The largest commercial building transaction in Hong Kong's history In the storm of production, Yingjun sold 24.5 billion Langham Place Qiankun

On July 17, Savills, as the chief agent, conducted a global tender for the Langham Place Office Building in Mong Kok, a subsidiary of Eagle King Group's Crown Crown Reitt, with an intended price of more than HK$24.5 billion, equivalent to more than HK$35,000 per square foot of floor area. If successfully completed, the project will become the most expensive commercial building in Kowloon and hong Kong.

Located in the heart of downtown Mong Kok, Langham Place was built by Eagle King Group for 15 years and spent HK$10.5 billion to build, which is a model for the transformation and reconstruction of old local blocks. Different characters have a very different experience of it – it is not only one of the shopping malls that foreign tourists must visit when visiting Hong Kong, but also a landmark office building favored by business groups.

Today, Langham Place has become one of the products of the period of disputes between the Hong Kong giants. In early July, Du Lijun, the widow of Yingjun founder Luo Yingshi, said publicly, accusing the family of not knowing about the proposal and questioning the sale of important assets as "inappropriate time".

In terms of business logic alone, Eagle Group's sale of the Langham Place office building has a deep market background. Since the first half of 2017, funds have sought a way out, coupled with the birth of Meili Dao and Kai Tak Commercial Land King, the transaction volume of hong Kong industrial and commercial shops has increased by about 1.3 times year-on-year.

Relevant people told The Viewpoint Real Estate New Media that the two newly launched commercial land parcels were sold at ideal prices, so that hong Kong commercial building owners have fallen into a wait-and-see due to "uncertainty about how to reverse prices", but believe that this will be broken after "a number of indicator transactions appear".

It added that if Langham Place can sell for more than HK$30,000 per square foot, it will become a "new focus of office buildings in Kowloon" and have a reference effect on other transactions.

Landmark buildings for sale

On 17 July, Lee Wai Man, chief executive of Savills Greater China, who was responsible for the sale, publicly stated that Langham Place, as "the only skyscraper office building currently sold as a whole building in Hong Kong", is a rare property in the market.

Accordingly, Guanjun REIT, a subsidiary of Eagle King Group, plans to sell the Langham Place office building in the form of a global tender for an intended price of HK$24.5 billion, corresponding to approximately HK$35,000 per square foot. Lee Wai Man also listed a number of sales conditions on behalf of the owner, including not considering the sale and only accepting a single buyer.

He also hinted that according to past experience, the Grade A commercial building sold in the whole building needs to pay a premium of more than 30% to impress the owner, otherwise it is "difficult to facilitate the transaction".

Even so, the newly announced price of intent is still much higher than the price predicted by the outside world. As of the end of 2016, Langham Place office building properties were valued at hk$8.477 billion by independent key valuers. According to this comparison, the intended price of the property has increased by about 1.89 times compared with the valuation at the end of last year.

Langham Place is one of the landmarks of Kowloon and Hong Kong, and has an important position in the market as a model for the successful reconstruction of older neighbourhoods. As early as the 1980s, the project was originally a 180-square-foot old residential land, facing the problems of complex ownership and wide range of ownership, and was later built by the Urban Redevelopment Bureau and Eagle Jun Group for many years of planning and reconstruction.

Eagle Group's plan was interpreted by the outside world as "integrating into the urban concept on a small plot", coupled with the cancellation of the height limit in Hong Kong at that time, which eventually formed a property form covering 600,000 square feet of shopping malls, 59-storey Grade-A commercial buildings and 42 floors of five-star hotels, which is now a "three-in-one large-scale development" Langham Place.

In its announcement of intent to sell in early July, Crown Trust & Industry mentioned that the Langham Place office building is located at 8 Argyle Street in Mong Kok and is wholly owned by the Company except for the 35th to 37th floors, 55th floors and public areas, with a total leasable area of approximately 702,900 square feet. In 2016, the building's net property income was approximately HK$295 million, representing 14.6% of the Company's overall net property income.

The big deal of the Langham Place office building has caused waves in the Hong Kong investment circle, and relevant rating agencies have given "heart water valuation". Among them, Macquarie said that the project price is about HK$14.75 billion based on the yield of 2% (the current price is about HK$40), while Morgan Stanley has given a more conservative valuation, and the project is expected to sell at about HK$98-15 billion.

