China Everbright to buy HK tower for $1.3bn

BEIJING / Bloomberg

China Everbright Holdings Co. and a unit agreed to buy a commercial building in Hong Kong for HK$10 billion ($1.3 billion), adding to the number of Chinese companies mopping up real estate in the world’s most expensive office market.
They are buying Dah Sing Financial Centre, a top-tier office building in the Wan Chai district, which will be used as office space by the group, according to a statement by unit China Everbright Ltd. to the Hong Kong Stock Exchange.
Hong Kong, which boasts the most expensive office rents in the world, has become a sought-after destination for Chinese companies seeking to boost their global brands and diversify assets offshore. Chinese demand could drive rents for high-quality offices in Central, the city’s business district, 5 percent to 10 percent higher this year, according to Jones Lang LaSalle Inc.
“I think the price is a bit on the high side on a yield basis, which is about 3 percent,” as well as on other factors including interest rate expectations, said Denis Ma, head of Hong Kong research at Jones Lang LaSalle. “The only people who can buy in this market are end users,” he said, referring to buyers who intend to occupy buildings they purchase.

Breaking Records
Evergrande Real Estate Group Ltd. and China Life Insurance Co. bought office blocks in separate transactions worth a combined HK$18.35 billion in mid-November, breaking previous price records. Buying a property is also a way for international companies to eliminate the risk of costly rent increases in the future, real estate analysts have said. The China Everbright Group is a state-owned company with assets from banking and broking to tourism. The 39-story Dah Sing property has a gross floor area of about 400,113 square feet, according to the statement, and the transaction works out to about HK$24,993 per square foot, which is less than the record HK$36,187 per square foot Evergrande paid.
The deal was announced the same day Development Secretary Paul Chan unveiled government plans to offer for tender the Murray Road car park site, which will be the first piece of land sold for commercial development in Central Hong Kong since 1995, said Ma. Vacancy rates in Central are just 1.2 percent, according to Jones Lang LaSalle.
Mainland Chinese are expected to bid aggressively on the site, said David Raven, regional director of Asia-Pacific capital markets at Jones Lang LaSalle. “There will be continued interest in sites, especially in Central as there is an increasing flow of Chinese capital outbound and Hong Kong still sits very high on that list,” he said.