Capping a more than nine-year process, Hong Kong-based Biel Crystal has acquired the last piece of a prime site in Kowloon East’s Kwun Tong area, paving the way for a 39-storey tower.
On 12 April the company took full ownership of the Yip Fat Factory Building 1 at 75 Hoi Yuen Road in an auction under Hong Kong’s compulsory sale ordinance, giving it control of the last of three buildings needed for the company to begin developing a 720,000 square foot (66,890 square metre) commercial project just a few doors from the Kwun Tong MTR station.
Through the auction, Biel Crystal, which is controlled by tycoon Yeung Kin-man and his wife, Lam Wai-ying and is known as one of the biggest producers of glass for iPhones and other devices, bought up the few rooms it did not yet own in the 45-year-old building in a transaction which valued the industrial structure at nearly HK$2.4 billion ($299 million).
The compulsory sale, which was managed by Savills, follows two similar transactions which gave Biel Crystal ownership of the adjoining Yip Fat Factory Building 2 on Hoi Yuen Road, and the Good Year Industrial Building on How Ming Street, with the value of the three buildings at the time of their respective compulsory sales totalling HK$5.1 billion.
With the acquisition completed, Biel Crystal is now ready to consolidate its three properties next to Sun Hung Kai Properties’ APM mall, with the glass manufacturer having received conditional planning approval in May 2022 to build a Ginza-style commercial development.
Ginza Building on the Way
“According to Biel’s proposal to the Metro Planning Committee in late 2021 (which was approved in May 2022), the lower levels of the project are designed for retail and F&B, while the upper floors would be used for offices,” Alex Leung, chief surveyor at CHFT Advisory and Appraisal Ltd told Mingtiandi.
He noted that, “Headline rents for The Millennity, a brand new office block in Kwun Tong, are in the region of HK$28 per square foot per month. For retail units on upper floors, the rents could range from HK$35 to HK$45 per month.”
Leung added that before proceeding with its plan, Biel needs to apply for a modification of the land rights to allow for commercial use.
Combining the two Yip Fat Buildings on Hoi Yuen Road with the Good Year Industrial Building on How Ming Road gives Biel a nearly rectangular plot, marred only by the nine-year-old Wang Tze Building at the intersection of Hoi Yuen and How Ming, which cuts a corner out of the site.
In 2010 Hong Kong lowered the threshold for investors owning the majority of the space in ageing buildings to apply for a forced auction of the remaining pieces of the buildings under its compulsory sale ordinance from 90 to 80 percent to speed up redevelopment. While this eased the path for Biel Crystal to consolidate the Kwun Tong site, the process still required nearly a decade.
In 2014, Biel Crystal filed for a compulsory sale of Yip Fat Factory Building 2 after having secured 82.3 percent ownership. In December 2017 the company acquired the remaining space in the building through an auction which valued the structure at HK$1.6 billion.
Just over one month ago, Biel Crystal bought out the remaining space in the Good Year Industrial Building through a compulsory sale which valued the entire asset at HK$1.128 billion.
For the Yip Fat Factory Building I, Biel Crystal had acquired around 84 percent ownership as early as 2018 when it first applied for a compulsory sale. In April 2022, the Lands Tribunal approved a compulsory auction at a reserve price of HK$2.349 billion.
Pawling Limited, a subsidiary of Sun Hung Kai Properties which then owned 2.8 percent of the Yip Fat Factory Building I, attempted to block that sale in a legal action which claimed that the property should be considered an industrial site, and thus the 80 percent threshold for forced sales did not apply and the sale order should not have been issued.
Sun Hung Kai’s attempt to block the compulsory sale was, however, overruled by the Land Tribunal in October paving the way for last week’s auction.
Getting Active in Kwun Tong
During March The Millennity, which just a few doors away from Biel’s upcoming project, scored a major office leasing win when a division of Deloitte leased two office floors totaling 38,800 square feet at a rent of HK$28 per square foot per month, according to JLL.
A number of office leasing deals were signed in Kowloon East during the first quarter as the market revived and occupiers jumped on bargain rates.
“This rise in demand can be attributed to the removal of social distancing policies and the reopening of the border with mainland China.” said CHFT’s Leung.
Despite that upswing in activity, a report released by Cushman & Wakefield last week showed Kowloon East office rents sliding 5.8 percent during the first quarter compared to a year earlier, although vacancy fell from 24.6 percent at the end of 2022 to 23.8 percent as of 31 March.