Car park sells for $3bn as Hong Kong real es­tate bo­nanza goes up a level

Financial Times USA - - FRONT PAGE - J ENNIFER HUGHES — HONG KONG

A Hong Kong de­vel­oper has paid $3bn for an old five-storey car park, the lat­est in­di­ca­tor of the fren­zied state of the ter­ri­tory’s prop­erty mar­ket.

The sale was the first in the premier Cen­tral dis­trict since Hong Kong was handed over to China by the UK in 1997. It sets the world’s most ex­pen­sive city even fur­ther apart from in­ter­na­tional ri­vals such as New York and Lon­don.

Lo­cal de­vel­oper Hen­der­son Land bought a site cov­er­ing 31,000 square feet, pay­ing HK$50,064 ($6,400) per square foot based on its po­ten­tial gross footage, once re­de­vel­oped. It was a record lump sum for Hong Kong and a record also per square foot.

The com­pany would need to charge as much as $419 per square foot per year in rent for of­fice space — about 50 per cent more than the most sought-af­ter units on the top floors of the city’s premier build­ing, Two In­ter­na­tional Fi­nan­cial Cen­tre — ac­cord­ing to an­a­lysts at No­mura who bench­marked it to the yields achieved by Hen­der­son’s ri­vals.

Of­fice rents have soared in Hong Kong and va­cancy rates have re­mained low as an in­flux of Chi­nese tenants has raised prices at Two IFC to as much as $279 per square foot per year. Those rents are 75 per cent higher than the equiv­a­lent in New York, which hosts the world’s sec­ond-most ex­pen­sive of­fices.

But other prop­erty ex­perts said that the price Hen­der­son paid for its car park looked more eye-catch­ing than eye­wa­ter­ing when the site’s rar­ity and Hong Kong de­vel­op­ers’ long-term ap­proach were taken into ac­count.

“It seems out­ra­geous but it’s not to­tally stupid,” said Peter Chur­chouse, a Hong Kong-based prop­erty ex­pert, who es­ti­mated the devel­op­ment could yield be­tween 2.5 per cent and 3 per cent.

Prime com­mer­cial prop­erty in Asian cities such as Hong Kong, Sin­ga­pore and Tokyo rarely changes hands. Hongkong Land, the prop­erty arm of Hong Kong­based con­glom­er­ate Jar­dine Mathe­son, bought its first plots in Cen­tral in 1901 and still owns them to­day.

Hen­der­son is con­trolled by Lee Shau­kee, Hong Kong’s sec­ond- rich­est ty­coon, whose wealth has been put at $21bn by Bloomberg. At 89, Mr Lee is six months older than the city’s rich­est ty­coon, Li Ka-shing, whose Che­ung Kong em­pire also bid for the car park.

The site, at Mur­ray Road, is squeezed be­tween Mr Li’s flag­ship Che­ung Kong Cen­ter, home to com­pa­nies in­clud­ing Gold­man Sachs, Bloomberg and Bar­clays, and his smaller Hutchi­son House.

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