China Evergrande’s US$2bil Price Tag For HK Headquarters Above Market Value
HONG KONG – Following reports that China Evergrande Group is considering to sell its headquarters in the Chinese territory for over US$2 billion, property experts said the price tag being floated by the developer substantially exceeds the asset’s market value, reported the South China Morning Post (SCMP) on Tuesday afternoon (24 August, SGT).
A real estate analysts reckons that the 26-storey China Evergrande Centre is valued between US$1 billion and US$1.35 billion given the prevailing prices of office properties and the downbeat sentiment of Hong Kong’s office market.
“A valuation of HK$10.5 billion or HK$30,000 psf is far more reasonable,” commented Vincorn Consulting and Appraisal’s Managing Director, Vincent Cheung.
“We are seeing a softened market and no increase at all in office rent, this makes a sale for Evergrande at HK$10.5 billion reasonable,” he said, adding that Grade A office rents in Wan Chai average around HK$45 to HK$55 psf, down from the HK$50 to HK$70 psf rental range before the COVID-19 pandemic struck.
Nonetheless, Cheung explained that although HK$30,000 psf appears to be high for a commercial property located in Wan Chai versus those in neighbouring Admiralty or Central, China Evergrande Centre’s harbour views as well as advertising and naming rights enable it to fetch a premium compared to other commercial assets in the vicinity.
Completed in 1985, the office tower along Gloucester Road has an overall floor area of 345,424 sq ft. Its current owner forked out HK$12.5 billion (US$1.61 billion) to acquire the commercial property. The developer paid the price in 8 instalments over 6 years.
Previously called the Mass Mutual Tower, the office building was purchased by China Evergrande’s Founder & Chairman Hui Ka-yan from Chinese Estates Holdings, which is controlled by Joseph Lau Luen-hung, one of Hui’s billionaire friends.
During the sale, China Evergrande Centre was fully occupied. But at present, the occupancy level has fallen to the mid-70 percent range, based on figures from property consultancy Colliers.
The US$1.61 billion transaction established a record for the single biggest sale of an office tower in Hong Kong. The psf price of HK$36,187 was an all-time high as well, but the stock price of China Evergrande dipped by 4 percent after the announcement of the deal, as the market viewed the price as exorbitant.