Chan the man for 'sweet' deal

Editorial | Mary Ma 11 Sep 2020

All speculation over who would dare buy the US consulate quarters on Shouson Hill Road came to an end with Hang Lung Properties tycoon Ronnie Chan Chi-chung's announcement that a deal was reached for his group to take over the plot for a relatively low HK$2.56 billion.

It takes an unusual kind of courage to make that type of deal.

Li Ka-shing, the city's richest man, had been touted as a frontrunner, but rumors that his CK Asset Holdings had bought the site for HK$2.8 billion were immediately dismissed.

Chan's statement confirmed the deal - and the price was lower than nearly all expectations.

As soon as the US offered the compound for sale in May, it was never going to be a normal transaction.

First, the market for luxury properties has been slack for a while due to uncertainty in the SAR.

Second - and most importantly - conflicts between the US and China have continued to mount across a whole range of flashpoints, from Hong Kong and Xinjiang to the South China Sea and semiconductor technology.

As soon as the US consulate tasked an agent with finding a buyer, the challenge was obvious, unless the compound could be sold at a deep discount to compensate for the commercial and opaque political risks involved.

Some observers had been expecting a higher amount in view of the HK$5.9 billion record price that China Resources Land paid for an adjacent site just two years ago.

In other words, the site bought by China Resources lost over a third of its value instantly.

The US Bureau of Overseas Buildings Operations confirmed several tenders were received but - apart from Hang Lung naming itself - none was identified.

Does that mean the remainder were even more bearish than the bearish Chan, missing out on the deal as they expected a bigger discount to justify the extraordinary risks?

Under the current politically charged atmosphere, it would have been extremely difficult to find a buyer.

Although the HK$2.56 billion selling price was at the lower end of market expectations, it was still a lot of money after taking into account the further investment needed to redevelop the staff quarters into several super-luxury homes.

Hang Lung is expecting its investment to rise to HK$4 billion in total. That's hardly affordable for anyone without a genuinely deep pocket.

Even those whose pockets are infinitely deep must have felt some hesitation about the vast sums involved.

Who else could have submitted tenders? Presumably, Chinese conglomerates would have been the last to show any inclination even if they were interested.

That is not surprising against the background that the Trump administration is widely seen as selling the site in preparation for a showdown with Beijing.

This is the first time Chan has successfully purchased a site in Hong Kong in 20 years, since buying a plot of government land in Tai Kok Tsui in 2000.

If the Shouson Hill plot was regarded as a dilemma for most, it's an opportunity for Chan - an SAR merchant with US citizenship who is, at the same time, well received in the mainland.

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