Fraught with uncertainties, the local property market has been seeing much fewer major transactions this year. So when a special deal crops up, it is all the more eye-catching.
Such is the case with HSBC Insurance's recent acquisition of a majority shareholding in a cold storage facility. It is said to be for self-use, and people were naturally baffled as to why an insurance operation would need a cold storage facility.
It transpired subsequently that such facilities are built for heavy electricity consumption, a feature that makes it feasible for the property to be transformed into a data center.
With only part ownership, redevelopment may not be on the cards. Coupled with the fact that the property has the right floor loading and power supply capacity for a data center, the latter option looks more likely.
For property investments, cold storage facilities are not a particularly popular choice. Apart from sinking in money, it also requires some degree of operating, so these properties are mostly bought as long-term holdings.
Many years ago, Seapower Resources International chairman Choi Sai-leung owned a few of such properties, earning him the moniker "cold storage king."
Choi, who had financial businesses too, believed there would always be demand for such facilities. And as their number would not suddenly increase because of the high initial setup costs, such an investment promises stable returns.
Bullish about the sector, Choi had intended to expand his market share to shore up his negotiating power with tenants. But as it turned out, he divested his interest in the business before the plan had a chance to be carried out.
In recent years, local data services have been expanding rapidly, and there are industrial estate sites earmarked for such purposes, with their prices on the rise.
It may or may not be more costly to build a data center from an old cold storage, but its potential for value appreciation would make this a more appealing option for HSBC Insurance.
Siu Sai-wo is publisher of Sing Tao Daily
