HKRI Buys Kowloon Luxury Residential Tower for HK$760M

Analysts are voicing growing uncertainty over the outlook for Hong Kong real estate, but a developer controlled by one of the city’s wealthiest families is confident enough in the market that it has just agreed to spend nearly $100 million to pick up a residential project in central Kowloon.

A unit of developer Hong Kong Resorts International (HKRI) won a tender for an 18-storey residential building at the northern fringe of Kowloon city for HK$760 million ($96.91 million), according to a Hong Kong Stock Exchange filing on 6 June.

The developer controlled by Hong Kong’s Cha clan was able to acquire the Wellgan Villa residential tower, located near Kowloon Walled City park on Nga Tsin Wai Road, for around 13.64 percent less than the owner’s original asking price, after analysts last week predicted that housing prices in the city might dip as much as 10 percent in the second half of this year, due to increasing uncertainty.

Picking Up a Kowloon Luxury Project

HKRI, which is best known for having developed Discovery Bay on Lantau island, is paying the equivalent of HK$27,050 per square foot (HK$291,163 per square metre) of saleable area to Hong Kong-based Wellgan Investment Limited and its director Tsang Yuk Kiu in order to take possession of the 13-year-old property.

The buyer said in its statement to the exchange that it sees the acquisition as an opportunity to enhance and enlarge its property investment portfolio and noted that the purchase is in line with the group’s strategy of increasing its rental revenue base.

Situated in a neighbourhood dominated by three-storey residential buildings, Wellgan Villa has 33,000 square feet of apartments by gross floor area, as well as 29 carpark spaces, a clubhouse, a landscaped garden, a gymnasium and an outdoor swimming pool.

The development is about 1.2 kilometres south of the Lok Fu metro station and 850 meters from the Kowloon Walled City Park, a public space established in memory of the centuries-old fort turned colonial era slum which was finally demolished in 1994.

The 24-unit development has 22 three-bedroom apartments from floors five through 22, each measuring 1,545 square feet. Some of the units have partial sea views and full views of the old Kai Tak airport site, according to Wellgan Villa’s earlier promotional material.

A pair of homes on the fifth floor each have gardens of 64 square feet each, while the top two floors feature a pair of five-bedroom duplex units at 3,137 square feet and 3,152 square feet respectively. The pair of penthouse units each include internal staircases to private rooftop gardens.

Redeveloped in 2006, Wellgan Villa is currently being leased to residential tenants and will be sold to HKRI on an “as is” basis subject to existing tenancies, according to the statement.

The total rental income derived from the property for the year ended April 30, 2019 is expected to be approximately HK$8.9 million plus management fee revenue of HK$2.1 million. After tax income deriving from the property is expected to be approximately HK$5.68 million, the statement added.

Tsang Yuk Kiu had appointed Cushman & Wakefield in February of this year to sell Wellgan Villa at a target price of HK$880 million according to local media reports, with the property agency highlighting the rare opportunity to purchase an en bloc residential property in its marketing for Wellgan Villa.

Cha Family Buys the Dip

The Cha family, which also controls redevelopment specialist Hanison Construction Holdings, is buying the Kowloon property at a time when many market observers are urging caution in the near term.

In an interview with Mingtiandi last week, Charles Chan, head of valuation and professional services for Savills in Hong Kong predicted that despite record housing sales in May, the deterioration in US-China relations is likely to result in fewer real estate deals from June onward.

With the superpower struggle showing every sign of becoming a prolonged stalemate, the veteran analyst noted that Hong Kong property prices could slide by five to 10 percent by the end of 2019.