Kowloon City Plaza, owned by toy tycoon Francis Choi Chee-ming, is said to have received a bid from a mainland investor who values the property at HK$5 billion.
Ownership of the shopping mall has changed hands several times since it was completed in 1993. It was built by Paliburg Holdings (00617.HK), under the control of Lo Yuk-sui.
Paliburg had won the land site in an auction for HK$286 million in early 1989, and intended to develop it into the largest shopping mall in the district.
The plan was stalled in view of the June 4 Tiananmen protests that year, but the project was finally finished at the end of 1993.
The 10-storey complex has a total floor area of 630,000 square feet. It quickly became a key shopping and recreational facility for residents in the district.
Back in those days, many foreign visitors would do last-minute shopping at Kowloon City Plaza, as it is close to the old Kai Tak airport. Locals would also dine there before setting off on their overseas trips.
Things took a nasty turn in 1998, when the airport was moved to Chek Lap Kok. Festival Walk, another sprawling shopping mall with much better transport connections since it sits on top of the MTR station in Kowloon Tong, was built in the same year.
As a result, Kowloon City Plaza lost a great number of customers and suffered a lot from the city’s economic slowdown.
Paliburg once proposed to dismantle the west side and rebuild a 39-storey hotel. However, the Town Planning Board rejected the plan, saying that all nearby buildings were much shorter.
In 2002, when the local economy was going through one of its darkest periods, Paliburg, strained by financial difficulties, pledged Kowloon City Plaza and Paliburg Plaza in Causeway Bay (now named 68 Yee Woo Street) as collaterals to its creditors.
Two years later, a consortium led by Morgan Stanley paid HK$2.03 billion to acquire the two malls from creditors.
During 2008 financial crisis, Morgan Stanley was in urgent need of cash and sold Kowloon City Plaza to Francis Choi for HK$1.48 billion.
His son Karson Choi took over the property. By introducing young fashion brands and building a 60,000-square-foot auto plaza inside the mall and rebranding the mall as KCP, Choi was able to triple its visitor numbers in just six months.
Francis Choi recently confirmed that a mainland billionaire was seeking to acquire the property for HK$5 billion, which means he would make a profit of HK$3.5 billion in just nine years.
Currently, the mall has a rental income of around HK$12.5 million, which means the offer prices the deal at a yield of 3 percent.
At around HK$8,000 per square foot, the valuation appears to be cheaper than that of some old industrial buildings.
Business conditions at the mall are set to improve along with the urban redevelopment plans in Kowloon City.
Mainland developer Country Garden has recently paid HK$610 million to acquire a residential project nearby, which is also good news for the mall.
This article appeared in the Hong Kong Economic Journal on June 13
Translation by Julie Zhu
[Chinese version 中文版]
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