Sun Hung Kai, Kwok family sell 30 per cent stake in office space at Hong Kong's most expensive commercial site to Ping An Life for US$1.45 billion

By Sandy Li sandy.li@scmp.com / https://www.scmp.com/business/article/3082204/sun-hung-kai-kwok-family-sell-30-cent-stake-office-space-hong-kongs-most?utm_medium=partner&utm_campaign=contentexchange&utm_source=EdgeProp&utm_content=3082204 | May 5, 2020 11:27 AM SGT
Sun Hung Kai Properties (SHKP) and its controlling shareholder, the Kwok family, are to sell 30 per cent of the office portion of Hong Kong's most expensive commercial project.
Ping An Life Insurance will buy the space on top of the West Kowloon high-speed rail station for HK$11.27 billion (US$1.45 billion), SHKP said in a statement on Wednesday evening.
SHKP won the biggest parcel of commercial land ever sold in the city for a record HK$42.23 billion (US$5.4 billion) in November last year.
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"Local property firms are unlikely to increase their [borrowing for expansion] in these market conditions, but mainland investors are still keen to invest in Hong Kong," said Raymond Cheng, head of Hong Kong and China research at CGS-CIMB Securities.
Once the project is completed in five to six years' time, the office spaces should be sought after by mainland firms which have a strong interest in setting up operations in Hong Kong, he said.
"Having an office atop the high-speed rail West Kowloon station, mainland firms can travel from their Shenzhen to their Hong Kong office in just 30 minutes by high-speed train, and less than an hour from Guangzhou," said Cheng.
"SHKP has intended to bring in a strategic investor since it won the site last year. It would help to reduce the risk."
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Ping An Life, part of China largest insurance group, will purchase 25 per cent of the office space in the development from SHKP and 5 per cent from Kwok Family Companies for HK$9.39 billion and HK$1.87 billion respectively, according to the SHKP statement.
Ping An Insurance (Group) is the world's seventh largest company by capitalisation, according to Forbes. It is the only insurer in the top 10 largest companies globally.
On completion of the deal, SHKP will own 50 per cent of the office portion of the project, while Ping An Life will hold 30 per cent and the remaining 20 per cent will be owned by Kwok Family Companies. The retail portion of the project will remain wholly owned by SHKP.
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The plot has an area the size of 47 Olympic swimming pools. It can be built into 3.17 million square feet of gross floor area for retail, office or hotel use, which would make it 12 per cent larger than the International Commerce Centre, Kowloon's tallest skyscraper.
The total investment cost for the mega development will be HK$65 to Hk$70 billion and will take a pay-back period of 20 years, according to Thomas Lam, executive director of Knight Frank.
Last year, SHKP's winning bid of HK$13,345 per square foot was at the low end of a valuation range of between HK$41.1 billion and HK$63 billion, or HK$13,000 per square foot and HK$20,000 per sq ft.
In December 2019, SHKP said Kwok Family Companies had become the first strategic partners to participate in the development of the office towers on the site. SHKP had indicated on a number of occasions in the past that it intended to invite in other long-term strategic investors as well.
"The presence of major strategic investors in this project should act as a catalyst in attracting more
multinational corporations and leading financial institutions to move in, thus further strengthening the reputation and market position of the project and that of the adjacent International Commerce Centre (ICC) as a key business and finance hub both in Hong Kong and the Greater Bay Area," said SHKP chairman and managing director Raymond Kwok Ping-luen.
The new site, Hong Kong's largest commercial plot by area in recent years, is widely acclaimed for its strategic location, being connected to the Airport Express line, the MTR's Tung Chung line and the West Rail line.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2020 South China Morning Post Publishers Ltd. All rights reserved.
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