HSBC selling its headquarters....

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  1. #1

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    HSBC selling its headquarters....

    Not in Hong Kong (well, may be they're not admitting it), but in London and two additional sites in New York and Paris.

    HSBC's Property Sale: Its HQ and 2 Other Sites - WSJ.com

    So what is the real story?

    HSBC Holdings PLC plans to put up for sale office buildings in New York and Paris as well as its London headquarters, a move that could raise billions of dollars for the U.K. bank.

    HSBC plans to send out sales material to roughly 20 real-estate investors this week, a person familiar with the matter said. The decision to put the buildings up for sale followed an expression of interest in them, the person said. It is unclear who may be interested or how much the buildings could fetch.

    "As part of managing its significant global real-estate portfolio, HSBC is testing the market with three of its landmark property assets," the bank said in a statement, confirming a report in London's Sunday Times.

    Buffeted by slowing economies around the world and losses at its U.S. consumer-lending operation, HSBC is in fund-raising mode. Last week, it completed a £12.5 billion ($18.32 billion) sale of shares to existing investors, the largest so-called rights issue ever in the U.K. The company also cut its dividend.

  2. #2

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    very common, its just a standard sale and leaseback situation.

    hsbc's main business is being a bank, not a property owner.


  3. #3

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    Agreed, but isnt the timing weird. Even a bank should know that you don't sell when prices are low or buy back when prices are high. Or are there some other new fundamental economic theories which override this?

    PIN: What about 1 Queens Road? Given that they're "not a property owner"?


  4. #4

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    Well Lehmans is holding out for better prices and isn't selling its uranium yet.
    Lehman Sits on Bomb of Uranium Cake as Prices Slump (Update1) - Bloomberg.com
    ...


  5. #5

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    Hmmm smells fishy indeed.

    Timing is bad and doing such a move now can only raise questions about the lender. Let's wait and see.


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    From my business degree, we found that most people do not like Internet Banks e.g. (Egg in the UK) because when they put money in, they prefer a "Bricks and Mortar" approach.

    i think the reason could be economical as with the current situation they are probably not using all the offices. So rather than paying money for open space (on a loan), they might as well sell the whole building, rent back half the office space, and leave the buyer wondering what to do with the rest of the building and i dont think there is huge demand for office space at the moment.

    the prices of property may be low, but the prices of these types of buildings (huge HQ skyscrapers/tower blocks etc) do not typically fluctuate much because the demand doesnt change alot. When you think about it... how many people do you know that can afford (or want) to buy the HSBC building when the economy is good let alone when it is bad?

    Similar to how shopping malls or sports stadiums are actually not worth as much as you think because the actual market is very small and demand is low.


  7. #7

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    >> i dont think there is huge demand for office space at the moment.

    Which means that they'd get a pretty low amount on the sale. Buyers are not that stupid (well, unless it is another investment bank using tarp funds) that they'll pay high prices given the scenario you outlined.

    Doubt HSBC takes out loans for buildings it buys... even if they do, it really should be funds moving from the right pocket to the left pocket.

    >> prices of these types of buildings (huge HQ skyscrapers/tower blocks etc) do not typically fluctuate

    But the amount of liquidity in the market fluctuates. At this point, say 20 entities have the money to buy skyscrapers - a year or two ago say 50 entities would have had the funds to buy it.

    All I'm saying is .. it is a very strange time for a bank to be going out and raising money like this, specially since its been a few weeks since they raised a truckload with their rights issue.

    But then .. what do I know ... don't have no fancy banking MBA.


  8. #8

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    HSBC had to buy back the building from a company that couldn't honour the repayments and the bank held the guarantee. It was bought at a very good rate and this resale should turn a nice profit and give them some nice cash.

    No conspiracy theory here I'm afraid.


  9. #9

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    Boris - New York and Paris too?


  10. #10

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    I have only seen details of the London property but IF true of the other sites then I would say that HSBC would only do it if there was an advantage over financing against asset value. That works for the London model.