(Sing Tao Daily/Hong Kong Economic Journal/Hong Kong Economic Journal) JD.com acquires Yau Ma Tei student dormitory for HK$750 million. JD.com has been actively increasing its investment in Hong Kong in recent years, and its latest acquisition is a student dormitory project in Yau Ma Tei from Far East Development. The initial price is HK$750 million. According to the agreement, a Far East subsidiary will lease back the dormitory for three years after the transaction, guaranteeing JD.com an annual income of HK$45 million during that period. Based on the transaction price, the return rate is approximately 6%.
Far East Development issued an announcement yesterday stating that it entered into a sale and purchase agreement with JD.com’s subsidiary JD Fabulous last Friday (3rd) to sell all issued shares of Jiecai Company for HK$750 million. The company holds the student dormitory project formerly the Yau Ma Tei Harbour View Silky Hotel, which has been converting guest rooms into student dormitory units. After the transaction, the property will undergo a complete renovation for student dormitory operation, expected to be completed in the second half of this year.
Far East Group to Leaseback the Student Dormitory
According to the management agreement, after the completion of the transaction, a Far East subsidiary will continue to manage and operate the student dormitory through a sale-leaseback model for a period of three years, paying JD.com a guaranteed income of HK$45 million annually during the three-year period.
The initial transaction price of the property was HK$750 million, representing a premium of approximately HK$484 million over the audited net book value of approximately HK$266 million at the end of March this year. It is expected that a sale gain of approximately HK$423 million will be recorded upon completion. After repaying existing bank loans, the remaining HK$106 million will be used for the Group’s general working capital.
Far East Group stated that this transaction provides an opportunity to establish a strategic relationship with JD.com and will explore further cooperation opportunities, including potential student dormitory projects.
Expected return on investment: 6%
This marks JD.com’s first foray into the Hong Kong student dormitory market. The Group has been actively increasing its investment in Hong Kong in recent years, including the opening of its first physical store in Hong Kong, JD.com MALL, last month. Located in the China Resources Bayview Centre in Wan Chai, the two-story store has a total area of approximately 30,000 square feet.
In addition, at the end of last year, the group acquired a 50% stake in the China Construction Bank Tower in Central from Lai Sun for HK$3.5 billion, at a price of approximately HK$31,300 per square foot. Its subsidiary, JD Smart Industrial Development, plans to acquire the entire Li Fung Centre in Sha Tin by the end of 2024, with market sources indicating a price of approximately HK$1.8 billion.
JD recently formed a consortium with China Overseas, China Merchants Land, China Resources Land (Overseas), China Tourism Group Investment and Operation Company, and Sino Land to bid for the pilot development project in the Hung Shui Kiu area. Industry insiders expect JD to primarily undertake the development of industrial land in the area.
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