HKRI, CITIC Pacific JV to Invest Nearly $2B in Discovery Bay Expansion

A joint venture between developer HKR International (HKRI) and CITIC Pacific is planning to add a nineteenth phase to their master-planned Discovery Bay project on Lantau Island by investing HK$15 billion ($1.9 billion) to build 1,400 new homes.

The plans by Hong Kong Resort Company, a 50-50 joint venture between the two firms, were revealed four months after HKRI paid a HK$5.24 billion land premium to modify the designated land use for a 699,660 square foot (65,000 square metre) plot north of Discovery Bay to allow for “residential, commercial and other” purposes.

Having gained approval for its development plan in September, the project is expected to grow the residential portfolio of the developer controlled by Hong Kong’s Cha clan by 1.3 million square feet upon completion, according to HKRI’s most recent annual report.

The joint venture partners are betting on the new housing project as demand for homes continues to rise in Hong Kong, with mass market prices expected to increase as much as 3 percent in 2022, according to research published by property services firm Knight Frank last month.

Discovery Bay’s Eight-Year Plan

Discovery Bay, which covers 650 hectares (1,606 acres) on Lantau island and accommodates approximately 20,000 residents, is itself a 50-50 joint venture between HKRI and CITIC Pacific, the Hong Kong unit of China’s CITIC Group, which was established in 1979 with the support of former top mainland leader Deng Xiaoping as China’s first state-owned investment firm.

The Cha family first acquired Discovery Bay in 1977 and CITIC Pacific joined as a partner in 1994.

The joint venture company will build new homes on a plot in Yi Pak Wan, located in the northern extension of Discovery Bay near Poggibonsi, a luxury residential building on 3 Bayside Drive which HKR Company completed less than two years ago.

HKR Company would be boosting the site’s plot ratio to 1.86 from the current 0.16, said a representative from HKR International, who noted that the project would provide buyers with a range of unit layouts to choose from, including studios, three to four-bedroom flats, and villa homes.

Units at the new project could sell for over HK$25,000 per square foot of floor area upon completion, said Vincent Cheung, managing director of local property consultancy Vincorn. Other analysts were more conservative in their estimate, with Alex Leung, senior director at local ​​surveying firm CHFT Advisory and Appraisal Limited, forecasting selling prices at the project would average around HK$16,000 per square foot, given that the per-square-foot selling prices for flats at the nearby Poggibonsi project fell in the HK$14,000 to HK$17,000 per square foot range.

“Discovery Bay is served by a comprehensive transport network that includes bus services to Tung Chung MTR Station, Sunny Bay MTR Station and Hong Kong International Airport,” said the HKRI representative. Residents would also benefit from improving transport connectivity in the area, with a new MTR station in Siu Ho Wan scheduled for completion in 2026.

HKRI estimates that the joint venture project would be completed in phases within the next eight years, with pre-sales for the first set of homes to begin in 2023.

HKRI Bulks Up

HKRI has been stocking up its project pipeline over the thirteen months, including acquiring a project in Hong Kong Island’s Sheung Wan area last March for HK$367.3 million.

In December of 2020, HKRI purchased the United Daily News Centre, a 16-storey office tower in Kowloon for HK$310 million, with plans to redevelop the property into a mixed-use complex combining residential and commercial space.

HKRI recorded HK$1.9 billion in revenue in the six-month period which ended 30 September 2021, representing a 20.7 percent decline from the same period in the preceding year, though the developer noted it had HK$874.6 million in contracted but unrecognised property sales at the time.

Within the same half-year period, the developer sold a total of 39 units at its Poggibonsi and Il Picco residential projects in Discovery Bay. This came after HKRI had raked in HK$771 million in sales proceeds at both projects in the year that ended March 2021, according to the developer’s annual report.

As debt-laden mainland developers have shied away from land sales in recent months, HKRI took advantage of the lull to secure a residential site in Shanghai’s Songjiang area in late November with a RMB 830.4 million ($130.3 million) bid, as part of what it describes as its ongoing interest in expansion opportunities in the Yangtze River Delta region.