Wang On has a new partner in its King’s Road joint venture
Financial pressure on mainland developers is creating opportunities for investors in Hong Kong’s residential sector, with Shanghai-based CIFI Holdings agreeing to sell its 60 percent stake in a Fortress Hill project with Wang On Properties to a joint venture of Wang On and Dutch fund manager APG for HK$1.34 billion ($170 million).
“We can confirm that APG and Wang On Properties JV has acquired 100 percent of a prime site, located on King’s Road,” said Joelin Ma, director of real estate for Asia Pacific at APG. “The site has been co-invested and managed by Wang On Properties, and is in line with the JV’s strategy to invest in Hong Kong residential property via urban redevelopment and revitalisation.”
APG highlighted the deal as a rare opportunity to acquire prime, and sizeable, assembled land, at the vendor’s cost base, in a traditional residential area, with this marking the second acquisition by the HK$4.6 billion APG-Wang On joint venture this month after the residential development strategy agreed to buy an Ap Lei Chau project from Wang On for HK$554.8 million.
The appraised market value of this latest project was HK$2 billion as of 30 June, and market sources put the project’s total value in a range of HK$2.65 billion to HK$3.2 billion. Sources familiar with the transaction indicated that the Wang On-APG joint venture is acquiring the stake at a rate of HK$14,875 per square foot of gross floor area, or around the same price that Wang On and CIFI originally paid when assembling the project.
In unaudited operating statistics released Tuesday, CIFI reported that its contracted sales for the first eight months of 2022 totalled RMB 94.3 billion (now $13.6 billion), down 47 percent from the year-earlier period. Last week CIFI’s shares fell by 14 percent after the developer announced plans to raise HK$622.57 million from a private placement to refinance debt and fund its operations.
King’s Quest
In late 2020, CIFI and Wang On acquired the 1982-vintage building at 101 King’s Road from Sing Pao Investment, a company controlled by the children of Sing Pao Daily News founder Ho Man-fat, for HK$1.7 billion under a 60:40 joint venture. The partners merged the site with a parking lot at 111 King’s Road acquired from Southeast Asia Properties for HK$180 million.
CIFI had made plans to redevelop the 12,695 square foot (1,179 square metre) site into a residential project with commercial space. The redevelopment is in the demolition stage and is expected to be completed in 2026, the company said in a Tuesday filing with the Hong Kong stock exchange.
CIFI chairman Lin Zhong
The current plan to redevelop the combined site into a 28-storey residential building with one basement level was approved by the government in May 2021. The total gross floor area for the project is 128,896 square feet, with 123,082 for residential and 5,814 for retail.
The net proceeds of HK$681 million from the disposal will be applied to the general working capital of the group, CIFI chairman Lin Zhong said in the filing. A representative for the company declined to comment further on the deal when contacted Tuesday by Mingtiandi.
New homes in Fortress Hill, situated between the Causeway Bay and Quarry Bay commercial districts, are mainly dominated by small flats, with each home selling for HK$8 million to $9 million, according to Alex Leung, senior director at CHFT Advisory and Appraisal. He expects the new project to provide about 300 new residential units.
“We cannot rule out the possibility that Wang On Properties may sell its share to APG and provide services as the asset manager with a management fee, a structure we last saw in the sale of its Ap Lei Chau residential site earlier this month,” Eric Chong, director of capital markets research at Savills told Mingtiandi.
Under the terms of that deal, Wang On Properties agreed to sell a building at 128-130 Main Street on Ap Lei Chau island to its 50:50 joint venture with APG for HK$554.8 million, with the partners planning to redevelop the property and an adjacent site already held by the JV into a single mixed-use project.
The combined properties at 120-130 Main Street represent two of the five “seed projects” under the Wang On-APG JV, which was announced last November and will invest up to HK$4.6 billion acquiring residential properties in the city for redevelopment and future sale.
Reversal of Fortune
After partnering on projects with some of Hong Kong’s key developers, CIFI has hit a rocky stretch characteristic of many mainland property firms during the ongoing crisis.
Fitch Ratings in April cut its outlook on CIFI from stable to negative, citing the company’s higher-than-expected leverage, continued sales pressure due to China’s COVID-19 resurgence and the associated social restrictions, and increasing risks at CIFI’s JV projects, including with partners that had delayed releasing their audited financial results.
CIFI previously partnered with Wang On on the joint development of the Maya by Nouvelle luxury residential project in Kowloon’s Yau Tong area, announcing the tie-up nearly four years ago. In 2017, CIFI agreed to jointly develop a project in Shanghai with blue-chip developer Henderson Land.
Note: this story has been updated to include fresh information on the price per square foot paid by the buyers.
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