Hong Kong's CK Asset to sell office tower for record $5.2 billion

HONG KONG (Reuters) - CK Asset Holdings Ltd, controlled by Hong Kong's richest man Li Ka-shing, is selling its 73-storey office tower to C.H.M.T. Peaceful Development Asia Property Ltd for HK$40.2 billion ($5.2 billion), the world's biggest ever single property sale.

The acquisition expands the footprint of Chinese investment in the Asian financial hub's prime office district, where half of all new leasing space has been snapped up by mainland Chinese companies.

Shares in CK Asset Holdings closed up 3.6 percent on Thursday at HK$67.0, their biggest gain since Sept. 8, and have risen more than 40 percent this year, outpacing a 30 percent gain in the Hong Kong market index.

The buyer is a British Virgin Islands-incorporated company, while 55 percent of the investment comes from Beijing-based China Energy Reserve and Chemicals Group, according to local media, with the rest coming from Hong Kong investors.

The energy company is a unit of state-owned China Overseas Holding Group, the website of the latter shows. And the deal is the world's largest for a single building, according to real estate services firm CBRE, confirming Real Capital Analytics data that tracks transactions since 2005.

"The selling price is reasonable ... it's a positive signal to the market and I expect we'll see more large transactions of office buildings in Q4," said Tom Ko, executive director of real estate consultant Cushman & Wakefield.

Ko said he expected high-value purchases would be mostly by Chinese investors as they usually buy for self-use purposes, making them more willing to bid aggressively, while local investors would focus on land and redevelopment opportunities.

CK Asset said it expects to record a gain of about HK$14.5 billion from the sale of its 75 percent stake in The Center, the fifth tallest in Hong Kong.

The proceeds will be used for general working capital purposes, it said in a filing to the stock exchange on Wednesday.

The deal comes after mainland developer LVGEM (China) Real Estate Investment Co Ltd said in October that it would buy an office tower from Wharf (Holdings) Ltd for HK$9 billion to strengthen its presence in Hong Kong property.

Chinese firms have been expanding aggressively in Hong Kong property, one of the world's most expensive real estate markets, buying 29 percent of residential land sold in 2015 and 2016.

Property agents said that while tighter capital controls in China had resulted in fewer purchases by mainland Chinese investors in the first half from a year earlier - accounting for around 8 percent of total transactions - mainland companies accounted for 50 percent of new leasing contracts.

Another property consultancy firm Colliers said it expected the office rental market in Hong Kong's central business district would continue to see strong demand.

"In addition to stable demand from multinational companies, Chinese national initiatives such as the Belt and Road project and the Greater Bay Area plan will continue to support demand from mainland Chinese firms in 2018. We expect new demand to arise predominantly from smaller Chinese firms," Colliers said in a report last month.

($1 = 7.8094 Hong Kong dollars)

(Reporting by Donny Kwok, Twinnie Siu and Clare Jim; Editing by Alexander Smith, Greg Mahlich)