A 16-storey building on Kowloon’s bustling Nathan Road commercial strip sold this past week at a 50 percent discount as Hong Kong’s property market continues to slide.
According to local media citing Land Registry records, the Tung Cheong Commercial Building at 221 to 221A Nathan Road in the Yau Ma Tei neighbourhood sold for HK$510 million ($66 million) on 2 August, slashing nearly 50 percent from its HK$1 billion asking price in 2018.
The 34,178 square foot (3,175 square metre) building, which is occupied on the lower floors by a Sasa cosmetics shop and a household goods outlet, sold for the equivalent of HK$14,921 per square foot, or nearly half the price at which a nearby building changed hands for two years ago.
The seller, Frank Leung Yat Cheung, also known as Hong Kong’s “Shoe King”, had purchased the 1986-vintage building along Kowloon’s principal commercial artery for HK$182 million in 2004. Positioned near John’s London Plaza, one of the landmark commercial buildings along the street running north from Hong Kong’s harbourside, the building currently generates roughly HK$1.4 million in monthly income, according to local media reports.
The new buyer is an unnamed mainland investor, according to local media reports.
71% Drop in Deals
The sale is estimated to be among the city’s largest commercial building transactions so far in 2020, as social tensions and COVID-19 pandemic woes disrupt commercial activities and reduce investment opportunities in the Asian financial hub. Only 19 transactions of HK$100 million or more in value were recorded in Hong Kong from 1 January through early June of this year – a 71 percent drop from the same period in 2019 – according to property consultancy Cushman & Wakefield.
This latest transaction in Yau Ma Tei took place at nearly 50 percent less per square foot than the most recent major sale in the neighbourhood, when CSI Properties Limited in May 2018 purchased the Everest Building at 241 to 243 Nathan Road — just two minutes’ walking distance away — for about HK$1.8 billion, or HK$29,650 per square foot.
Shoe King Hit By Retail Storm
The discounted sale came as a number of international retail chains have fled Hong Kong’s famously pricey retail strips in recent months as sales of luxury goods plummet in the face of closed borders and economic gloom. Late last month, a street-front shop in Causeway Bay, the world’s most expensive shopping district, was sold at a 73 percent loss.
As disruptions of the pandemic led to sluggish consumer demand in Europe and the United States, Leung, who serves as president of the Federation of Hong Kong Footwear, said in an interview with local news outlet Wen Wei Po last month, that some of his retail outlets in Hong Kong have been closed recently. The shoe retailer and maker, who who inherited the footwear business from his father said orders had fallen by about 30 percent in the first half of this year.
“If there is no subsidy from the government, many businesses have no choice but to borrow money from the bank, and therefore will be heavily leveraged after the pandemic,” said Leung, who remained pessimistic about retail prospects in Hong Kong with concerns about the economic impact of the Sino-US trade war on mainland China and Hong Kong as well as prospects for the global economy.
In July last year, the retail tycoon had reportedly teamed up with New Wing Investment Limited director Lam Chun Kei in a deal to sell a 17,497 square foot hotel at 423 – 425 Reclamation Street in Kowloon to Hong Kong’s “Shop King” Tang Shing-bor for HK$328 million. The deal later failed after Tang walked away from a HK$32.8 million deposit to back out of the transaction.
A member of the HKSAR Trade and Industry Advisory Board, Leung had been active in expanding his business to Africa since 2010. As the local media reported, Leung currently owns two factories in Africa with over 2,000 employees.