Derelict buildings on prime site in Causeway Bay may finally be in line for redevelopment as two families sell their minority stake for up to HK$1.8 billion

A 20 per cent share of the plot in one of the Hong Kong’s busiest shopping districts will be put up for tender, potentially netting the two owners HK$1.8 billion (US$231 million)
It clears the way for the majority owner to buy the stake and force the sale of the remainder of the plot for renovation

Hong Kong property

Sandy LiandLam Ka-sing

Published: 7:30am, 17 Aug 2021

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The final hurdle standing in the way of plans to redevelop three dilapidated buildings in the heart of Causeway Bay may soon be cleared.

Two families have decided to auction off their 20 per cent stake in the plot in one of the Hong Kong’s busiest commercial districts, in a move that could pave the way for refurbishment if the majority owner successfully bids for it.

According to property agents, the majority shareholder owns 70 per cent of the site, and the further 20 per cent would give it the legal right to force a compulsory auction of the remainder.

The units at the junction of Percival Street, Russell Street – once the world’s most expensive retail location – and Lee Garden Road, will be put up for tender, according to sole agent JLL, and could pocket the owners HK$1.8 billion (US$231 million).

“The value of these properties will be very high as it is in the core centre of Hong Kong’s busiest district,” said Joseph Tsang, chairman of JLL Hong Kong.

The sale comes as Hong Kong’s home prices have risen to new highs and retail prices have bottomed out as the economy recovers.

Located on first-tier shopping streets, the properties, aged more than 50 years, represent about a 20 per cent ownership share in the building lot. The tender will be closed on September 28.

The proposed redevelopment – which would probably see the building upgraded into high-end flats with a retail component – has been stalled for years as the biggest single owner faced difficulties in acquiring the remaining shares after it accumulated its 70 per cent stake, said Tsang.

“It is a valuable opportunity to secure a meaningful ownership share in a sizeable potential landmark development in the heart of Causeway Bay,” he said. “It offers high redevelopment potential and will benefit from the development of the nearby commercial development project at Caroline Hill Road and The Excelsior redevelopment project.”

Under the Land (Compulsory Sale for Redevelopment) Ordinance, developers can force a compulsory auction to buy the remaining stake in a building, if it is over 50 years old and they already own at least 80 per cent.

Most units in the building have been left empty, while ground level shops have been leased to different retailers, from luxury watch brand TAG Heuer to jewellers and underwear merchants.

Sales of shops gained momentum as retail sales rose 8.4 per cent year on year in the first half of 2021.

There were 13 commercial and industrial property deals of over HK$100 million each in July, up 30 per cent from June and the highest in 20 months, according to Midland IC&I. Eight of the deals involved shops.

“Shop sales accounted for the majority, reflecting the fact large funds are optimistic about the shop market,” said Tony Lo, chief executive of ICI Property at Midland IC&I.

Lo cited the fact the US Federal Reserve has kept interest rates low, global quantitative easing that has driven capital inflows, and an easing of the pandemic as reasons for the market’s heat.

“The market sentiment is hot. The government has accelerated the vaccination schedule, the unemployment rate has fallen, and consumption coupons will stimulate the economy and will further boost confidence in the investment market,” added Lo.