Tycoon Edwin Leong’s Tai Hung Fai Completes $42M Purchase of $24M Kowloon Property

One of Hong Kong’s richest men is wrapping up a HK$324.7 million ($42 million) purchase of a Kowloon property now worth just over half that amount, thanks to the city’s rapidly declining housing market.

Tai Hung Fai Group late last week secured full ownership of a pair of ageing tenement buildings in Kowloon’s Sham Shui Po area, completing an incremental acquisition process begun earlier this decade which sees the property investment firm helmed by tycoon Edwin Leong acquiring the redevelopment project at a nearly 40 percent discount from its 2022 valuation.

At a compulsory sale auction managed by Savills on Thursday, the company acquired the remaining space it did not already own in Hoi Sang Mansion, located at 54 and 56 Fuk Wa Street, and the adjacent building at 58, 58A, and 60 Fuk Wa Street, at a reserve price of HK$183 million.

Tai Hung Fai is moving forward with its acquisition of the properties despite residential sites in Hong Kong selling for less than half of 2022 values, as home prices have fallen by more than a quarter from their peak three years ago. Tai Hung Fai had not responded to Mingtiandi inquiries by the time of publication.

Below Acquisition Cost

Having acquired most of its holdings in the properties in 2021, when housing prices were at their highest point, Tai Hung Fai plans to build a 25-storey residential tower on the site after forcing the sale of the remaining space it did not yet own in the buildings under Hong Kong’s compulsory sale law.

The company moved ahead with the forced sale after persuading the city’s Lands Tribunal to accept a valuation by property consultancy Savills that was 37 percent less than the figure used when Tai Hung Fai applied for the process just over two years ago.

“Mr. Charles Chan (of Savills Valuation and Professional Services Limited) had previously assessed the RDV (redevelopment value) of the Lots as at 11 August 2022 at HK$290,000,000 and as at 27 April 2023 at HK$227,000,000, which are higher than his latest assessment as at 4 July 2024 at HK$183,000,000,” Lands Tribunal member Alex Ng said in the judgment. “Nonetheless, given that property prices had been dropping and the property market was uncertain as at the valuation date, I share his view that land price had been dropping too.”

With home prices in Hong Kong having declined 28 percent from their September 2021 peak through 30 September, according to the latest citywide residential price index published by Hong Kong’s Rating and Valuation Department, Tai Hung Fai’s total acquisition costs now exceed the site’s reserve price by nearly 80 percent, with most of those costs having been incurred in September 2021 when the company acquired around 93 percent of the space in the buildings, according to Hong Kong Land Registry records.

“The total acquisition price of HK$324.7 million is equivalent to HK$8,329 per square foot of developable gross floor area, which is 77 percent higher than the reserve price for the auction,” said Bobby Mak, real estate valuer at Hong Kong-based CHFT Advisory and Appraisal.

The completed acquisition gives Tai Hung Fai a 4,620 square foot (429 square metre) site four-minutes’ walk from the Sham Shui Po MTR station at 54-60 Fuk Wa Street, between the junctions with Nam Cheong Street and Shek Kip Mei Street.

In June, Hong Kong’s Buildings Department approved Tai Hung Fai’s plan to develop 23 levels of residential space on the site, above a two-storey retail podium. The project is expected to yield 90 residential units and a gross floor area of just under 39,000 square feet upon completion.

Tai Hung Fai’s acquisition of the Kowloon site comes after local developer Soundwill Holdings in September walked away from a second auction for the Haven Court residential and commercial block in Causeway Bay, after the project’s redevelopment value fell below the reserve price set by the Lands Tribunal, with the administrative body having swatted down the company’s subsequent requests to adjust the auction reserve price downward.

After having applied for a forced sale of the 65-year old building in 2019, Soundwill had declined to place a bid for the property at the initial auction in April, with the HKEX-listed developer having subsequently applied for a reduction of the reserve price to “align with the current market value” of the project following a February appraisal which assessed the redevelopment value of the project to be HK$2.1 billion, marking a 13.4 percent decline from the asset’s HK$2.425 billion reserve value.

Asset Sales

Tai Hung Fai, which develops residential and commercial properties across Hong Kong and owns a portfolio of office, retail, and industrial properties, as well as several hotels and serviced apartments in the city, is acquiring the Sham Shui Po site after having sold or put up for sale a string of assets this year.

Leong, the sixth son of a former business partner of Hong Kong’s Jardine Matheson group, holds Tai Hung Fai privately and has a personal fortune of $3.3 billion, according to Forbes. That stash of wealth is down by around a quarter since Leong began acquiring his Sham Shui Po prize.

Last month, Tai Hung Fai began marketing a set of retail units valued at HK$400 million in the Kwai Chung Plaza in Kwai Chung, according to Savills, which is managing the marketing effort.

That same month, Tai Hung Fai sold a shop in Tai Po for HK$43 million and several units in the Eastern Centre industrial building in Quarry Bay for HK$67.5 million, according to local media accounts. Those disposals came just weeks after the company sold the 22nd floor in Tower Two of the Ever Gain Plaza industrial and office building in Kwai Chung to local bus operator Kwoon Chung Bus Holdings for HK$75.9 million.

In August, Tai Hung Fai reportedly sold the seventh floor of the South China Building, an office block located at 1 Wyndham Street in Central district, for HK$120 million.