Baar-Zug, Switzerland, 13 May 2015
Partners Group, the global private markets investment manager, has sold its investment in a 13-story building in Kowloon East, Hong Kong, generating an IRR of 45% for Partners Group's clients.
Partners Group invested in the building on Kowloon's Hung To Road on behalf of its clients in April 2013 and was able to achieve an exit one and a half years ahead of schedule. Originally a warehouse, Partners Group launched the conversion of the industrial building into high specification office space with a gross floor area of 206'255 square feet and a modern and sustainable design with a BEAM Plus rating, a green building label recognized by the Hong Kong Green Building Council.
Kowloon East, formerly a largely industrial area, has emerged as an important office sub-market since the Hong Kong government launched an initiative to transform it into Hong Kong's second central business district. Though rental rates per square foot of office space in Kowloon East are much lower than those in Hong Kong Island, they can be more than three times higher than equivalent rental rates for warehouses or industrial buildings in the area, providing a compelling investment thesis for building conversions like the Hung To Road project.
Bastian Wolff, Managing Director and Head Private Real Estate Asia, Partners Group, comments: "The building in Kowloon East was a prime example of our investment strategy to fix underutilized properties in markets with strengthening fundamentals. Our investment thesis of providing additional high quality office space in an area with limited supply successfully generated an attractive return for our clients. Due to the strong demand for office space by owner occupiers, we were able to achieve an exit ahead of plan and before the conversion of the building had been fully completed."