News
　　On Oct 28, Swire Properties （SP） announced it has entered into a sale andpurchase agreement to dispose of its Kowloon Bay NKIL No. 6312 project toan independent third party for HK$6,528mn. The implied sales price for thisdisposal is c.HK$11,800 psf GFA.
　　Analysis
　　SP bought this site in 2013 in a government tender for HK$2.6bn （orHK$4,753 psf on GFA）。 Per the SP annual report, the 25-storey office buildingwith 555,000 sq ft GFA （cannot be sold in strata-title）， is expected to becompleted in 2017.
　　We have seen other developers’ actions in recent years to monetize non-corecommercial properties amid the low-cap rates environment. Also, we see HKas likely benefitting from the trend of SOEs/ MNCs/ SWFs diversifying theirportfolios, acquiring assets that can generate yield and adding propertiesthat match long-term objectives. We see heightened demand in en bloc realestate in HK, potentially keeping cap rates relatively low for some time, evenamid risk of a potential rate hike.
　　Implications
　　SP plans to complete the building work in accordance with the agreement;transaction completion is conditional upon occupation permit and certificateof compliance being obtained by end-2018. SP expects to record a disposalgain of c.HK$1,170mn on the proposed sale. Even assuming disposal of thisproject, we continue to see a strong pipeline of investment projects comingonline – per the 2016 interim result, SP expects to add attributable 4.9mn sqft GFA of investment properties over the next five years （Brickell City Centrein Miami, HKRI Taikoo Hui in Shanghai, 8-10 Wong Chuk Hang Road project,Tung Chung Town Lot No.11 project, and Taikoo Place Redevelopment），which will increase its size of rental portfolio by 23%.
　　We have a Buy rating on SP and a 12m NAV-based TP of HK$29.20. Nochange to our estimates. Risks: Weaker-than-expected office demand; worsethan-expected retail sales trend.