Goldin Financial Holdings is hoping to offload a piece of land which had once been part of the runway of Hong Kong’s former airport, as a property slump in the Asian financial hub has been intensified by the virus pandemic.
The Hong Kong-listed financial conglomerate said in an announcement to the stock exchange on Friday that the company had received a conditional offer for the residential land parcel known as New Kowloon Inland Lot 6591 on the former Kai Tak airport site, from a “well-established integrated company principally engaged in property development and related businesses”.
Goldin said that the company would convene a board meeting to discuss the proposed transaction, which is subject to the execution of contracts between the parties, and make further announcements in accordance with stock exchange regulations.
Looking to Dispose of Unwanted Land
Goldin gave no indication of its rationale for wanting to sell the 9,708 square metre (104,496 square foot) residential site, which it paid HK$8.9 billion to acquire in November 2018, but the disclosure of the proposed transaction comes as the property market in Hong Kong has continued to deteriorate, with JLL predicting that residential prices will fall by up to 15 percent this year.
Should the transaction complete, it would be the second time the company controlled by mainland billionaire Pan Sutong has had a change of heart over Hong Kong’s former airport. Just nine months ago Goldin had walked away from its HK$11.1 billion ($1.43 billion) purchase of a Kai Tak commercial site, with the company forfeiting a HK$25 million deposit as it cited the city’s economic and social instability as motivation for its decision.
The announcement also comes just over three weeks after Goldin, which invests in restaurants and wineries alongside its property deals, revealed it had recorded a loss of HK$482 million during the second half of 2019.
Selling an HK$8.9B Slice of Former Runway
Market industry sources have speculated that CK Asset Holdings, which has yet to secure a plot on the former airport, may be behind the offer for the 9,708 square metre (104,496 square foot) residential plot.
Insiders have also suggested that the offeror may be a member of a consortium comprised of Henderson Land, New World Development, Wheelock and Company, and Empire Group Holdings which purchased the adjoining site a week prior to Goldin winning New Kowloon Inland Lot 6591.
Based on the plot’s approved gross floor area of 53,394 square metres (574,728 square feet) of new homes, Goldin’s purchase price fourteen months ago had been equivalent to HK$15,497 per square foot of built area. Flats at Wheelock’s Oasis Kai Tak development, which is also located on the city’s former airport, were priced last month at between HK$25,300 and HK$25,700 per square foot, factoring in a 14.5 percent discount, according to a local media account.
Despite Goldin’s winning bid for the plot having come in at the higher end of the predicted HK$8.33 billion to HK$9.2 billion selling range, the company had said at the time of the award that it believed the HK$8.9 billion price tag was “reasonable” because it commanded sea views.
In April 2019 Goldin Financial agreed to purchase a 40 percent stake in the project from Pan for cash consideration of HK$2.16 billion and assumption of existing liabilities, according to a statement to the Hong Kong stock exchange at the time.
Weakening Demand Gives Developers Pause
With a constant stream of bad news undermining Hong Kong’s property market, Goldin is negotiating the sale of the Kai Tak land parcel as the city’s developers are holding back on sales launches amid weakened demand.
Just three weeks ago, JLL reported that developers added just 40 new flats to the available market stock during the month following Chinese New Year – down almost 93 percent from the average of 530 homes made available for sale over the same period within the last three years.
Sales data for January showed the downturn already in full force, with buyers spending only HK$7.5 billion on new flats during the first month of the Western calendar year – just a quarter of the HK$28.4 billion during the same period last year.
Although home sales picked up in February, mass residential capital values slipped 1.5 percent, quickening from 1 percent in January, according to JLL.