Stan Group has applied for the compulsory sale of a 50-year-old industrial building in Hong Kong’s Mongkok district, according to an account in the Hong Kong Economic Times.
The Hong Kong investment group, which manages a HK$60 billion ($7.7 billion) property portfolio in partnership with founder Stan Tang’s family, is closing in on the China Paint Building after having taken its ownership of the property above the 80 percent threshold necessary to apply for a compulsory purchase under Hong Kong regulations.
The company’s move to force a sale follows a trend among some Hong Kong developers of buying up older buildings piece by piece as a way of securing new sites amid a scarcity of available plots in the city.
Readying for a 72,000 Sq Ft Project
Should the application for the forced sale be successful, Stan Group will be able to buy up the remainder of the 1969-vintage building through a public tender, allowing it to redevelop the property’s 8,000 square foot (743 square metre) site into a residential project of up to 72,000 square feet.
Located at 1163 Canton Road in one of the Kowloon peninsula’s most densely populated neighbourhoods, on an en-bloc basis, the property, according to a third party valuer’s report, has a current value of HK$330 million ($42 million) while the eighth floor is already the home of Stan Group’s headquarters.
The 9-storey property is a seven minute walk from Prince Edward MTR station and within ten minutes’ walking distance of Mongkok MTR station in an area dominated by industrial and residential buildings.
Waiting for the Right Time to Buy
Prior to the compulsory sale application being made, Stan Group, the holding company for the youngest son of Hong Kong shop king Tang Shing-bor, owned 85.7 percent of the building after the elder Tang had purchased the upper eight floors of the property for HK$206 million in 2011.
The China Paint Building’s ground floor shop units, which are valued at HK$71 million, are said to be owned by individuals related to Hong Kong investment group CNT.
Stan Group is seeking to add the Mongkok project to its portfolio of residential, commercial and industrial properties in Hong Kong, which Tang has built up since he founded the group in 2014. The company’s assets, which are concentrated in Kowloon and the New Territories, as of December last year included six restaurants, a spa, a fitness centre and eight hotels.
Developers Close in On Compulsory Sales
Stan Group’s bid for a forced sale comes amid a flurry of moves by developers to build up ownership of buildings for compulsory sale despite an overall market slowdown.
Just last week, New World Development acquired a set of flats in the upscale Kowloon Tong neighbourhood for a combined HK$458 million, bringing its ownership of the building over the 80 percent threshold required for the developer to file for a compulsory sale.
In August, New World Development moved a step closer to acquiring full ownership of the Hong Kong State Theatre when it acquired three shop units in the building for HK$188 million, paying a 132 percent premium over a third-party valuation of the property.
Just days before that New World transaction,Henderson Land took another step toward consolidating the site a one million square foot project in Kowloon when it bought the remaining 20 percent of the tenement buildings at 1-21C Whampoa Street and 80-86 Baker Street in Hung Hom it did not already own in a compulsory sale.
Compulsory sales, which apply only to buildings aged 50 years or older, were introduced under the city’s Land Ordinance in 1999 to encourage the redevelopment of obsolete assets.