Hysan Closes In on $958M Causeway Bay Project

Hong Kong’s Hysan Development earlier this month took a step towards adding another project to its Causeway Bay kingdom with the reported purchase of a unit in an aging building which backs against its Leighton Centre commercial tower and opens the door for a new HK$7.5 billion ($958.1 million) commercial project in the city’s busiest shopping district.

A buyer linked to the developer controlled by the Lee family is said to have purchased a second-floor unit in 9A Sharp Street East for HK$24.28 million, which adds momentum for a compulsory sale that could give Hysan full ownership of the 66-year-old property. The same buyer had in 2020 applied for a compulsory sale of 9A and 9B Sharp Street East and now holds an 83.3 percent ownership in the site.

Should the developer succeed in consolidating the site and merging it with the six neighbouring properties it is reportedly acquiring in the area, Hysan — the dominant commercial landlord in Causeway Bay — could add 216,000 square feet (20,067 square metres) of floor area to its property portfolio, according to Alex Leung, senior director at ​​surveying firm CHFT Advisory and Appraisal.

Hysan, which dominates the commercial market in Causeway Bay with its 4.5 million square foot (418,000 square metre) portfolio concentrated in the area, said in its 2020 annual report. “We will continue to maintain a strategic focus on the Lee Gardens area of Causeway Bay, our primary base, while actively seeking other investment opportunities beyond our core geographical footprint”.

Causeway Bay King

When Hysan applied for a compulsory sale of the Sharp Street East property two years ago, three other compulsory sale applications for nearby plots were submitted by unnamed parties, which market sources also linked to Hysan. The adjacent properties, located at 5 Sharp Street East, 10-12 Matheson Street and 16 Matheson Street, were at least 83.3 percent-owned by their applicants.

In April of last year, the 1971-vintage property at 5 Sharp Street East was the first of four plots to be acquired through a compulsory sale, with local news reports naming Hysan as the likely buyer.

Although the applications for the three compulsory sales were made by different limited companies, local reports at the time noted that the registered directors for the three entities shared Koo Ching Fan and Lo Tai On as directors — with those names matching with directors of Hysan’s subsidiaries for the financial year that ended 31 December 2019 and in the continuing period up to 20 February 2020.

The same group of applicants was also said to be acquiring neighbouring properties at 7 to 9 Sharp Street East, as well as 14 and 18 Matheson Street, Guandian reported.

Should Hysan win approval for full ownership and redevelopment rights for all seven properties, it would be set to build another office-and-retail project in the neighbourhood, just a few minutes’ walk from both the Leighton Centre, its commercial complex at 77 Leighton Road, and Causeway Bay MTR station.

“A composite retail and office building or Ginza-type building would be optimal (for the area),” said CHFT’s Leung, who added that the total estimated value of the new project could be as much as HK$7.5 billion upon completion.

“In comparison to the site at Caroline Hill Road, which sold for HK$18,374 per square foot to Hysan and Chinachem Group in May 2021, we believe the seven consolidated sites could fetch between HK$17,000 and HK$18,000 per square foot in terms of accommodation value,” Leung said.

Empire Expansion

“The consolidation and redevelopment in Causeway Bay surrounding Hysan’s Lee Gardens developments could be an expansion of the developer’s commercial empire, which would strengthen its rental and leasing management businesses in the area,” said Vincent Cheung, managing director at local brokerage firm Vincorn Consulting.

The plot at 9A and 9B Sharp Street East is less than 500 metres (546 yards) from the Caroline Hill Road site that Hysan and joint venture partner Chinachem Group won with a HK$19.8 billion bid last year for a “large-scale commercial project in the heart of Hong Kong”, according to chairman Irene Lee at the time.

Hysan’s Causeway Bay kingdom also includes a set of commercial and retail towers dubbed Lee Gardens One, Two, Three, Five and Six and the Hysan Place mall and office building.

On the residential front, Hysan and the privately held Empire Group last month agreed to acquire respective 25 percent stakes in Henderson Land’s To Kwa Wan residential project for a combined HK$6.1 billion. The project, scheduled for completion between 2025 and 2026, could provide about 1,150 homes with a gross development value between HK$16 billion and HK$17 billion.

Outside of Hong Kong, Hysan also holds a 24.7 percent stake in Hang Lung Properties’ Grand Gateway 66 mixed-use development in Shanghai.