As an agent, First Taiping takes the commercial land king traded in the second quarter as the comparison standard, and expects the price of the Sun Hung Kai Central Merry Road project to be as high as HK$70,000 after the completion of the project, and the commercial land of Nan Fung Kai Tak will also be as high as HK$2.5-2.7 after the completion. Langham Place is located in Mong Kok, and it is expected to have a premium of 30%-40% over Kai Tak DiWang, which is only half of the price of Central Di Wang, which is "a reasonable level".

Regarding the hk$24.5 billion price, Lee Wai Man only responded that the prospective buyer of the sale of the project was "not a target buyer" if he did not have a long-term vision. He also said that the project is a recruitment of mainland state-level enterprises with financial resources, including large non-banking central enterprises, and believes that such enterprises are "willing to pay a huge amount of silver code".

The commercial building market is clean

In the recent Hong Kong real estate circle, the sale price of Langham Place office buildings is one of the most intensely discussed topics among practitioners.

Pan Zhiming, managing director of Zhongyuan (Industrial and Commercial Shop), told Viewpoint Real Estate New Media earlier that looking for landmark buildings in Hong Kong's Kowloon District, Langham Place can not be sought, first, because of the overall level of construction of the project, and second, the historical value behind it. Nevertheless, he gave an estimate of more than HK$30,000 per square foot, equivalent to a total price of more than HK$21 billion.

On July 18, He Shaorong, senior sales director of the Commercial Department of Li Jia Ge (Industrial and Commercial Shop), stressed at a press conference that since several floors of the project had been demolished earlier, the Chinese-funded company may think that it is not perfect, and the transaction price may be discounted compared with the sale of the entire property. He also expects the project to be priced at HK$30,000 per square foot, with a total turnover of more than HK$20 billion.

Although the valuation given is contrary to the intended price of Eagle Jun Group, many people believe that langham place transaction still has an indicative impact on the Hong Kong commercial building market.

Benefiting from the warming market sentiment, in the first half of 2017, Hong Kong recorded about 62 large-scale transactions of office buildings over HK$100 million, accounting for more than half of the large transactions of industrial and commercial shops; of these, 5 were cases of changing hands of commercial buildings in the whole building, such as THE WELLINGTON in Sheung Wan with an average transaction price of HK$35,500, and the highest transaction price of HK$39,000 in Central was a new high.

Pan Zhiming pointed out that the accelerated pace of buyers entering the market reflects the blazing popularity of so-owned enterprises and funds for Hong Kong commercial buildings. However, the situation that followed was that after the birth of The King of Commercial Land in the second quarter of Murray Road and Kai Tak, there was a shortage of market outlets, and the demand remained high.

According to Zhongyuan estimates, in the next three to five years, Hong Kong office buildings will rise by as much as 50%, of which the increase in the second half of this year will be 10%-15%. However, the bank said that considering that the owners are still in the exploratory stage in the second half of the year, it is expected that the number of office transactions will decrease by 35.28% compared with the first half of the year, and the price support will increase the turnover by 36.08%.

"Floor prices reached a new high, resulting in a reduction in market turnover. Many owners dare not set prices at will, and no one can estimate how many points they want to reverse the price. He said that an upward trend is expected to form when a number of indicator trades appear.

According to the plan, the Langham Place office building is expected to have a deadline at the end of August, when the transaction situation is still to be revealed. If it can still be sold at the intended price of eagle group of more than HK$24.5 billion, the property will break the record of 12.5 billion Hong Kong dollars purchased by Evergrande Real Estate from China Purchase in Wan Chai.

At the same time, Langham Place has a price of HK$35,000, which may become one of the highest average prices in Mong Kok and even Kowloon. According to the data, the most expensive price of office buildings on Hong Kong Island in the first half of the year has been approaching HK$40,000, while the average price of commercial buildings in Kowloon District has hovered around HK$10,000.

After the sale of Langham Place, Li Jia Ge also believes that in the future, more family-owned owners may bid on the entire commercial property.