Swire in talks to sell Cityplaza One office tower as it picks up the pace on asset sales after first interim loss in half a century
- Cityplaza One, completed in 1997, has about 629,000 square feet (58,400 square metres) in gross floor area
- The 21-storey office tower is said to have received a purchase offer of HK$10 billion (US$1.3 billion), according to industry sources
Swire Properties Limited, one of Hong Kong’s largest owners of offices and shopping centres, said it is in discussions to sell a 21-storey office building on the eastern side of Hong Kong Island, as it picks up the pace on an asset-disposal programme after its parent posted the first interim loss in half a century.
Swire Pacific, one of Hong Kong’s largest and oldest conglomerates and the 82 per cent owner of Swire Properties, swung to its first interim loss since 1974, as its Cathay Pacific Airways unit was weighed down by the unprecedented travel slump from the coronavirus pandemic.
“It is better to sell it now, [to] help the company shore up its cash flow in the meantime as the Cityplaza One is old and it will cost the company more to renovate it,” said Vincent Cheung, managing director at Vincorn Consulting and Appraisal. “It also reflects the diminishing possibility for office rent to recover [anytime] soon back to its peak level.”
Cityplaza One, with a gross floor area of about 629,000 square feet (58,400 square metres), is home to companies like Marriott International, MSIG Insurance and AT&T. The Taikoo Shing project was built on the site of the former Taikoo Dockyards, which traces its history to the late 19th century during British colonial days under the ownership of John Swire and Sons, the ultimate owner of the Swire Group.
The Grade A office tower, completed in 1997, is said to have received an offer of HK$10 billion (US$1.3 billion), or HK$15,900 per square foot, according to industry sources.
“At HK$15,900 per sq ft, that’s cheaper than Cityplaza Three and Cityplaza Four towers” sold in 2018, Cheung said. “The time has changed, and it is a reasonable price at this moment. You may not even get this price, if you don’t cash out now.”
“The potential disposal, if realised, may not result in a substantial gain on disposal as we believe the transaction value would be close to its mark-to-market book value,” said Raymond Cheng, managing director and head of Hong Kong/China property research at CGS-CIMB Securities in Hong Kong, who values the building at between HK$9 billion and HK$11 billion. “We believe a special dividend for the potential disposal is unlikely, as Swire prefers recycling capital obtained from asset disposal to new projects.”
Swire Properties said it remained committed to Hong Kong, and would continue to invest and grow in it.
“Our long-term strategy for our home market has not changed. The decision to dispose of certain non-core assets in recent years is in line with our business strategy to further fuel growth,” it said in a statement.
“It provides opportunities for us to recycle capital and channel it into new projects which are under construction; explore new investments; and further develop core assets including Taikoo Place and the Pacific Place neighbourhood.”
Swire Properties is building a solid pipeline of new residential projects in Hong Kong, with the recent launch of Eight Star Street in the Starstreet Precinct in Admiralty as well as two upcoming developments in Wong Chuk Hang station and Chai Wan.
Swire Properties’ shares continued their declines after the lunch trading pause and after the company’s statement, falling 0.2 per cent to HK$20.55, while Swire Pacific’s stock fell 0.3 per cent to HK$36.75 on the Hong Kong exchange.
