Buyer forfeits $2b as $20b sale of CK's Mid-Levels project collapses

The sale of luxury estate 21 Borrett Road in Mid-Levels has been terminated and the HK$2.08 billion deposit paid by a Singaporean asset management firm has been forfeited, according to developer CK Asset.

The buyer, controlled by Sino Suisse Capital, has failed to make the first-part payment of HK$1.04 billion and the accrued interest, leading to the deal being canceled and the deposit forfeited, according to a filing by CK Asset.

The two parties entered the HK$20.77 billion agreement last September, with Sino Suisse paying a 10 percent deposit.

The asset manager was then required to pay 40 percent of the consideration in a five-part payment, each in every six months - the first two installments of HK$1.04 billion each and the last three of HK$2.08 billion each. The remaining 50 percent should be paid upon completion of the transaction in 2025.

"Despite the parties' attempts to address the default through discussion on a 'without prejudice' basis, no resolution had been reached amid the changing market conditions and fluctuations in interest rates," CK Asset executive director Justin Chiu Kwok-hung said in a separate statement yesterday.

Chiu said the project is a "rare and high-quality" asset and it is regrettable that the firm had to proceed with the relevant contractual terms.

CK will unveil new sales arrangements based on the prevailing market conditions, he added.

The board of the developer believes that the termination of the agreement "will not have any material adverse impact on the business and financial position of the company and the interests of its shareholders as a whole," the filing said.

Sino Suisse provides investment advisory, portfolio management, and wealth planning services to ultrahigh-net-worth individuals and families, according to its website.

It was founded in 2017 by Albert Liu Chung Hsing, who had spent 19 years in UBS top clients in China. One of the firm's advisers, Keith Wu, was the head of equity investment for China Everbright.

While high interest rates did play a part in the failure of the deal, there is a high chance that the default was because of a broken capital chain of the company, said Andrew Wong Wai-hong, Anli Securities chairman and chief executive.

Its own capital might not have been able to cover the whole deal, Wong said.

It might have failed to raise enough funds from its clients or found it very difficult to get a loan that was sufficient to pay for the price from banks as property prices went down, he noted.

People were expecting that the prices of luxury properties would jump after the border with the mainland reopened, but they are now disappointed, Wong added.

Hong Kong's home prices sank 10.9 percent from the beginning of 2022 to May as interest rates increased.

The drops in luxury properties are less but property agency JLL expects a decline of up to 5 percent in the second half of this year following a 1.3 percent rise in the first half.

A total of five flats in the Mid-Levels property were sold after the deal was struck last year, for a total consideration of HK$747.9 million.

In April, a 2,193-square-foot unit was sold for HK$153.8 million via tender together with two parking lots - or HK$70,132 per sq ft.

A month earlier a 2,316-sq-ft flat with two parking spaces changed hands for HK$162.8 million or HK$70,294 per sq ft.

The disposal agreement last year involved 152 flats, 242 residential car park spaces, and 31 motorcycle parking spaces.

It valued residential units at HK$62,000 per square foot, car parks at HK$5 million, and motor parking spaces at HK$300,000.

aiden.he@singtaonewscorp.com