Henderson Adds to Kowloon Pipeline with Acquisition of Tsim Sha Tsui Building

Henderson Land has secured full ownership of an ageing building in the heart of Hong Kong’s Tsim Sha Tsui district, as the developer continues to build out its presence in Kowloon.

Two months after winning approval from Hong Kong’s Lands Tribunal for the forced sale of Block B of the storied Champagne Court, the Hong Kong-listed builder acquired the remaining units in the building as the sole bidder in Hong Kong’s first compulsory sale auction of the year, according to local media accounts.

Henderson, which has a history of snapping up properties through auctions under Hong Kong’s regimen for compulsory sale for redevelopment, intends to redevelop the property into a 23-storey commercial building, according to preliminary plans filed as part of the compulsory sale application.

However, with Hong Kong’s commercial property market mired in a protracted slump, the October 2022 appraised value of HK$1.73 billion ($221 million) on which the auction was based is likely to exceed current market valuations, challenging the economics of the project as office demand in the Asian financial centre is expected to remain sluggish this year.

“The commercial real estate market has experienced a slower-than-expected recovery in 2023. Negative carry deepened, and investment appetite halved, hitting a 15-year low as financing costs reached a 22-year high. Overall property demand is expected to see moderate growth in 2024,” Marcos Chan, head of research at CBRE in Hong Kong said in a report this month, adding that citywide office rents are expected to come down another 5 to 10 percent in 2024.

Once Kowloon’s Tallest Building

Henderson began acquiring units in the 67-year old building in 2011 and reached the 80 percent threshold to apply for a compulsory sale in 2019. The company then applied to the city’s Lands Tribunal in August 2020 to force a sale of the portion of the building not yet under its control at the appraised value.

Located a six-minute walk from the Tsim Sha Tsui MTR station at 16-20 Kimberley Road, a new development on the site can span up to a gross floor area of 147,396 square feet (13,694 square metres), with Henderson’s plan for the property including shops on the ground and second floors, topped by a third floor podium garden. The fourth through twentieth floors would be for office space, with a restaurant on the 21st floor.

However, with Hong Kong’s commercial property market worsening since Henderson submitted those plans in its compulsory sale application, the company has kept its options open, with Henderson executive director Augustine Wong telling local media that the company has yet to finalise a plan for the property and is considering various redevelopment options, including office, hotel, or “Ginza-style” commercial space.

While Henderson has acquired Block B, one of two adjoining buildings which constitute Champagne Court, market sources also indicate that the developer has been acquiring units in the adjacent Block A and intends to redevelop the combined property. With Block B located next to Henderson’s 492-key Mira Hong Kong hotel, the company has the opportunity to leverage Champagne Court’s site to enhance the value of its hospitality asset.

Constructed in 1957 and once known for its vice dens, Champagne Court is now a hub for photo equipment shops. The land on which the property sits was purchased by the late tycoon Henry Fok Ying Tung in 1954 and built into what was Kowloon’s tallest building at the time, according to local media reports.

Compulsory Sale King

Henderson’s redevelopment plans for Champagne Court come as the developer has been boosting its presence in Kowloon through a string of compulsory sales.

Last month, the developer acquired a site at the junction of Liberty Avenue and Victory Avenue in Kowloon’s Ho Man Tin area at a reserve price of HK$355 million, with plans to develop a residential project.

That purchase came three months after Henderson acquired four old buildings on 177 to 191 Tai Kok Tsui Road in West Kowloon at a reserve price of HK$697 million. The company intends to redevelop that site into 140,000 square feet of residential units constituting the seventh phase of the company’s Square Mile mixed-use project in the area.

In June 2023, the company purchased the last of four adjoining buildings in Kowloon’s To Kwa Wan neighbourhood, bringing the combined value of the properties acquired through the four compulsory sales to HK$4.2 billion. After consolidating the sites, Henderson expects to develop a 382,000-square-foot project on the plot.

Beyond Kowloon, the company made a splash in September 2023 when it teamed up with competitor Swire Properties in the largest compulsory sale acquisition in Hong Kong’s history, with the partners buying a set of ageing buildings in the Quarry Bay area at a record-breaking valuation of HK$6.3 billion ($806 million). The companies plan to transform that site into a 487,213-square-foot residential project.