Winland Group Buys Causeway Bay Project From New World for HK$2.17B

Hong Kong’s real estate market is likely to see another compulsory sale application after local agency-turned-property investment firm Winland Group purchased 96 percent ownership of the Sun On Mansion in Causeway Bay for HK$2.17 billion ($280 million), according to a Mingtiandi source with knowledge of the deal.

Winland plans to use Hong Kong’s Compulsory Sale for Redevelopment law to convert the 10-storey residential building on Cannon Street into a commercial tower, with a planned gross floor area of 85,000 square feet (7,897 square metres).

The 54-year-old building was sold to Winland by New World Development, which started taking over the building in 2015 through a series of strata-title purchases. The Hong Kong government encourages owners of buildings aged over 50 years to apply for compulsory sale  — essentially, a forced auction to buy out the minority owners of a building — in order to redevelop buildings that have outlived their original purpose.

Compulsory sales of buildings for redevelopment have gained in popularity in recent years as available land for sale has become scarce. Statistics from Hong Kong’s Lands Tribunal show that there were 23 compulsory sale applications in the first nine months of 2018, an increase of 60 percent over the level in 2016, as developers continue to step up competition for sites in Asia’s most expensive real estate market.

Commercial Tower Expected to Sprout

Sun On Mansion, with four retail shops on the ground floor, is located at the centre of Hong Kong Island’s commercial hub, Causeway Bay. It is a two-minute walk from the Causeway Bay MTR station and a 10-minute walk from Times Square and the world’s most expensive retail thoroughfare, Russell Street.

According to a report in the Sing Tao Daily, the 5,000 square foot (464 square metre) site the building sits on has already been approved for construction of a commercial tower. Since Winland has passed the 80 percent ownership threshold needed to force a compulsory sale, it is expected to win approval from the government to begin redevelopment.

Based on the potential 85,000 square foot construction area of a future development, the purchase price of HK$2.17 billion works out to an average of HK$26,593 per square foot.

Flipping for Profit

New World Development, the sister company of Hong Kong-listed retailer Chow Tai Fook Jewellery Group, had paid a total of HK$1.4 billion over a period of three years to build up its 96 percent stake in the tower.

The home builder originally bought 20 residential units in the building in 2015 for a total of HK$200 million, accounting for 30 percent of the building’s shares.

Last year, it purchased the four retail shops on the ground floor from Leong On-kei, the wife of Macau gambling godfather Stanley Ho, the chairman of SJM Holdings, taking its total stake in the building to 96 percent.