New World Development offers to donate land to non-profit linked to chief executive
Two of Hong Kong’s largest developers have expressed their willingness to hand over part of their land banks for housing development as the government looks into requisitioning underused plots in a bid to lessen a home shortage.
On Thursday, Henderson Land, which made more than HK$4 billion ($510 million) selling real estate last year, offered to make available for development one million square feet of rural land reserves if asked to do so by the government. That move by the top five homebuilder came just 24 hours after competitor New World Development had pledged to donate three million square feet to a local housing organisation to help alleviate the housing crisis in Hong Kong.
The pair of moves by two of Hong Kong’s largest landlords came two weeks after China’s state-run media pointed to the city’s shortage of affordable housing as a root cause of Hong Kong’s on-going civic unrest and accused real estate developers of hoarding practices that have inflated home prices.
The cost of housing relative to earnings is off-the-scale in the Asian financial hub, where the median home price is 20.9 times the median annual income, according to this year’s Demographia International Housing Affordability Survey.
Henderson Land Vows to Co-operate with Govt
A spokesperson for Henderson Land, which held 6.3 million square feet of undeveloped agricultural in the New Territories at the end of last year and makes most of its income from residential development, said in a written communication to the South China Morning Post that it has identified three plots in Fanling near the Shenzhen border, which are already zoned for social housing, that it is willing to dispose of.
Adrian Cheng said he wants to avoid perceptions of conflict of interest
The spokesperson confirmed that the company is ready to cooperate with the government if it invokes the Lands Resumption Ordinance, legislation that empowers the government to buy back farmland for public use.
“A government purchase of land by compulsory order needs full and proper compensation, so there’s nothing charitable about the offer, and Henderson would obviously expect to get at least the current ex gratia payment, which is HK$1,124 per square foot,” said activist investor David Webb, who is a regular commentator on Hong Kong corporate governance.
Henderson Land made its offer less than 24 hours after rival New World Development, which holds 18.5 million square feet of farmland in the New Territories, offered to release farmland equivalent to 16 percent of its agricultural land bank valued at HK$3.37 billion ($430 billion), as a donation to non-profit organisations.
Of the total that New World has pledged, the company will. for the token sum of HK$1, transfer one million square feet to Light Be (Social Realty), a social housing organisation that the developer has worked with since 2016 and which has links to the family of convicted fugitive Joseph Lau and political figures connected to Carrie Lam.
Social Housing Developer Tied to Lam Supporters
New World’s first instalment in its donation is 28,000 square feet of farmland near the Tin Shui Wai metro station in the New Territories, which will be used to provide 100 homes measuring 300 square feet each for low-income families.
Construction of the housing is expected to be completed by 2022, with beneficiaries of the programme able to rent their homes for a maximum of three years, Light Be’s founder, Ricky Yu, was cited as saying in local media accounts.
Webb told Mingtiandi that he perceived a potential conflict of interest in the developer’s proposed relationship with the social housing organisation, which has seen its projects honoured by visits from Hong Kong chief executive Carrie Lam on several occasions.
The connection of Light Be (Social Realty), which is a for-profit company, with the non-profit organisation Light Be Foundation is unclear, according to Webb, who said that three of the foundation’s board members – Ronald Arculli, who co-headed Carrie Lam’s election campaign, Laurence Li Lu-jen, another campaign member, and Lau Ming-wai, the son of convicted fugitive Joseph Lau – are prominent supporters of chief executive Carrie Lam.
New World’s Cheng Donates to Charity Linked to Lam Supporters
“We don’t want to be misunderstood, or accused of a conflict of interest,” Cheng said in announcing the move at a press conference unveiling New World’s interim financial results, adding that the donation was a way to help society and provide 10,000 people with new homes.
Investor activist Webb told Mingtiandi that New World’s proposed donation will be of grave concern to shareholders.
“If they are donating shareholders’ assets, they are going to have to explain to shareholders why because they can’t just give away assets to make a loss,” Webb said. “There must be a commensurate benefit to the company in any charitable donation, but the scale he’s talking about – 3 million square feet – even at the ex gratia price of HK$1,124 dollars per square foot would be hard to justify. You could buy an awful lot of advertising for that.”
Webb said that if the donation was part of New World’s on-going negotiations with the government to convert its agricultural land stock into housing projects, the company should explain the terms of any understanding reached with the authorities, while any claim that the donation might improve its environmental, social and corporate governance score is irrelevant unless it adds to shareholder value.
Along with Sun Hung Kai Properties and CK Asset Holdings, Henderson Land and New World make up Hong Kong’s big four developers, which together have supplied 40 percent of the city’s homes over the past decade, according to local media.
Jan Kot provided additional research for this story.
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