Tycoon Lo Yuk-sui’s Century City Consolidates Kowloon Site for Hong Kong Condo Project

Companies controlled by Hong Kong tycoon Lo Yuk-sui have acquired a tenement building in Kowloon’s Cheung Sha Wan area with plans to build 47,307 square feet (4,395 square metres) of new apartments in the redeveloping neighbourhood, despite a home sales slump which property consultants are describing as the worst since the Asian financial crisis nearly 30 years ago.

P&R Holdings, a 50:50 joint venture between Regal Hotels International Holdings and Paliburg Holdings, both units of Lo’s Century City International Holdings, acquired the last remaining units in 291-293 Castle Peak Road at a compulsory auction on Monday which valued the building at HK$120 million ($15.4 million).

The forced sale under Hong Kong regulations that allow developers to buy out minority owners in properties where they hold more than 80 percent of the space paves the way for Lo’s team to begin redeveloping a combined site that they began acquiring nearly six years ago.

The newly acquired 2,880 square foot site is adjacent to 301-303 Castle Peak Road, which the Century City units bought out in 2018, with a company representative pointing to a merged 5,257 square foot future for the plots, pending official approval.

“The project has a high chance of being developed in conjunction with the adjacent site,” Terence Wai, director of Century City unit Regal Estate Agents Limited said in a statement on Monday. “Our preliminary plan is to develop small to medium-sized residential units, though the details remain subject to further discussions with government departments.”

Historic Building

The Century City JV acquired the remaining units in 291-293 Castle Peak Road at a 13.9 percent discount to the property’s HK$139.4 million valuation when it had applied for the compulsory sale in December 2021. The planned project is within a five-minute walk of Cheung Sha Wan MTR station at the junction of Castle Peak Road and Fat Tseung Street.

In its most recent annual report, Paliburg indicated plans to develop the residential project on the adjacent sites, despite that scheme having become more challenging in 2019 when Hong Kong’s Antiquities and Monuments Office classified 301-303 Castle Peak Road as a grade II historic building, requiring certain parts of the property be preserved.

Century City said it is currently in discussions with authorities on a conservation proposal for the proposed new development.

P&R reached the 80 percent threshold for compulsory sale of 291-293 Castle Peak Road in 2019, allowing the developer to apply to Hong Kong’s Lands Tribunal to force owners of the remaining units to sell at the appraised value.

Regal Hotels, which serves as the hospitality business of Lo Yuk-sui’s HKEX-listed Century City, operates a portfolio of 19 hotels totaling 8,200 keys, most of which are located in Hong Kong and mainland China under the Regal and iclub brands. Century City’s property development, investment and construction businesses are conducted through Paliburg.

Lo is the second eldest son of the late property tycoon Lo Ying-shek, who founded HKEX-listed property firm Great Eagle Holdings in 1963. Great Eagle is currently chaired by Lo Ka-shui, the patriarch’s third eldest son, while fourth son Vincent Lo is the chairman of mainland China-focused developer Shui On Land, which built the Xintiandi project in Shanghai.

Century City is the sponsor of HKEX-listed hotel trust Regal REIT, and also controls mainland China property development unit Cosmopolitan International Holdings.

Housing Market Slide

Century City’s acquisition comes just over a week after Hong Kong developer Wheelock Properties acquired an industrial building in the Wong Chuk Hang area for HK$728 million through compulsory sale auction with plans to redevelop the asset into a 117,500 square foot “industrial and trade project”.

While compulsory sales have traditionally rewarded patient developers with opportunities to acquire new sites at a discount, no applications were filed for new forced auctions so far this year, as declining revenue from home sales and commercial rents helped trigger profit plunges at some of the city’s largest builders.

2023 saw just five applications for compulsory sale, the lowest since 2004 and well below the average of 29 applications between 2019 and 2021, according to JLL.

The drought in compulsory sales comes as home prices in Hong Kong fell to a nearly eight-year low in June, down 24 percent from their September 2021 peak according to data from Hong Kong’s Rating and Valuation Department, despite the government’s removal of cooling measures earlier this year. JLL expects mass residential capital values to decline 10 percent year-on-year in 2024.

“Home prices have dropped for three consecutive years since September 2021,” Joseph Tsang, chairman of JLL in Hong Kong said in a July release. “Such a sustained decline in home prices has not been witnessed since the price fall during the Asian financial crisis in 1997. It is imperative that we recognise and address the risks currently facing the housing market.”