SEA Holdings to Sell Half-Stake in Repulse Bay Luxury Project to Hon Kwok Land

SEA Holdings is selling a half-stake in its luxury residential project in Hong Kong’s Repulse Bay area just 10 months after the local developer picked up the site for HK$1.19 billion ($152.3 million) at a government auction.

The HKEX-listed builder agreed to form a joint venture in which property firm Hon Kwok Land will take ownership of 50 percent of the development on South Bay Road, SEA Holdings said in a filing with the Hong Kong stock exchange.

In return for its stake, Hon Kwok Land will pay a nominal consideration of $1 and reimburse SEA Holdings for 50 percent of the venture’s shareholder loans in the amount of HK$387.1 million.

“The joint investment and development of the project are in accordance with the business strategies of the group in building up its prime property portfolio and pursuing sound investment opportunities,” SEA Holdings chairman Jesse Lu said in the filing.

Billionaires’ Hideaway

In February, SEA Holdings bested eight competing bids to gain the right to develop up to 19,055 square feet (1,770 square metres) of luxury housing on the site near Repulse Bay beach in one of the most exclusive neighbourhoods on Hong Kong Island’s south side.

The winning bid of just over HK$62,355 per square foot of accommodation set a record for a residential site sold at government auction. Analysts attributed the price paid for the site, known as Rural Building Lot No.1203, to its location in a neighbourhood favoured by billionaires and movie stars and to the limited scale of the project — yielding four or five fully detached homes — which brought it within the budgets of a wider array of potential bidders.

Hon Kwok Land, whose controlling shareholder is HKEX-listed Chinney Investments, expects its participation in the project to help it enlarge its presence and replenish its land bank for development in Hong Kong.

“The JV arrangement will also provide synergies for the project, allowing Hon Kwok and SEA to share their resources, expertise and extensive experience in property construction and development,” Hon Kwok Land said in a separate filing.

Uncertain Climate

In June, SEA Holdings followed up its Repulse Bay purchase with the acquisition of another luxury residential site, paying HK$627 million to acquire full ownership of Loong Fung Terrace in the Jardine’s Lookout neighbourhood.

The company is developing up to 22,000 square feet (2,043 square metres) of luxury rental housing at the ageing residential block on Tai Hang Road, reversing an earlier plan to sell condos in light of an exodus of senior professionals and the city’s closed borders.

In a recent report, CBRE forecast transaction volume in Hong Kong’s residential market to remain sluggish, with higher interest rates continuing to weigh on sentiment and buyers taking a wait-and-see approach. Overall residential prices in October were down 10.5 percent in the year to date and 11.5 percent from their all-time high in September 2021.

In terms of the rental residential market, homeowners at newly completed projects may face pressure to lease out their properties amid the worsening economic environment, the agency said.