Mainland China developer Hopson Development Holdings is poised to make its first overseas acquisition after agreeing to buy a stalled residential project in New York for $113.5 million, according to a company announcement to the Hong Kong stock exchange.
With no movement on the project since the previous buildings were demolished three years ago, the Hong Kong-listed property developer is planning to erect a 34-storey tower on the site at 131-141 East 47th Street, just four blocks southeast of Rockefeller Center in the Midtown Manhattan business district.
The news of the acquisition comes on the same day that Hopson announced that it had recorded contracted sales of RMB 19 billion ($2.7 billion) during the first eleven months of the year, up 35 percent from the same period last year.
Chaired by billionaire Zhu Mengyi, the Guangzhou-based developer is acquiring the project from a company that lists as a director a founder of New York-based, China-backed property firm New Empire Real Estate Development. The vehicle controlled by New Empire boss Bentley Zhao had purchased the site in 2015 for $81 million and filed plans for the development four years ago.
Gunning to Launch Pre-Sales in 2021
Located a three minute walk from the 51st Street station in Midtown, the tower planned for the site will provide 200 apartments across a gross floor area of 183,310 square feet (17,030 square metres), according to Hopson Development’s regulatory filing.
Construction on the residential project is expected to start next year with a provisional completion date of 2022, while pre-sales of homes in the tower are scheduled to kick off in 2021.
The company said in a statement that it estimates the total development investment for its new undertaking, including the purchase price, at $225 million dollars, with 60 percent of that to be financed by bank loans and the remainder coming from internal resources.
New York developer New Empire had originally planned a 49-storey residential skyscraper for the site — a taller building than Hopson is now planning — while reducing the number of units to 122 across a smaller floor area of 151,000 square feet.
New Empire’s efforts to develop the project crumbled last year when US brokerage Town New Development sued the developer for $210,000 in consulting fees as well as a $2.2 million termination fee and $5.45 million in damages, according to accounts in the local press.
Taking a First Step Overseas
With all of Hopson Developments’ projects currently in Greater China, the purchase of 131-141 East 47th Street will be the group’s first overseas acquisition.
“The company wishes to expand its property investment globally through investments in high quality property projects in major cities in order to improve the group’s allocation of assets and bring returns to the group,” the company said in its announcement, adding that tapping into the US market was intended to establish a platform from which it could expand into the country should the opportunity arise.
In a market increasingly dominated by property giants such as Country Garden and China Evergrande, Hopson Development is a mid-sized player which came close to bankruptcy in 2014 when a combination of rising land prices, slower sales and tightening credit markets put the company in a cash crunch.
Hopson said in a statement regarding its maiden overseas project that it had targeted Manhattan due to its status as a global financial centre while the growing population in New York had created a demand for residential properties.
Hopson Confident in New York Market
Despite the Guangzhou builder’s confidence in the Manhattan market, the transaction comes as America’s traditional business hub struggles with a glut of luxury condos. The chief executive of real estate company Douglas Elliman, Howard Lorber, said in a CNBC interview six weeks ago that an oversupply of apartments coming onto the market is causing a softening of prices across New York.
The average sale price for an apartment in New York City fell to $961,048 in the third quarter of 2019, an eight percent drop from the $1 million average the year before, according to a third quarter report for brokerage Miller Samuel.
In the borough of Manhattan, the average sale price for apartments fell to $1.7 million in the third quarter, down from $2 million for the same period in 2018.