Former Agile Project in Hong Kong’s Quarry Bay May Bring 15% of Acquisition Cost

A residential site in Hong Kong’s Quarry Bay area formerly owned by defaulted mainland developer Agile Group Holdings has been put up for sale via tender by the receiver, with the 50,000 square foot plot having been approved for development of a nearly 600-unit apartment project that has seen its value plummet amid Hong Kong’s housing slump.

Guangzhou-based Agile had paid HK$3.3 billion ($423 million) to acquire the adjacent parcels located a few minutes walk from Swire Properties’ Taikoo Place complex at 992-998 King’s Road and 2-16 Mount Parker Road, according to Savills, which is marketing the project, with the sites having since been consolidated into a single plot.

With the parcels having been acquired from 2017 through 2020, some analysts estimate that the project may now be worth as little as 15 percent of Agile’s reported acquisition costs, however, advisors to the sellers pointed to the location as a selling point.

“With scarce new residential supply in the urban areas of Hong Kong Island, coupled with its proximity to Taikoo Place, the development is expected to appeal to both owner-occupiers and investors, offering promising returns that investors should not miss out on,” said Tommy Chan, senior director of investment at Savills Hong Kong, which is managing the tender.

The sites had served as collateral for a HK$894 million mezzanine loan that carried an annual interest rate of 20 percent, which Agile’s main Hong Kong unit had borrowed from a pair of Hong Kong billionaires and an independent third party in June 2022, as China’s protracted property slump eroded the developer’s liquidity, credit rating, and access to financing. Agile defaulted on its offshore senior notes in May after failing to make interest payments.

High-Rise Apartments

Located a five-minute walk from both Quarry Bay and Tai Koo MTR stations, the site was approved in 2022 by Hong Kong’s Town Planning Board for the development of 592 residential units across a pair of high-rise towers totaling 29 and 33 storeys, with a maximum buildable gross floor area of around 448,000 square feet (41,621 square metres).

“In my opinion, the value of the project on an “as-is” basis, which reflects the government’s approval for redeveloping the project but excludes land premium to release the existing government lease restrictions, is only around HK$500 million to HK$600 million, though high acquisition costs were incurred by the developer,” Alex Leung, chief surveyor at Hong Kong-based CHFT Advisory and Appraisal told Mingtiandi.

The proposed project also features four levels of parking and a five-storey podium with clubhouses, retail space, and a nursery or elderly care facility. Expressions of interest for the site are due by noon on 2 October.

“The Site has completed the compulsory sale and site amalgamation procedures,” said Raymond Wan, chief senior director of investment at Savills Hong Kong. “The first phase of site formation has also been completed, and the Lands Department has already issued the Basic Term Offer. Buyers will not need to worry about complex planning and land grant processes, as they can seamlessly proceed with the subsequent development upon acquisition of the site.”

Agile acquired the 992-998 King’s Road plot in December 2017 for HK$400 million and consolidated three adjacent parcels into 2-16 Mount Parker Road through a set of transactions, including paying HK$452 million for the 2-8 Mount Parker Road portion in October 2020. The site also includes 1,394 square metres of government land.

Continued Losses

The tender comes as Agile on Tuesday warned of an attributable net loss of RMB 9.3 billion to RMB 9.8 billion for the first half of the year, after logging two consecutive years of losses in 2022 and 2023.

The company attributed the shortfall to a continued decline in average selling price of properties, lower profit margins of completed projects, project and asset impairments, as well as losses from the sale of joint ventures and associates.

Following its default in May, Agile in June appointed advisory firm Alvarez & Marsal Corporate Finance Limited as its financial advisor and Sidley Austin as its legal advisor to facilitate dialogue and explore solutions with offshore creditors.

Last week, an entity linked to Agile chairman Chen Zhuolin sold a three-bedroom flat in the Hamburg Villa apartment block located at 8-10 Eastbourne Road in Kowloon Tong for HK$14.3 million, representing a 54 percent haircut from the HK$31 million price paid for the apartment in 2018, according to an account from the South China Morning Post.

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.”