Citigroup Pays Record $697 Million for Hong Kong Tower

Photographer: Jerome Favre/Bloomberg

The International Commerce Centre tower, center, sits in West Kowloon district of Hong Kong, China. Close

The International Commerce Centre tower, center, sits in West Kowloon district of Hong Kong, China.

Close
Open
Photographer: Jerome Favre/Bloomberg

The International Commerce Centre tower, center, sits in West Kowloon district of Hong Kong, China.

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 the Kowloon East district 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.

“The lack of supply in Hong Kong has been a challenge for many large occupiers, such as Citi, who are in Hong Kong for the long term,” said Sigrid Zialcita, managing director of research for Asia-Pacific at Cushman & Wakefield in Singapore. “Hong Kong has not lost its luster as a regional financial hub, even with competition from Singapore and Shanghai.”

Source: Wheelock Properties Ltd.

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

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

Close
Open
Source: Wheelock Properties Ltd.

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

Industrial Zone

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.

Citigroup is paying about 20 percent more for the Kowloon tower than Manulife, which paid HK$4.5 billion last year to Wheelock for a similar-sized block at the same development, called One Bay East. The waterfront district where the two towers are located, formerly an industrial zone, is earmarked by the Hong Kong government as an alternative financial hub.

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.

‘Continued Growth’

“There aren’t many banks historically that have bought their real estate,” said Ben Dickinson, head of Hong Kong markets at broker Jones Lang LaSalle Inc. “Most banks in Hong Kong prefer to retain the flexibility leasehold occupation offers them. It’s going to be interesting to see if it changes the perception for occupiers in Hong Kong whether more people will look at purchase.”

Photographer: Lam Yik Fei/Bloomberg

Billionaire Peter Woo, chairman of Wheelock & Co. Citigroup Inc. paid a record HK$5.4 billion ($697 million) to a unit of Wheelock controlled by the family of billionaire Peter Woo. Close

Billionaire Peter Woo, chairman of Wheelock & Co. Citigroup Inc. paid a record HK$5.4... Read More

Close
Open
Photographer: Lam Yik Fei/Bloomberg

Billionaire Peter Woo, chairman of Wheelock & Co. Citigroup Inc. paid a record HK$5.4 billion ($697 million) to a unit of Wheelock controlled by the family of billionaire Peter Woo.

Wheelock shares fell 0.8 percent to close at HK$32.80 in Hong Kong, compared with the 0.1 percent drop in the benchmark Hang Seng Index.

Hong Kong is one of the eight markets in Asia where the bank generates more than $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 center and hub for some of our core regional businesses,” Stephen Bird, Citigroup’s Asia-Pacific chief executive officer, said in yesterday’s statement.

To contact the reporter on this story: Michelle Yun in Hong Kong at myun11@bloomberg.net

To contact the editors responsible for this story: Andreea Papuc at apapuc1@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.