Henderson Land and Friends Seek $6B in Financing for Kowloon Mega-Project

Hong Kong-listed real estate developer Henderson Land is leading a consortium of property firms in the city in an effort to raise about HK$46 billion ($6 billion) via bonds and loans, according to sources cited by Bloomberg. to push forward a project in Hong Kong’s Yau Tong area that would be the city’s largest residential development in over 20 years,

Henderson along with its partners is seeking the financing for the settlement of land premiums and development costs associated with the 6,500 home project around Yau Tong port, which is 22.8 percent owned by the blue-chip developer.

The project, which was approved by the Town Planning Board in early 2013, has faced a rocky development process as the group seeks to transform a former shipyard into a huge residential site.

Heavyweight Developers Expect to Secure Cash by June

Now, the consortium which currently is said to include, in addition to Henderson, Sun Hung Kai Properties, Hang Lung Development, Wheelock Properties, Central Development, and New World Development is in talks with banks to raise financing which the group expects to secure by next June, according to local media reports.

People with knowledge of the matter have said that no final decisions have been made yet regarding the financing package, however, should the funds be raised, the consortium would be in line to a total of 6,500 apartments, more than half the size of the 12,698-home Taikoo Shing development in Hong Kong’s Quarry Bay.

The first two phases of the project, the entirety of which have already been approved by the Hong Kong Buildings Department, will provide around 6,200 homes in 30 residential towers, with total GFA to be built expected to reach up to 4,088,000 square feet (379,787 square metres).

Gathering Funds for a 1.9M Square Foot Project

According to media reports from 2013, a consortium planning the project was then comprised of eight developers, including Henderson Land, Sun Hung Kai Properties, Hang Lung Development, Swire Properties, Wheelock Properties, Central Development, Moreland and Fu Tai Enterprises.

However, the new developers list revealed by Bloomberg showed that Swire Properties, Moreland and Fu Tai Enterprises have left, while New World Development has joined as a new member of the group.

“We believe this CDA development will accelerate the transformation of Yau Tong Bay from a traditional industrial district into a major residential cluster,” said Reed Hatcher, Head of Research for Hong Kong at Cushman & Wakefield, referring to the project under the Hong Kong government’s Comprehensive Development Area nomenclature for master-planned developments under the city’s planning system.

Initial Phases to Include 30 Residential Towers

According to Hatcher, the first phase of the project is located at Cha Kwo Ling Road, opposite the CCC Kei Faat Primary School in Yau Tong. This initial undertaking is designed to yield 12 residential buildings that would provide up to 2,800 homes totaling 1,934,000 square feet of space.

The second phase of the site, which is located less than a kilometre down that coast at the junction of Ko Fai Road and Cha Kwo Ling Road, is approved for construction of 18 buildings divided up into as many as 3,400 homes.

Apart from the 2,027,000 square feet of homes, the second phase of the project will also provide 124,000 square feet of retail and recreational facilities.

Ricky Wong, Executive Director at Wheelock and Company, said last September that although the Building Department has approved a part of the construction plan, the developers have yet to apply to the government regarding the procedures and land premiums necessary for converting the sites from industrial to residential use. Savills has estimated that land premium for repurposing the site will reach HK$16 billion to HK$20 billion considering its waterfront views and proximity to the MTR Yau Tong station.

“Yau Tong Bay consists of various land parcels that are mainly held by Henderson, Wheelock and other landowners for many years. These lands are not newly acquired from government land sales. Some of these lands were used for storage, go-down, and industrial purposes,” said Thomas Lam, senior director at Knight Frank, explaining the current situation of the properties that the consortium hopes to redevelop.

Yau Tong Joins Polite Society

Yau Tong, once a gritty industrial area in southeast Kowloon, has demonstrated its popularity with housing developers through a pair of 2018 land sales.

In May of this year, Sino Land and CSI Properties teamed up to purchase the development rights for a 43,400 square foot in Yau Tong from the MTR Corporation. The price of the winning bid wasn’t officially disclosed, however, local media reported that the developers paid a land premium of over HK$1.5 billion for the residential site.

Three months later, a subsidiary of China Poly Group in August drew attention to the Yau Tong property market again as it purchased a 39,708 square foot site for HK$3.3 billion. The plot is permitted to build around 480 units of housing totalling some 297,100 square feet.

With that site suffering from significant construction challenges, it still attracted a field of ten property developers including Sun Hung Kai Properties, CK Asset Holdings, New World Development, Henderson Land Development and other Hong Kong companies.