Introduction

In recent months, Gale Well Group, a prominent property investment firm based in Hong Kong, has launched a significant strategy to ease its financial burdens. The privately held company has announced plans to sell several properties valued at approximately HK$1.6 billion (around $202 million), as founder Jacinto Tong Man-Leung prepares to step away from the tumultuous property market.

Diving Into the Sales

Last week, Gale Well Group began marketing a 98-room boutique hotel located at 39 Morrison Hill Road in Causeway Bay, and a prestigious office space on the 39th floor of the Lippo Centre in Admiralty. Back in September, the firm also listed the 35th floor of the Shun Tak Centre in Sheung Wan for sale. This strategic move comes amid a challenging landscape for Hong Kong's property sector, where values fluctuate dramatically.

Founder Jacinto Tong shared his thoughts on the current market climate via Facebook. He expressed concerns about excessive uncertainty, predicting that commercial property values might swing wildly, with potential increases or decreases of up to 10% next year. Tong pointed out that many industry insiders are overly optimistic about market stability, a stance that he believes is unlikely, especially if interest rates remain high.

Repaying Debt and Future Outlook

The 26-storey hotel currently operates as the 184-bed BeLiving youth hostel and is valued at HK$630 million—a striking 28% drop from the HK$880 million Gale Well paid for the property in 2016. Located just a five-minute walk from the Causeway Bay MTR station, the property features various room sizes, ranging from 176 to 324 square feet, alongside a café. Part of the proceeds from the sale is earmarked for repaying a HK$200 million loan secured against the property.

Tong commented on potential backlash regarding the sale: “Some think we’ll incur losses, but we are more focused on avoiding negative equity,” he stated. His remarks emphasize the importance of maintaining a solid financial footing rather than clinging to assets that may not yield returns in the current market.

Current Market Conditions and Future Predictions

The wider market is wrestling with high vacancy rates and declining rent prices. According to recent data, the average office vacancy in Hong Kong stood at around 16.8% in Q3, with rents decreasing by 4.7% so far this year. Grade A office values have fallen a staggering 41.6% since their peak in 2019, highlighting a crisis in the real estate sector.

In addition to the hotel, Gale Well is looking to sell the 12,158 square foot floor in the Lippo Centre, listed at HK$277 million (HK$22,783 per square foot), as well as the Shun Tak Centre property for HK$663 million (about HK$29,985 per square foot). Local demand remains tempered, with recent transactions revealing significant depreciation in property values.

Gale Well has tapped into real estate powerhouses, with Savills managing the sales of the Causeway Bay hotel and the Shun Tak Centre office while Centaline is handling the Lippo Centre asset.

Will Gale Well Group Bounce Back?

As the company adapts to shifting market trends and outlines its plans for the next year, the question remains: can the Gale Well Group navigate through these difficult times and emerge successfully? With a proactive approach and strategic asset management, the firm might just set the stage for a future comeback in Hong Kong's unpredictable property market. Stay tuned for updates on this unfolding story!