Henderson Land and Swire Properties have moved a step closer to redeveloping a site in Hong Kong’s Quarry Bay with a joint venture between the two property heavyweights recently winning approval for an auction which would pave the way for a pair of residential towers.
Earlier this month Hong Kong’s Lands Tribunal approved an application by the joint venture to force a compulsory sale of the remaining space in 16 to 94 Pan Hoi Street and 983 to 987A King’s Road with the reserve price valuing the ageing buildings at HK$6.3 billion ($806 million).
After an earlier application to develop the site for commercial purposes was rejected in 2020, Swire and Henderson have since received approval from the Town Planning Board for a pair of residential towers above a retail podium which will measure 487,213 square feet (45,264 square metres) when completed. No date for the compulsory sale has been announced at this time.
With the joint venture having already acquired more than 90 percent of the total units in the target properties, Swire and Henderson are virtually certain to win control of the site under Hong Kong’s Compulsory Sale for Redevelopment rules, which allow developers to seek permission to force an auction of the remaining units in buildings older than 50 years, once they have gained more than 80 percent ownership.
Largest Compulsory Sale Ever
At the reserve price set by the Lands Tribunal, the remaining units in the building are valued at the equivalent of around HK$12,951 per square foot, according to Alex Leung, a senior director with CHFT Advisory and Appraisal.
While the buyers only need to ante up for the units in the buildings which they have not yet purchased, the deal sets a new benchmark for site acquisition through the city’s forced auction regime.
“At HK$6.3 billion, this should be Hong Kong’s largest compulsory sale transaction ever, if its successful,” according to Vincent Cheung, managing director at Vincorn Consulting and Appraisal. He added that the deal is valued at around HK$1.5 billion more than New World Development’s 2020 acquisition of the State Theatre in North Point.
Swire has now been a player in Hong Kong’s three largest compulsory sale approvals to date, according to Leung.
Earlier this year the company cancelled a scheduled compulsory sale for the Wah Ha Factory Building on Shipyard Lane in Quarry Bay which would have valued that property at HK$5.13 billion, after it acquired the remaining pieces of the project directly.
The next priciest compulsory sale was Swire’s acquisition of the Zung Fu Industrial Building, which is directly adjacent to the Wah Ha Factory Building at 1067 King’s Road, at a HK$5 billion valuation in 2022. Swire has said it plans to consolidate the two sites for development of a new commercial tower.
The Zung Fu Industrial Building site is within 100 metres of Swire’s One Island East office tower, while the Pan Hoi Street/King’s Road site is within 100 metres of the company’s Two Taikoo Place.
Quarry Bay Expansion
With this latest site within their grasp, Swire and Henderson are expected to develop a set of two residential towers of 28 storeys each above a 3-storey podium accommodating commercial space and a clubhouse, according to CHFT’s Leung.
About 368,300 square feet of the project will be dedicated to residential space, with the commercial area limited to about 72,400 square feet, according to the plans approved in May last year.
Swire and Henderson are splitting the project 50-50, according to their annual reports, with Swire also having applied last year for a compulsory sale of 9-39 Hoi Wan Street and 33-41 Tong Chong Street in Quarry Bay, which occupy a site in the heart of its Taikoo Place hub between the company’s East Residences and One Taikoo Place.
Should Swire win control of the Hoi Wan and Tong Chong Street properties, it would add a more than 20,000 square foot site to its Quarry Bay footprint.
Henderson and Swire have also been working together to buy up the Tor Po Mansion, an ageing building at 2A Finnie Street in Quarry Bay. With the two companies working to grow their footprints in the district, analysts see the Pan Hoi Street/King’s Road as part of that ongoing expansion.
“As Swire and Henderson have long-term acquisition and development plans in the area, it’s not surprising that the current acquisition is part of their bigger plan,” Vincorn’s Cheung said.