Li looks like getting the last laugh

Amid the current market sentiment, it is extraordinary that a Singapore-based investment fund has struck a deal to buy out CK Asset's luxury property project 21 Borrett Road in the Mid-Levels for HK$20.8 billion.

Although it isn't a record sum, it is big enough to wow the financial and property sectors.

Apparently, Albert Liu Chung Hsing - founder of Sino Suisse Capital that is acquiring 21 Borrett Road via a subsidiary - is striving to keep his word to massively grow his asset management empire.

In a 2021 interview he undertook to expand Sino Suisse to over US$10 billion in five years.

Higher risk infers higher returns. If his group's venture in Borrett Road turns out to be a huge success, this will put him a major step nearer the target.

At the same time, higher risk can also mean greater loss, depending on prevailing market conditions.

In 2017, a consortium backed by Hong Kong and mainland investors bought from CK Asset The Center, a grade-A office in Central, for the awesome sum of HK$40.2 billion, expecting to reap a windfall from the booming market.

Unexpectedly, the market for office space cooled and some consortium members resold their holdings at a loss.

The Borrett Road buyer did not say whether it is going to hold the project for long-term investment or sell it for a quick profit when the pandemic is over and all border crossings - including the mainland's - return to normal.

Priced at HK$62,000 per square foot, it is much lower than the HK$79,000-HK$91,896 psf region that the Borrett Road project achieved in recent sales - let alone its Asian record of HK$136,000 psf for strata household.

The price could not be more attractive - if, that is, market outlooks are positive.

Buyers of the Center in 2017 were also in a buoyant mood. Since then, the price has come down by 30 percent. In this sense, nobody can deny that tycoon Li Ka-shing is probably the wisest businessman here.

The 21 Borrett Road deal appears to be rather favorable to the seller. For one, CK Asset will act as the agent to continue to sell the units during the period, with profits above a certain level reportedly going to the developer. If deficits are incurred as a result, the project buyer will have to make up the shortfalls in the special account.

The deal also includes a loan of up to HK$10.38 billion from CK Asset - 50 percent of the selling price - for the buyer to complete the deal.

Strictly speaking, while earning interest from the buyer if the loan is drawn, Li's company need not advance the loan from its own pocket since this would be the deposit the buyer has to advance to the seller in several instillments.

Standing to lock in a profit of at least HK$6.3 billion, CK Asset is spared the risk of uncertainty in the property market.

Perhaps Liu is betting on a major rebound in both the mainland and Hong Kong economies post-pandemic.

Time will tell who will have the last laugh. In light of past records, the odds seem to be in Li's favor.