Gaw Capital Targets Full Ownership of Hong Kong Commercial Properties Amid Financial Stress

Gaw Capital Partners is seeking to acquire Hengli Investments' 35% stake in Cityplaza Three and Cityplaza Four in Hong Kong. The move aims to consolidate full ownership of the office buildings amidst a commercial property slump and high credit stress in the city. The existing HK$10.3 billion loan for the properties requires rental income to cover the bi-annual interest payments, but vacancy rates and high interest rates have led to a shortfall. Hengli has not contributed its share since September 2023.

In a significant move to bolster its commercial property portfolio in Hong Kong, Gaw Capital Partners, a renowned real estate private equity firm, is set to acquire Hengli Investments Holding (Group) Ltd.'s 35% stake in Cityplaza Three and Cityplaza Four [1]. This strategic acquisition aims to consolidate full ownership of the office buildings amidst a commercial property slump and high credit stress in the city [2].

With an average price of around HK$19,350 per sq. ft., the two Grade-A office towers, located in the Taikoo Shing business center of Hong Kong's Eastern District, offer a combined GFA of approximately 775,000 sq. ft. [1]. The attractive location in the fast-growing Eastern District, with direct walkways connecting the buildings to Tai Koo MTR station and Cityplaza shopping mall, and quick access to the Central business district, positions the towers to capture the new wave of tenants seeking cost-effective and spacious office spaces [1].

The existing HK$10.3 billion loan for the properties requires rental income to cover the bi-annual interest payments. However, vacancy rates and high interest rates have resulted in a shortfall [2]. Hengli Investments has not contributed its share since September 2023 [2]. Gaw Capital Partners' acquisition of Hengli's stake enables the firm to reposition the properties into attractive office space, enhancing their value and potential rental returns [1].

The investment aligns with Hengli Investments' strategic vision to add value to their long-holding properties in Hong Kong, providing continuous stable rental returns [1]. Chang Wei Chen, Chairman of Hengli Investments Holding (Group) Ltd., possessing over 30 years of experience in investment, industrial and commercial sectors and real estate development, leads the strategic development for Hengli Group [1]. Kenneth Gaw, President and Managing Principal of Gaw Capital Partners, emphasizes the firm's delight in partnering with Hengli Group to reposition the properties and appeal to the new wave of businesses moving into Hong Kong [1].

Sources:
[1] Gaw Capital Partners. (April 11, 2019). Hengli Investments Holding (Group) Ltd. and Gaw Capital Partners Close Acquisition of Cityplaza Three Four in Hong Kong. https://www.gawcapital.com/news/pressrelease/hengli-investments-holding-group-and-gaw-capital-partners-close-acquisition-of-cityplaza-three-four-in-hong-kong/
[2] South China Morning Post. (February 2, 2023). Hengli Investments faces default on HK$10.3 billion loan for two Hong Kong office towers. https://www.scmp.com/business/article/3185699/hengli-investments-faces-default-hk-10-3-billion-loan-two-hong-kong-office