Evergrande Buys Hong Kong Resi Project From Henderson for HK$4.7B

Top mainland developer China Evergrande is ready to start building 400 villas in Hong Kong after buying a site in the New Territories from Henderson Land, according to a report by the blue chip local builder late last week.

In a deal which was finalised in July, the real estate giant headed by billionaire Xu Jiayin paid Henderson HK$4.7 billion ($606 million) to purchase the Yuen Long project after Hong Kong home sales fell more than 34 percent in August, compared to the previous month, and with mainland developers seeing fewer opportunities beyond their tightly controlled home market.

“The politics, the pandemic and the economy will limit their scope in other countries at this particular moment, and Hong Kong’s weak economic cycle represents a great opportunity for them,” said veteran industry analyst David Ji, former head of research for Greater China at Knight Frank said in explaining Evergrande’s most recent move in the city.

The purchase by the top three mainland developer comes as Chinese investors have stepped up purchases of Hong Kong real estate in 2020 with players including Ping An Insurance, China Vanke and Kaisa Holdings having made major investments in development projects in the city during 2020.

Evergrande Returns to the New Territories

A project from Henderson’s extensive pipeline of former agricultural land in Hong Kong’s New Territories, the Yuen Long site entitles Evergrande to build 893,000 square feet (83,000 square metres) of homes with the purchase price equal to approximately HK$5,263 per square foot of finished housing.

With Yuen Long a popular area among recent immigrants from north of the border, Ji sees an opportunity for Evergrande to market the project to its existing customer base, noting that, “Everyone is seeking mainland buyers to prop up the market.”

Evergrande scored a win with its first project in Hong Kong, in the New Territories district of Tuen Mun, when it sold out all 167 homes on offer at the project on its first day of sales in October last year.

Back home on the mainland the company, which ranked second last year among mainland developers in terms of contracted sales attributable to shareholders, is offering 30 percent discounts on homes nationwide during the month of September in an effort to boost revenue.

Return Engagement with Henderson

The purchase of the Yuen Long project was finalised in July when control of Broadwin International Ltd, a local private company which holds the rights to the project, was transferred from Henderson Land chairman Lee Ka-shing to a new director Gao Xiong, whose name matches that of a senior director with Evergrande’s local Hong Kong unit.

Henderson had first indicated that a sale of the Yuen Long project was underway last year with the local developer having secured revisions to the official development plan on behalf of the new owner in January of this year, as well as having helped to arrange loans secured by the land, according to previous statements.

Evergrande also acquired its Tuen Mun project from Henderson, paying HK$6.6 billion to acquire that plot in 2018. In that transaction, Evergrande’s Gao Xiong also was named as a director of the local entity holding the project when the mainland firm took possession.

The Yuen Long villa project occupies a 2.42 million square foot site which, with its location beside the environmentally sensitive Mai Po Wetlands, will demand conservation considerations, Ji pointed out.

Evergrande has yet to make a statement on what would be its fourth major acquisition in the Hong Kong market since purchasing the then Mass Mutual Tower in Wanchai from Chinese Estates for a then-record HK$12.5 billion in 2015.

Since then the company has also purchased a development site in the city from New World Development, in addition to the 2018 tie-up with Henderson Land, with its total acquisitions in Hong Kong now tallying over HK$23 billion.

Mainland Investors Buy Up Hong Kong Sites

Evergrande’s finalising of its New Territories deal fits into a pattern that saw mainland investors pick up six of 13 development sites sold between July 2019 and July 2020, according to Colliers International.

The year started with Shenzhen-based builder Kaisa Group picking up a 600,000 square foot residential project in the Castle Peak Bay Area of Tuen Mun for HK$3.5 billion in January.

Then in July, top three mainland developer China Vanke paired up with a local unit of Qingdao-based Qingjian to acquire an 800,000 square foot residential project in the New Territories’ Tai Po district for HK$3.7 billion.

On the industrial side, mainland telecom provider China Mobile also got into the Hong Kong action in July by paying HK$5.6 billion to a site for a 900,000 gross square foot data centre.

In addition to dominating government land sales, mainland buyers have also been investing at the secondary level with Ping An Insurance in April committing just over HK$11 billion to acquire 30 percent of Sun Hung Kai Properties’ commercial development atop the West Kowloon high speed rail station.

In a transaction not yet included in official tallies, Shenzhen’s Kaisa Group is also reported to have been the as-yet-unnamed buyer of a residential plot in Kai Tak which cash-strapped Goldin Properties agreed to sell for HK$7.04 billion in May of this year.