Hong Kong-based property services firm New World Development Company has just sold its interest it two major shopping malls in the city to MTR Corporation. Hong Kong's sole retail operator agreed to purchase the stake in the two malls for $385 million.
The sale of the company's stake in the two Hong Kong malls comes as the local retail sector continues its slump amid the ongoing viral epidemic, among other factors. New World Development mentioned in a a statement that the sale of its "non-core" assets is part of its strategy to fine-tune its business.
MTR Corporation agreed to purchase New World Development's 50 percent stake in the Telford Plaza II in Kowloon Bay and the company's 21 percent stake in the PopCorn 2 mall in Tseung Kwan O.
New World Development stated that it plans to shed its other "non-core" assets in the coming months in order to raise additional capital. The proceeds of the sales will apparently be used to develop its other core businesses. This will include enhancing its business portfolios in both mainland China and Hong Kong to increase its income.
According to the property, infrastructure, and services firm, it plans to significantly increase the total gross floor area of its investment properties in both Hong Kong and mainland China. It specified that by 2026, it expects to triple its total gross floor area in Hong Kong and increase its area in the mainland by at least six times.
Analysts have pointed out that the sale of its stake in the Hong Kong malls is likely the company's way of mitigating its exposure to the city's slumping retail sector. New World Development could be planning to unload a number of its other low-profiting developments in the city in the coming months. The recent viral epidemic has also managed to exacerbate the dire situation, which was mainly a result of the months of civil unrest in the city last year.
In the previous quarter, Hong Kong's retail sales had fallen by 24.1 percent as it received fewer and fewer visitors from the mainland and other countries. The city's local economy shrank by around 2.5 percent during the same period.
New World Development, which operates several hotels and commercial properties, likely wants to increase its investments in mainland China, where most of its assets are located. Around 38 percent of the company's massive HK$251 billion worth of fixed assets is located in mainland China. The company could potentially use the proceeds of its asset sales to develop its substantial land bank, estimated to yield roughly 6.5 million square meters of gross floor area.