China Resources Logistics Adds Fifth HK Industrial Asset in Two Years
A unit of China Resources Group has agreed to buy a pair of warehouses in Hong Kong from Kerry Properties for a total consideration of HK$4.62 billion ($588.6 million), with the deal bringing the mainland firm its fourth and fifth industrial assets in the city in less than two years.
China Resources Logistics is acquiring the industrial assets, known as Kerry Warehouse (Chai Wan) and Kerry Warehouse (Shatin) for HK$2.29 billion and HK$2.33 billion, respectively, according to a filing with the Hong Kong stock exchange.
“Since September 2020, China Resources Logistics has spent around HK$8.38 billion on five warehouses (in Hong Kong), with a combined gross floor area of 1.75 million square feet (162,580 square metres) in the city,” said Eric Chong, director of capital markets research at Savills Hong Kong.
With its latest set of purchases, China Resources is also expanding its total storage space in Hong Kong — an amount close to 5 million square feet — by 18 percent.
Though the group has not yet disclosed plans for the warehouses, it could put both properties up for lease, having in March this year leased out the Mineron Centre in Fanling, which it purchased for HK$695 million in August 2021, to a cold storage operator, Chong said. This year, the anchor tenant of China Resources’ East Asia Industrial building has also renewed its lease for a 10-year term expiring in June 2032.
General strata-title industrial transactions in the area typically fall between HK$3,500 and HK$4,200 per square foot, said Alex Leung, senior director at surveying firm CHFT Advisory and Appraisal. On Hong Kong Island, the Kerry Warehouse on 50 Ka Yip Street is selling at a slightly higher unit price than that average, at HK$4,393 per square foot, with the building covering 521,253 square feet of area across 15 storeys.
The Kerry Warehouse in Shatin, located at 36-42 Shan Mei Street in the New Territories, spans 404,374 square feet of floor area across 18 storeys and is just a five-minute drive from Fo Tan MTR station. Due to the structure’s higher load-bearing capacity, strata units at Kerry’s Shatin warehouse have previously traded at an above-average rate of HK$5,762 per square foot, Leung said.
Kerry Properties three years ago acquired the pair of warehouses from a wholly owned subsidiary for a combined HK$3.6 billion, saying at the time that it aimed to redevelop them for long-term investment. The sale this month comes as developers in Hong Kong are eyeing opportunities to redevelop existing industrial blocks into data centres, Leung said. The trend is driven in part by the government’s industrial revitalisation scheme to encourage redevelopment by charging standardised premiums for land-use modifications.
Kerry Properties, controlled by the Kuok family behind Shangri-La Hotels, is selling down its warehouse holdings in Hong Kong about a year after Shenzhen-based package delivery services provider SF Holding had acquired a 51.8 percent stake in its Kerry Logistics Network (KLN) for HK$17.6 billion in September 2021.
Industrial in Style
China Resources’ fourth Hong Kong acquisition followed a string of purchases in the New Territories, including a reported HK$450 million buy made by Chicago-based fund manager Heitman to acquire the New China Laundry building from a grandson of New World founder Cheng Yu-tung earlier this month.
Just down the street from that building is the six-storey Yip’s Chemical Building, which US private equity giant Blackstone purchased last July for HK$282.6 million.
China Resources’ other industrial asset on Hong Kong Island extends the group’s warehouse footprint outside of the New Territories. About 200 metres (218 yards) from the property is a nine-storey automobile showroom and go-down building on 60 Ka Yip Street, which Hong Kong’s Link REIT paid about HK$2.7 billion to acquire from a unit of Jardine Motor Holdings last November.