HK-Listed Builder Buys Mong Kok Residential Site for HK$330M

Hong Kong-listed developer Vantage International has agreed to acquire an apartment building in Mong Kok for HK$330 million ($42.6 million), according to a local news report yesterday.

The company, which is part of the Vantage Group alongside its Able Engineering Holdings listed affiliate, is said to be planning to demolish the existing property at 181-183 Sai Yee Street to make way for a residential project with a gross floor area of up to 31,445 square feet (2,921 square metres).

Should Vantage succeed in redeveloping the site, the company would join a number of competing builders who have acquired Mong Kok properties in recent months as property prices in the mid-market Hong Kong neighbourhood fall from recent highs.

Residential Project Provides 2% Yield

The report of the impending transaction comes after the seller, private investor Wong Suey-hoy, had last year appointed surveyors Cushman & Wakefield to market the property in an exercise which closed on 5 December 2019 with no sale ensuing.

The 3,310 square foot site six minutes’ walk from the Mong Kok MTR station is currently occupied by Kwai Wah Court, a nine-storey residential building with retail space on the ground floor.

The current owner is said to receive a combined rental income of approximately HK$530,000 per month from leasing out the apartments and shops in the building after buying the property in 1950 for HK$100,000

Vantage Holdings, which is led by Ngai Chun Hung, has yet to announce a transaction to the Hong Kong exchange, had not responded to inquiries from Mingtiandi by the time of publication.

Expanding Hong Kong Portfolio

The Hong Kong-listed firm is pursuing the purchase of 181-183 Sai Yee Street despite warning shareholders last month that it expects to record a net loss of HK$300 million for the year ending 31 March 2020. In a statement, the company attributed the loss to factors including a decrease in the fair value of its investment properties and a drop in revenue as a result of the COVID-19 pandemic.

Despite these financial challenges, the company has continued to build up its property investment portfolio in the city over the past two years.

Last April, the developer paid HK$140 million to purchase a luxury villa in Kowloon Tong after acquiring a villa in Shek O Village for HK$338 million in 2018.

Vantage picked up that pair of residential properties after it had spent HK$779 million in 2016 to acquire Kam Ying Court shopping centre and Tin Ma Court shopping centre in Wong Tai Sin from Link REIT.

Mong Kok Becomes Kowloon’s Bargain Bin

Vantage’s move to Mong Kok comes as developers have been ramping up activity in the district over the past two months amid a property slump that has driven down land prices across the city, including one of Kowloon’s more affordable neighbourhoods.

Just last month, Capital Group Development agreed to pay HK$467 million to pick up a residential site at the intersection of Soy Street and Shanghai Street in Mong Kok through a government auction. The developer won that plot at a price near the low end of the HK$420 million to HK$640 million price expectations which valuers had established for the land sale.

Four weeks prior to that tender, a Hong Kong registered entity linked to Shenzhen’s Kaisa Group acquired a residential site between Reclamation Street and Shanghai Street in Mong Kok for HK$85.9 million in a deal which undercut market estimates by 30 percent.

Earlier this year, local news reports tied mainland development giant Sino-Ocean Land to a campaign to consolidate a site for a 20,000 square foot residential project in the area after local entities scooped up 15 units at 25, 27 and 31 Yin Chong Street in Mong Kok for a combined HK$344 million in February.

For developers bidding on land in the mid-market Kowloon neighborhood, Mong Kok sites could offer an opportunity to mimic Henderson Land’s success with its 26-storey Aquila Square Mile residential complex one kilometre away.

On 24 May the blue chip developer opened up sales in the project at 18 Ka Shin Street in Tai Kok Sui by selling out 40 out of the 88 flats offered in the first batch of the 176,422 square metre development on the first day.

Betting on Hong Kong in the Long-term

Local developers such as Vantage may be encouraged to bet on bargain sites after seeing recently released official data for March which show that home prices in Hong Kong rose 0.4 percent from the month before.

Despite the COVID-19 pandemic putting pressure on the city’s economy, JLL’s senior director of capital markets in Hong Kong, Henry Mok, said in a recent report that demand for mass market residential developments, which would include projects in Mong Kok, are driven more the city’s economic fundamentals, while the city’s luxury residential market is more volatile and vulnerable to shifts in market sentiment.