Hongkong Land Denies Report of $2B Exchange Square Sale Plan

The Hong Kong property funding market’s standing as a deal desert was confirmed at the moment with the looks of what appears to have been a 33-storey mirage.

Property consultancy Savills has ready a advertising doc selling Three Exchange Square within the metropolis’s Central district to potential buyers, with Sing Tao Daily, which first reported the sale effort, citing an asking worth of HK$16 billion ($2 billion) for the grade A tower.

“The market rumor is pure speculation. Hongkong Land has no plan to sell any of the buildings in Central,” a Hongkong Land spokesperson informed Mingtiandi. Hongkong Land had accomplished an inside switch of Three Exchange Square right into a particular objective car final yr, nonetheless, there have been no indications of the transfer being half of preparations for a sale of the 335,000 sq. foot (31,122 sq. metre) constructing.

Multiple market sources indicated to Mingtiandi that Savills had been pitching the tower to potential patrons, significantly mainland buyers, though no substantial discussions had been confirmed. Inquiries by Mingtiandi to Savills had not obtained a response by the point of publication.

Prime Asset, Central Location

The advertising doc touts Three Exchange Square’s location in Central, in addition to its connectivity by way of pedestrian overpasses, MTR stations and the Airport Express practice.

Also featured is a tenant listing that features China Merchants Bank, regulation companies DLA Piper and Allen & Overy, ANZ Bank and S&P Global. At the reported pricing, a possible purchaser can be buying the property at round a 3 p.c yield.

Hongkong Land accomplished Three Exchange Square in 1988 with the tower standing as the ultimate section in a 1.4 million sq. foot workplace advanced fronting on Victoria Harbour.

The constructing’s neighbours, One and Two Exchange Square, are dwelling to the Hong Kong inventory trade and the three-tower advanced additionally hosts places of work for Ping An Bank, China Life Franklin Asset Management, Commonwealth Bank of Australia and actual property companies Hines and ESR.

While the three buildings have historically been among the many most sought-after in Hong Kong, they’re now dealing with new competitors from Henderson Land’s The Henderson mission, which is able to carry 465,000 sq. toes of prime house into Central when it opens later this yr.

Also coming into the Central market this yr is CK Asset’s Cheung Kong Centre Two, with that 498,000 sq. foot property bringing new provide of grade A workplace house within the district this yr to 960,000 sq. toes.

Unmotivated Seller

In its most up-to-date financials, Hongkong Land declared a loss attributable to shareholders for the primary six months of 2023 of $333 million, nonetheless, the division of conglomerate Jardine Matheson additionally famous present belongings of $4.8 billion in opposition to present liabilities of $2.9 billion.

While not offering statistics on particular person properties in its portfolio, Hongkong Land mentioned within the report that its Central workplace portfolio was 93.1 p.c occupied as of 30 June, though that represented a slide from the 95.3 p.c mark recorded a yr earlier.

In the 12 months ending in June common rents within the firm’s Central portfolio declined from a mean of HK$111 per sq. foot to HK$107 per sq. foot. However, these costs nonetheless go away Exchange Square and its neighbour, Jardine House, as some of the most costly workplace properties on the planet.

Apart from instances of misery, Hong Kong’s workplace market has been almost devoid of asset gross sales this yr, with MSCI reporting this week that the April by way of June interval represented town’s low-water mark in phrases of each the quantity of workplace belongings traded, and the entire worth of these belongings, for the reason that agency started accumulating information in 2007.

With fund managers struggling to take care of greater rates of interest and asset house owners detest to half with properties in a down market, throughout 2023, the one important en-bloc gross sales of workplace asset in Hong Kong had been PAG and Mapletree’s HK$5.6 billion buy of the Goldin Financial Global Centre in a January distressed deal, and Schroders’ HK$350 million disposal of a Mongkok industrial tower that very same month.

During the previous yr marked-down properties corresponding to the previous China Evergrande Centre in Wanchai have did not discover a purchaser regardless of a number of rounds of worth cuts.

Build and Hold – Usually

While Hongkong Land is thought for holding onto its properties for the long-term, there are situations of constructing disposals up to now, with the corporate having offered the 9 Queen’s Road workplace tower in Central to a mainland-backed consortium in May 1992.

The Innsbruck consortium paid the equal of HK$7,000 to buy the property on the intersection of Queen’s Road and Ice House Street earlier than promoting off the person flooring on a strata title foundation.