New World Development has sold its interest in two Hong Kong shopping malls to MTR Corporation, the city’s sole rail operator, for HK$3 billion (US$385 million) as the local retail sector slips into a deep slump.
The developer said the sale of the “non-core” assets, a 50 per cent stake in the Telford Plaza II in Kowloon Bay and a 21 per cent share of PopCorn 2 in Tseung Kwan O, was part of its strategy to fine-tune its asset structure.
New World Development will continue to dispose of non-core assets to “recycle capital” for the development of its core businesses, the company said in a statement.
“New World Development is committed to enriching its assets and business portfolios in Hong Kong and mainland China to increase recurring income,” it added.
It said that between 2019 and 2026, the total gross floor area of the company's investment properties in Hong Kong and China would increase by three times and six times respectively.
The sales come as Hong Kong’s economy grapples with a recession for the first time since 2009 following months of social unrest last year.
The Covid-19 epidemic that originated in China’s Hubei province is now weighing on local retailers and developers. It has claimed more than 2,600 lives and infected about 80,000 people worldwide.
Hong Kong reported 85 confirmed cases of the virus, with two deaths, as of Tuesday.
“The transactions reflect the dire scenario in Hong Kong’s retail sector,” said Jeffrey Mak, property analyst at CGS-CIMB Securities. “New World Development may want to exit from some low-profiting developments and focus on their major projects like K11.”
Hong Kong’s retail sales fell 24.1 per cent as mainland tourist numbers dwindled in the last quarter, according to government data.
The local economy shrank 2.5 per cent at the same time. Financial Secretary Paul Chan Mo-po has said more job losses could follow a deeper recession this year.
Early this month, New World Development appointed Adrian Cheng Chi-kong as head of its property business in mainland China, entrenching his position as the next-generation successor at the city's third-largest hotel and property empire by market value.
The mainland market accounted for a third of the group’s revenue and 39 per cent of its gross profit last year.
New World Development has 38 per cent of its HK$251 billion worth of fixed assets in the mainland, according to its latest annual report. It owns a land bank with a potential 6.5 million square metres of gross floor area.
Additional reporting by Ka-sing Lam
More from South China Morning Post:
- China coronavirus and Hong Kong protests: are we fighting a disease or the government?
- Coronavirus: Hong Kong airport suffers worst January in five years as officials blame protests and deadly bug for poor traffic