File photo: A woman walks past a McDonald’s outlet in Hong Kong in this July 25, 2014 file photo. REUTERS/Tyrone Siu/Files Photo.
HONG KONG, Aug 1 (Reuters Breakingviews) – Iconic buildings don’t often change hands. Yet a trio of prime commercial properties in Hong Kong is now up for grabs. Each carries a strong connection to China’s state-backed giants, which could emerge as buyers. The deals will signal whether or not mainland money will step up to halt the city’s brutal real estate slump.
Prices have dropped over 30% since hitting a peak in 2021. Slow sales and high vacancy rates are so bad that Hong Kong’s government has suspended the sale of commercial sites, proceeds of which comprise a major source of its income. Finding a new cohort of buyers is, therefore, of the utmost official importance.
Valued at about HK$1.2 billion ($153 million), the eight retail properties McDonald’s (MCD.N), opens new tab put up for sale, opens new tab this week will be a small but indicative transaction. The American company has established itself as one of the world’s biggest commercial landlords by leasing properties to franchisees. Its well-located premises in the city, including in Tsim Sha Tsui, Causeway Bay and Mong Kok, ought to be a strong draw for Citic, one of China’s largest conglomerates, which runs the local concession.
Elsewhere, the prolonged bear market is also putting pressure on developers to sell their prized assets. Lai Sun Development (0488.HK), opens new tab may offload its 50% of CCB Tower, Bloomberg reported, opens new tab this week citing unnamed sources. China Construction Bank (601939.SS), opens new tab, (0939.HK), opens new tab owns the rest. So far, though, the banking mammoth has not expressed interest in acquiring full ownership in its head office, the report added.
The giant airport mall developed by New World Development (0017.HK), opens new tab under a tender worth HK$20 billion, roughly $2.6 billion, is a much bigger deal, opens new tab. It’s located next to the Hong Kong-Zhuhai-Macau bridge. With Beijing keen to enhance the economic integration of Hong Kong with other Chinese cities, the mall ought to have appeal to the state firms New World outbid for the project in 2018.
Citic and its peers all have the money and official incentives to drive purchases. One obvious problem, though, is that Hong Kong remains one of the world’s priciest cities. This looks increasingly at odds with its struggling economy and weak retail sales. If Chinese buyers do emerge for these assets, they may drive a hard bargain and set the tone for where prices go.
Editing by Una Galani; Production by Aditya Srivastav
Chan Ka Sing is China Columnist for Reuters Breakingviews. Prior to joining Reuters, he worked at Week in China, Hong Kong Economic Journal and Dow Jones Newswires.
