One of Hong Kong’s wealthiest men has moved a step closer to developing a residential complex in the city’s Sai Ying Pun district after successfully applying for a compulsory sale of the remaining units in a 61-year-old walk-up near the University of Hong Kong.
After having already acquired over 91 percent of the On Hing Building, which enjoys a location about 800 metres from the HKU campus on Des Voeux Road West, Edwin Leong Siu-hung’s Tai Hung Fai Enterprise plans to snap up the remaining 8.6 percent at a public auction managed by property consultancy Knight Frank on 20 May.
Privately-held Tai Hung Fai is scheduled to make its bid, in a sale which values the whole property at HK$700 million ($90 million), after spending more than a decade acquiring units in the building at 326-332 Des Voeux Road West and 11A-D Sai On Lane.
Making Way for a New Tower in Western
The company plans to redevelop the site two MTR stations west of Central into a 53,718 square foot (4,991 square metre) residential tower with two storeys of retail on the lowest floors of the complex.
Vincent Cheung, managing director at Vincorn Consulting and Appraisal, said that, when completed, a new tower on the site could be expected to offer new homes at a sale price of HK$27,000 to HK$28,000 per square foot.
Another market analyst held out the potential to achieve higher prices for homes in the project, which could stretch up to 32-storeys, estimating that the developer could achieve around HK$28,000 to HK$32,000 per square foot.
“Demand for old buildings in Sai Ying Pun has been very strong in recent years, given its proximity to the Sai Ying Pun MTR stations and Hong Kong University,” the brokerage source said. “Many potential investors are willing to buy the properties and lease them to university students.”
With its proximity to the city’s CBD area, Sai Ying Pun residential area, which has been known primarily for shops selling dried foods and other goods along narrow back lanes, has more recently given way to hipster cafes and craft beer pubs, helped by the extension of the MTR rail line through the district six years ago.
New World Development and Henderson Land have jointly developed the Bohemian House residential project at 321 Des Voeux Road West — just adjacent to the On Hing Building — which commenced sales of 191 apartments last month.
A 297 square foot upper-floor unit at Bohemian House is currently listed at an asking price of HK$6.8 million at HK$22,896 per square foot, according to brokers cited in a local news report.
A Decade in the Making
Tai Hung Fai has spent a total of HK$443 million over the past ten years assembling its ownership of the eight-storey residential property, bringing its stake above the 80 percent threshold required to force a compulsory sale in April last year, according to local news accounts and a judgement by the city’s Lands Tribunal dated 22 March 2020.
During that decade, the developer acquired 52 of the property’s 56 flats, paying between HK$3.7 million to HK$6.2 million each for the homes, according to market valuations, and purchased two of the eight ground floor retail units at valuations of between HK$10 million to HK$40 million.
Based on the HK$700 million auction reserve price, the developer will need to pay HK$$13,031 per square foot to take over the remaining 8.6 percent of the property and make way for its new residential project.
Taking Aim at Sai Ying Pun
Tai Hung Fai is gunning for full ownership of its Sai Ying Pun prize two years after setting its sights on a commercial redevelopment just a ten-minute walk away.
Near where the eastern edge of Sai Ying Pun meets the neighbouring Sheung Wan area, the firm had amassed a 20,000 square foot site including buying the Butterfly on Waterfront hotel for HK$810 million in 2018. With the site largely secured,Tai Hung Fai has plans to invest over HK$10 billion to build a 400,000 square foot grade A office building on the assembled plots, according to a local media report at the time.
Tai Hung Fai’s move to force the sale of this latest property in Sai Ying Pun comes as the number of compulsory sales in the city has dropped to its lowest level in three years, with many investors shelving plans amid the COVID-19 pandemic, according to a report in the Hong Kong Economic Times citing official figures.
Hong Kong has seen only three applications for compulsory sales in the first quarter of the year, a 50 percent drop from the same period last year, according to the report.