Embattled apparel retailer Esprit has sold its Hong Kong office block on a leaseback arrangement to free capital for its continuing reform plan.

The transaction will deliver Esprit an estimated one-off net gain of HK$725 million.

The company said in a statement the  proceeds will be used by the group as general working capital, including funding any future investment opportunities that may arise.

“The lease of the Hong Kong offices will better reflect the cost of the local operation, and hence help management efforts to streamline the actual current cost structure.”

The property has been sold to Phoenix Property Investors for $918 million.

The offices comprise five floors and 16 car park spaces at 39 Wang Chiu Rd in Kowloon, with settlement scheduled for March 21 next year.

Four of the floors will be leased back and 13 of the car park spaces for six years initially, representing a 20 per cent contraction of the group’s office space requirement.

In the year to June 30, Esprit reported a net loss of $3.7 billion, largely due to impairments.