China’s Country Garden has shrugged off a government clampdown on cross-border capital flows by acquiring its second Hong Kong project in less than three months. The Guangzhou-based developer is picking up a 60 percent stake in a waterfront residential site in Ma On Shan for HK$2.44 billion ($312.3 million).
A subsidiary of the mainland developer purchased the stake from Hong Kong’s Wang On Properties, for the equivalent of HK$10,500 ($1,344) per square foot of built area, according to a Monday filing to the Hong Kong exchange. The developer has already paid a 10 percent deposit for the site, which will yield a gross floor area of 387,500 square feet (36,000 square metres).
Wang On Flips Flips Stake in Project for $105M
The 253,000 square foot (23,504 square metre) site is located at Yiu Sha Road in the coveted Whitehead waterfront area, overlooking Tolo Harbour in the New Territories. Wang On acquired the plot from China City Construction (International) in June for HK$2.7 billion, saying that it planned to develop luxury flats and villas on the parcel.
Beijing-based China City Construction had won the site at a public tender in 2014, but was forced to sell it after struggling to secure financing for the construction. The price Wang On paid for the full site implies that the property group earned a profit of around HK$820 million ($105 million) for the 60 percent stake it sold to Country Garden less than three months later.
Offshore Capital Lets Country Garden Skirt Cross-Border Clampdown
The acquisition marks the latest cross-border foray for Country Garden, which is also building the $100 billion Forest City mega-project in Malaysia and multiple suburban residential projects around Sydney and Melbourne. Country Garden first entered the Hong Kong market this past June by acquiring a redevelopment project in Kowloon City from Hong Kong’s Winfull Group for HK$610 million ($78.3 million).
Country Garden’s latest deal comes amid mainland China’s clampdown on capital outflows, which has snared many investors with overseas real estate ventures. The company’s chief financial officer Wu Bijun told the South China Morning Post that Country Garden already had enough offshore capital to fund the site purchase.
Does Hong Kong Count as Overseas?
China’s intensifying crackdown on “irrational” investment, which has slashed the amount of mainland capital chasing overseas real estate, was formalized last month in a new set of restrictive guidelines issued by the State Council.
However, Chinese companies buying residential sites in Hong Kong seem immune to the enhanced controls. Mainland developers shelled out over HK$44 billion ($5.6 billion) to purchase all of the residential plots auctioned across the city in the first half of the year.
That pattern was broken in July, when Hong Kong developer Sino Land scooped up a prime residential site in Whitehead for HK$1.38 billion ($176.7 million), outbidding dozens of rivals. The payment of HK$11,588 per square foot exceeded the area’s previous record prices by 80 percent.