Bridgeway Prime Shop Fund Management is blazing a new trail in the property market by becoming Hong Kong’s first asset management firm and collective investment scheme, focused purely on shops and retail outlet investment.
Since being given the regulatory go-ahead in July 2015, it has so far bought seven retail properties worth a combined HK$86.4 million.
“We raise funds from our investors after we buy a property rather than before any acquisition. That way we avoid sitting on cash, and can buy properties even if we are not offering the best price,” said Edwin Lee is the founder of Bridgeway Prime Shop Fund Management, who was a New York-based investment banker before returning to his native Hong Kong in 2001.
In general, the company hold 40 to 50 per cent equity in its projects, with the remainer coming from investors.
“We would also consider owning a property outright 100 per cent if we fail to attract interest from investors,” said Lee, who sets his sights on street-level shop and retail properties worth less than HK$50 million.
The fund bought its first shop in Jordan in Kowloon for HK$11.78 million in July, when shop sale prices were plunging. But the market is now picking up, according to Centaline Property Agency, with 155 retail shop deals done last month from the yearly low of 56 in July. The total value surged to HK$2.46 billion last month, from HK$996 million in July.
Last week, the fund bought two street shops in Yuen Long for a total HK$19.5 million, bringing its portfolio to seven.
Lee added the seventh was sealed just a day after Hong Kong Chief Executive Leung Chun-ying announced he would not be seeking re-election in March.
“Leung’s decision removed market uncertainty that domestic stamp duty of 15 per cent could be extended to the commercial sector. It should prove positive news, so I decided to buy one more property,” said Lee.
Bridgeway founder Edwin Lee carves niche role in Hong Kong street shop property market
He expects the market in shops, which cater to local consumers, will become particularly active in the second half of next year. By that time, the new Hong Kong chief executive’s policy on the property market should have been finalised and the city’s tourism industry should be stabilising too, he adds.
The fund last week paid HK$10.5 million for its seventh property – a 500-square-foot shop – after the owner cut the asking price from HK$12 million. The shop is currently rented out as a coffee shop earning HK$23,800 per month, an investment yield of 2.3 per cent a year. It was the second street shop in Yuen Long bought by the fund within a week.
Lee also bought a 250 square feet outlet in Yuen Long for HK$9.1 million after the vendor slashed the asking price by nearly a quarter. The shop currently provides an annual yield of 2.4 per cent with the tenant paying a monthly rent of HK$18,000.
The seven shops, bought for between 12 and 32 per cent below asking price, can potentially be subdivided them into 11 smaller outlets for resale.
On C Suite in P3, Lee shares more details on the fund’s investment strategy and his market outlook for retail properties