Kong rags-to-riches legend nicknamed “superman” for his deal-making prowess who retired at the conglomerate’s annual meeting in March at the age of 89.
“Victor Li has to show his capability to bring the conglomerate to a step forward after he took over the business empire,” said Phillip Capital Management fund manager Li Kwok-suen. “Redevelopment of Hutchison House will boost the asset value and beef up its property portfolio.”
The building is adjacent to the world’s most expensive commercial plot, a former car park in Murray Road that was sold to CK’s rival Henderson Land Development for a record HK$23.28 billion (US$2.97 billion), or HK$50,064 per square foot, in May 2017.
That sale has driven up the valuations of buildings in the area, which is Hong Kong’s main business district. A redevelopment of Hutchison House could lift its value to as much as HK$25 billion, analysts said.
“For Hutchison House, it is fair to estimate it could be worth HK$40,000 to HK$50,000 per square foot after the redevelopment,” said Alfred Lau, a property analyst at Bocom International, noting that asking rents at prime office buildings nearby, such as the International Finance Centre tower, have increased to about HK$200 per square foot.
Hutchison House has a total gross floor area of 500,000 square feet, meaning that based on that estimate it could be valued at between HK$20 billion and HK$25 billion after the redevelopment. Its value was given as just HK$7.7 billion in a circular released when the CK group underwent its largest reorganisation in 2015.
“No final decision has been made in regards to the redevelopment of Hutchison House,” according to a statement by Hutchison Estate Agents, a member of CK Asset Holdings.
The group first gained approval to redevelop Hutchison House into a 47-storey building with a gross floor area of 500,000 square feet in 2008, and revised the plan in 2012 to 41 floors with the same gross floor area.
CK Asset was one of nine bidders to take part in the government tender for Murray Road, but it lost out to Henderson Land, chaired by Hong Kong’s second-wealthiest man, Lee Shau-kee. Meanwhile CK Asset’s cash position has been boosted after it sold another Hong Kong tower, The Center, for a record HK$40.2 billion in a deal completed early last month.
Surveyors believe the redevelopment of Hutchison House would cost about HK$5 billion, based on construction costs of HK$10,000 per square foot.
Mark Bernard, managing director at OfficeAsia TCN Worldwide, which focuses on office leasing, said the redevelopment of Hutchison House would definitely generate higher rents.
“As Hutchison House is close to the waterfront and to Central MTR station, a brand new office building with spectacular sea views could double its current asking rent of HK$70 to HK$80 per square foot to HK$140 to HK$160 per square foot,” he said.
Henderson Land has said it planned to develop the Murray Road site into a 31-storey office and commercial building, scheduled for completion in 2022, at a total investment of HK$26 billion inclusive of the land cost.
“The view from the future office building to be built on the Murray Road site would be blocked by Hutchison House if it is redeveloped into 40 plus storeys,” said Bernard.