Phoenix Property Investors has exited its investment in Enterprise Square III for around $171 million, generating a gross post-tax IRR of 50 percent.
The sale marks the seventh exit from Phoenix Asia Real Estate Investments V, which the firm closed on $750 million at the end of 2013. The firm has made 19 investments so far and around 90 percent of the fund’s capital has been deployed.
The assets, the top five connecting office floors in the Grade-A commercial property together with 3 signages and 16 car parking spaces situated in Kowloon Bay, were sold to a Chinese developer.
They were originally acquired from retail group Esprit Holdings under a sale-and-leaseback structure where Esprit continues to lease three of the five floors. The new buyer will use the properties as its corporate headquarters in the future, while utilizing the prominent signage spaces in the building.
According to research from CBRE, Kowloon East is the best-equipped office market outside of the Central CBD, Wan Chai, Causeway Bay and the Tsim Sha Tsui core office markets to meet ever-increasing demand for space.
Vacancy in the core office submarkets has stood below 5 percent in nine of the last 10 years and rents increased in 27 out of 40 quarters during the same period.
The city’s high rents are primarily due to the limited supply of office space and the fact that just 0.4 percent of its land area is allocated for commercial use.
Yet, new decentralized office submarkets such as Kowloon East in Hong Kong are set to provide occupiers with cost effective options outside of the above markets, according to CBRE.
Phoenix was unable to comment by press time.
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