Kaisa Group Buys New Territories Site for HK$3.5B to Expand HK Foothold

Kaisa Group Holdings has expanded its foothold in Hong Kong as the Shenzhen-based developer beat out 14 other bids to take home a site in the New Territories, according to an announcement by Hong Kong’s Lands Department late Monday.

The Hong Kong-listed builder agreed to pay HK$3.5 billion ($450 million) for the right to build up to 54,152 square metres (583,000 square feet) of homes on the butterfly shaped site between Castle Peak Road and Tuen Mun Road near the east coast of Castle Peak Bay.

The site purchase, which follows just two months after Kaisa acquired a redevelopment project in Hong Kong’s Sai Ying Pun area, has been taken as a sign of expansion ambitions by the developer which had filed for bankruptcy in 2016 after an earlier series of bond defaults.

Outbidding Hong Kong’s Largest Developers

Kaisa’s winning bid for the 13,538 square metre Tuen Mun site is equal to approximately HK$6,014 per square foot of built area, a figure which approaches the top end of analyst predictions for the property.

To triumph in the tender, the developer chaired by Kwok Ying Shing shoved aside bids by some of Hong Kong’s largest developers, including Sun Hung Kai Properties, Wheelock Properties, Henderson Land Development and CK Asset Holdings.

Also submitting bids were Kerry Properties, Sino Land, Wing Tai Properties, K Wah International and Far East Consortium International, along with a number of other players.

The successful bid marked the first time that Kaisa had purchased a Hong Kong site through a government auction, and only the second purchase outside of China ever for the Guangdong developer.

Defaulting Developer on the Rebound

Kaisa had defaulted on offshore bonds and numerous other debts in 2015 after Kwok was detained over a corruption scandal in Guangdong in late 2014. After the company’s chairman was eventually released, Kaisa spent years rebuilding its balance sheet and credit rating.

Late last week, just days before the successful tender was announced, the company announced that it is issuing $500 million in senior notes due in 2025. Those bonds, which carry an interest rate of 10.5 percent, were rated as B2 by credit agency Moody’s Investors Service.

The developer’s return to the international credit markets coincides with Kaisa reaching beyond the mainland borders for the first time in November when it purchased an aging building at the intersection of Eastern Street and Des Voeux Road West in Hong Kong.

According to a Hong Kong Economic Times account citing Land Registry records, Kaisa spent a total of over HK$500 million buying up 1-9 Eastern Street, giving it rights to a 3,924 square foot site which can be redeveloped into around 31,400 square feet of new property.