AEW Sells Central Serviced Apartments, US Pension Fund Backs Sai Ying Pun Deal

Real estate investment firms AEW and Crane Capital, backed by a US pension fund, have been involved in significant serviced apartment transactions in Hong Kong. AEW has divested a boutique property in Central, while Crane Capital has acquired a building in Sai Ying Pun, highlighting continued investor interest in the city's residential rental market.

Key Takeaways

• AEW sold its Aveny serviced apartment building in Central for HK$240 million.
• The buyer is a local individual investor planning a long-term hold.
• Crane Capital, backed by the Washington State Investment Board, purchased a Sai Ying Pun property for HK$420 million.
• The Sai Ying Pun deal represents a significant markup for the seller, Hanison Construction Holdings.

AEW's Central Sale

US real estate private equity firm AEW has reportedly sold the Aveny serviced apartment building, located at 31 Wyndham Street in Hong Kong's Central district, for HK$240 million (approximately $30.66 million). AEW had acquired the former Mood Hotel building in 2015 for around HK$220 million and subsequently refurbished it into 11 serviced apartments, each occupying a full floor. The building, spanning 8,916 square feet, is situated in a prime entertainment and business hub.

Initially listed last year with an asking price of HK$280 million, the sale price was reportedly reduced due to a slowdown in Hong Kong's market. The buyer is identified as a local individual investor who intends to hold the property for long-term investment. The serviced apartments cater to working financial professionals, with monthly rents ranging from HK$32,000 to HK$43,000, commanding an average of HK$52 per square foot, which is about 30 percent higher than the surrounding residential rental rates.

US Pension Fund's Sai Ying Pun Acquisition

In a separate transaction, Crane Capital, a newly formed private equity fund manager backed by the Washington State Investment Board, has agreed to purchase a serviced apartment building at 111 High Street in Sai Ying Pun for HK$420 million (approximately $54 million). Crane Capital is headed by Wai Tang, former managing director of Evergreen Real Estate Partners.

The seller is tycoon Payson Cha’s Hanison Construction Holdings, which acquired the property four years ago for HK$253 million. The current sale represents a 66 percent markup for Hanison. The 19,792 square foot property generated profits after tax of HK$6.75 million for the financial year ended March 31, 2019. Hanison stated that current market conditions present a favorable opportunity to unlock the investment's value.

The Washington State Investment Board is increasing its Asian real estate portfolio through its partnership with Crane Capital. The pension fund has committed $250 million to Crane and facilitated the transfer of $400 million in assets from Evergreen Real Estate Partners. The Sai Ying Pun property features two-bedroom units, each measuring 790 square feet, currently renting for HK$54,000 per month.

Sources

• AEW Sells Hong Kong Apartments for HK$240M, Mingtiandi.
• US Pension Fund Backs HK$420M Serviced Apartments Deal, Mingtiandi.