HONG KONG — Kerry Logistics is planning to convert one of its basic warehouse facilities in Hong Kong into a columbarium that will store the remains of up to 100,000 people, according to a local media report, a move that would appear to be a significant money spinner for the group.
No confirmation could be obtained from Kerry Logistics on the reported conversion plans, but sky high property prices and land in tight supply in Hong Kong are pushing burial plots beyond the reach of many people. And in a city where parking spaces can cost more than $250,000, a place to store ashes is also commanding a premium price.
Citi Research gave as an example Macau property conglomerate Shun Tak, which recently sold 40,000 columbarium niches at $9,000 per niche. If the Hong Kong-listed Kerry Logistics can achieve the same price for 100,000 slots, the sale will yield $900 million on what Apple Daily said would be an investment of as much as $256 million, an impressive 70 percent gain.
In a note to customers, Citi Research said the warehouse in question was in Wan Chai on Victoria Island and represented about 10 percent of Kerry Logistics’s gross floor area in Hong Kong. Importantly, the rental and valuation of the warehouse could be below average because it was a long way from the port, “making such a redevelopment attractive.”
However, Citi was skeptical about the project gaining official approval. “With a lack of space in Hong Kong, we understand the need and demand for such facilities, but believe the government approval and local opposition could stall such a project’s completion,” the note said.
Kerry Logistics has also been converting other warehouse space in Hong Kong into cold storage and data centres, Citi said, likely yielding a 20-30 percent premium to basic warehouse rents.
“While we believe these conversions only represent a fraction of the company’s five million square feet of gross floor area in Hong Kong, with higher rents and the use of slightly lower cap rates we can see potential for additional property revaluation gains in the financial year 2014 and beyond,” Citi noted.
In the logistics segment, Kerry Logistics has been on an acquisition spree recently, with the Hong Kong-listed group earlier this month buying majority stakes in two Canadian forwarding companies focused on Asia-Pacific — Total Logistics Partner Ocean Consolidators Inc. and Total Logistics Partner Air Express Inc. (TLP). The deal adds Montreal and Toronto to Kerry Logistics’ worldwide network.
Late last year the company acquired Dubai-based logistics operator Able Logistics Group, an international freight forwarder headquartered in Dubai with offices across the U.A.E., Saudi Arabia, Oman and China, for $32 million.
Expanding its international freight forwarding business is a key focus of the logistics operator, with Asia as the centre of the network. Last year, Kerry Logistics formed freight forwarding joint ventures in New Zealand and Australia, linking the trans-Tasman market to Asia.
Following its initial public offering in Dec. 2012, Kerry Logistics said it planned to invest $124 million, or 51 percent, of the proceeds on international expansion.
Kerry Logistics is also in line to boost its access to the closely protected Chinese courier market as the State Post Bureau prepares to grant the company, along with Japanese firms Yamato Logistics and Overseas Courier Service (OCS), a license to operate express services in the mainland. Kerry has applied to operate in 13 province-level regions, including Beijing, Shanghai and Guangdong, and 18 cities.