Ares Management Acquires 51% Stake In Kowloon Office Project
HONG KONG – Ares Management, an American private equity company, has purchased a 51 percent stake in an upcoming Kowloon office project from New World Development for about HK$3.07 billion (US$392 million), reported Mingtiandi on Friday (30 September, SGT).
The deal marks the private equity firm’s 1st direct investment in Hong Kong property.
Specifically, New World Development has teamed up with Ares SSG, the local branch of the private equity firm, to complete the 363,392 sq ft office project at 83 Wing Hong Street in Cheung Sha Wan.
The transaction values the commercial property at HK$16,613 psf based on its gross floor area (GFA). In terms of marketable area, Ares SSG is paying around HK$14,500 psf. Previously, New World Development bought the site for HK$2.97 billion (almost HK$8,000 psf) in August 2017.
Expected to be finished by late-2023, 83 Wing Hong Street is just a stroll from the Lai Chi Kok MTR station. Of the building’s overall GFA, only 6,008 sq ft is intended for retail space, based on the latest annual report of New World.
Apart from building the Wing Hong Street office project, New World will be responsible for the asset management, as well as sales and marketing of the units in the strata-titled commercial property.
“After completion of construction and development of the property into a commercial complex, the unit sales of such commercial complex will further strengthen the income stream of the group,” said New World, adding that it expects to book an unaudited gain of HK$450 million from the sale of the 51 percent stake to Ares Management.
The transaction also includes an option agreement that grants Ares SSG the right to sell its 51 percent stake to New World for up to HK$3.46 billion. This would trigger if New World fails to obtain pre-sale consent for the strata units in the commercial property before the project’s legal completion date on 30 June 2024.
Meanwhile, even though Hong Kong’s office leasing sector has been languishing for the past 3 years, a source revealed that New World managed to divest 80 percent of the space at the 888 Lai Chi Kok Road office project, which was renamed as the NCB Innovation Centre in June 2022.
According to Alex Leung, Senior Director at CHFT Advisory and Appraisal, monthly rents for new office space like the NCB Innovation Centre range from HK$32 psf to HK$35 psf. Comparatively, office projects in Cheung Sha Wan but in less popular areas and with lower quality specifications such as Billion Plaza and China Shipbuilding Tower have monthly rental rates of around HK$25 psf.