Citigroup Pays Record $697 Million for HK Office Tower

19-Jun-2014 Intellasia | Bloomberg | 6:00 AM Print This Post

Citigroup Inc. (C) paid a record HK$5.4 billion ($697 million) to a unit of Wheelock & Co. for a Hong Kong office tower that will bring most of its 5,000 employees in the city under one roof.

The price for the 512,000 square-foot property in Kowloon is the largest ever office transaction in Hong Kong, the New York-based bank said in a statement yesterday. The tower, scheduled for completion by the end of 2015, will be used to house staff currently spread out across offices in the city, said Weber Lo, the bank’s chief executive officer for Hong Kong and Macau.

Citigroup’s purchase may mark a return of investment demand in Hong Kong’s office market as falling vacancies and high rents pose a challenge for companies seeking large office spaces. Banks and insurers, including Agricultural Bank of China Ltd and Manulife Financial Corp., have bought buildings in the city, which is home to the highest office rents in the world after London, according to property broker Cushman & Wakefield Inc.

“With Hong Kong being the most expensive location in Asia, most companies really have to manage their costs,” said Sigrid Zialcita, managing director of research for Asia-Pacific at Cushman & Wakefield in Singapore. Citigroup’s buy “is a testament Hong Kong hasn’t lost its luster as a regional financial hub.”

Source: Wheelock Properties Ltd

Artist rendering of office building acquired by Citigroup from Wheelock, right.

‘Continued Growth’

The overall vacancy rate in Hong Kong fell for a second consecutive quarter in the first three months this year, to 3.6 percent, according to CBRE Group Inc., which advised on the transaction. Office rents in Central may drop as much as 5 percent this year on increased demand from mainland Chinese firms and an improved economic outlook, the realtor said.

Manulife, Canada’s largest life insurer, paid HK$4.5 billion last year to Wheelock, controlled by the family of billionaire Peter Woo, for a similar-size tower as the one Citigroup bought at the same development in Kowloon East, the district earmarked by the Hong Kong government as an alternative financial hub in the city.

Central is Hong Kong’s main financial district, where banks including HSBC Holdings Plc and Goldman Sachs Group Inc. have their regional headquarters. Agricultural Bank, a Beijing-based lender, paid HK$4.9 billion in 2012 for a 28-story office building near Central.

Hong Kong is one of the eight markets in Asia where the bank generates over $1 billion of revenue annually and has close to 5,000 employees, Citigroup spokesman James Griffiths said.

The purchase “underlines our belief and confidence in Hong Kong’s continued growth as a leading global financial centre and hub for some of our core regional businesses,” Stephen Bird, Citigroup’s Asia-Pacific chief executive officer, said in yesterday’s statement. billion-for-hong-kong-office-tower.html


Category: Hong Kong

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