Lai Sun developed the CCB Tower on the site of the former Furama Hotel (Image: Lai Sun)
China’s JD.com has followed its rival Alibaba in investing in a major Hong Kong office tower, with the mainland tech giant said to have bought into Lai Sun’s CCB Tower.
Lai Sun Development and parent company Lai Sung Garment announced late Tuesday night that the companies have agreed to sell their half stake in the China Construction Bank Tower in Hong Kong’s central district for HK$3.5 billion ($449 million), without naming a buyer. Market sources identified the purchaser to Mingtiandi as a unit of JD.com.
Lai Sun, a Hong Kong developer which has been struggling to bail out its balance sheet and reduce its debt load, announced the prospective sale as the latest in a series of asset disposals to raise cash.
In their joint announcement to the stock exchange the Lai Sun companies said, “The disposal would provide immediate cash flow, with an estimated net cash inflow of approximately HK$2,400,000,000, thereby enhancing the financial resources of the LSG (Lai Sun Garment) Group and the LSD (Lai Sun Development) Group.”
The JD acquisition comes less than two months after Alibaba and its Ant Group financial affiliate bought the top floors of Jardine Matheson’s One Causeway Bay office tower for $925 million, in Hong Kong’s biggest property sale of the year.
Lai Sun Sale Streak Continues
News of Lai Sun’s efforts to sell its stake in the 2012-vintage office tower on Connaught Road has circulated in Hong Kong for some months with Bloomberg having reported in July that the local group was seeking buyers for the property.
JD.com chairman Richard Liu is expanding his global property portfolio (Getty Images)
At the reported compensation, JD is paying HK$30,523 per square foot for its stake in the 229,206 square foot (21,294 square metre property). The remaining 50 percent stake in the tower is owned by China Construction Bank, with the state-owned lender having reportedly passed on its right of first refusal before JD clinched the deal for the property.
For its financial year ended 31 July, Lai Sun Garment declared a net loss attributable to owners of the company of HK$1.7 billion, after losing HK$2.2 billion a year earlier, as valuation impairments on its Hong Kong-centric investment portfolio clobbered the company’s balance sheet, according to company statements.
The transaction ranks as Hong Kong’s third largest sale of an office property this year, after Alibaba’s October acquisition and Hongkong Land selling a set of floors in its Exchange Square complex to the Hong Kong stock exchange for HK$6.3 billion in April, according to MSCI data.
Lai Sun Development declared a net loss attributable to its owners of HK$2.9 billion for the year ended 31 July, after losing HK$3.7 billion a year earlier. Lai Sun Garment renewed an agreement to provide financial assistance to its property subsidiary earlier this month.
In April last year Lai Sun Development agreed to sell its 10 percent stake in the AIA Central office building in Central to AIA Group in return for HK$1.4 billion in cash, plus assumption of debt. One month later the developer, together with Lai Sun Garment, agreed to sell a pair of floors in a luxury residential tower in the Mid-Levels area for HK$215.8 million.
While Hong Kong office rents have shown signs of levelling off in recent weeks, average leasing rates for grade A space in the financial hub have declined more than 42 percent since their peak in 2019, according to agency data.
Mainland Corporates Expand Global Footprints
JD is seen as likely to use the CCB Tower as a regional base outside of its Beijing home, with Alibaba also said to plan to use the 13 floors it purchased in One Causeway Bay to house its own staff.
In addition to the Hong Kong purchase, JD has been expanding its real estate investments globally, with the company’s JD Property division having teamed with Hillhouse Investment’s Rava Partners division to invest in Southeast Asia-focused industrial platform EZA Hill in 2023. That company has since expanded its Singapore-centric portfolio.
JD has also purchased an office property in London and warehouses in the UK, the Middle East and continental Europe in recent months.
Alibaba is the largest investor in what will be Singapore’s office tower with the project on the site of the former AXA Tower set to stand 305-metres (1,001 feet) tall upon its completion.
