Swire Pacific says it will sell its Festival Walk shopping and office complex in Kowloon Tong for a record-breaking HK$18.8 billion, a move analysts say is the fastest way for the company to raise capital to fund its aggressive mainland expansion.
In a statement filed with the stock exchange yesterday, Swire said it had entered a sale and purchase agreement to sell 100 per cent of the 13-year-old Festival Walk to Mapletree Investments, a unit of Singapore's Temasek Holdings.
It would be the most expensive property transaction in the city's history, outside of land sales.
The conglomerate said it would record a HK$1.63 billion profit from the sale of the 1.2 million square foot complex, one of three major retail projects in Swire's 15 million sq ft investment portfolio, which also includes offices and hotels in Hong Kong.
'Swire has been trying various methods for some years [including selling Festival Walk through] real estate investment trusts and spinoffs [its property arm] to raise money,' said Lee Wee Liat, regional head of property at Samsung Securities.
'But tapping capital from the market subjects them to lots of market uncertainty, especially now when the global economic outlook is so uncertain. I think they have run out of time to wait. This is especially so when the number of commercial projects they have in China is getting larger and larger. I guess this method provides the fastest way to get capital.'
In 2009, Swire Pacific said it planned to spend HK$13 billion over the next five years to expand its investment property portfolio to 24 million sq ft by 2013, of which 8 million sq ft would be on the mainland and 16 million in Hong Kong.
