Mainland developer Aoyuan hoping for US$57.3m profit on conversion of commercial Kwai Chung site into flats
Firm has pencilled in total target sales price of HK$1.4 billion for completed flats after buying building in June for HK$950 million
Aoyuan, the acquisitive mainland China developer, is hoping to generate a HK$450 million (US$57.33 million) profit from the sale of residential units being created in a former a 12-storey commercial building in Kwai Chung, in Hong Kong’s New Territories.
The company has pencilled in a total target sales price of HK$1.4 billion for completed flats in the building, after buying it in June for HK$950 million, its second move into the Hong Kong market.
The Guangzhou-based developer bought five units at Yin Yee Mansion at Mid-Levels West for HK$131 million in March.
“We are hoping to enter the compulsory sale procedure as soon as possible, and will develop a low-end luxury project there,” said Jacky Chan Ka-yueng, its vice-president.
“Hong Kong’s property market is particularly attractive considering the maturity and its critical position in the Greater Bay Area [the proposed joint economic cluster of 11 cities in southern China, including Hong Kong and Macau].”
Once a firm owns more than 80 per cent of a building, according to Hong Kong property rules, the other owners have no choice but to sell their share to them.
Yin Yee Mansion will become the first residential conversion project by the mainland developer, which failed to win a bid for another in Whitehead in Ma On Shan last year.
Chinese developers are aggressively on the hunt for commercial Hong Kong property, as residential prices continue to soar and the mainland authorities prioritise stabilising home prices.
In January, Evergrande Group, China’s third largest developer, paid a Hong Kong record price of HK$8,300 per square foot in Tuen Mun, a site expected to be developed into a 1,982-unit project valued at HK$6.5 billion.
That move followed Country Garden, the largest mainland developer by sales, paying HK$2.44 billion for a 60 per cent stake in a plot in Ma On Shan last September, and second-largest China Vanke paying HK$3.8 billion in 2015 for a parcel of commercial land.
The Hong Kong-listed arm of state-owned China Poly Group, Poly Property Group, also won the tender for a 39,612 square foot plot on Ko Chiu Road in Yau Tong for HK$3.3 billion in August.
Aoyuan is on a buying spree outside the mainland. It already has six ongoing residential projects in Sydney, Australia, and a growing presence in Toronto and Vancouver in Canada.
Its “Maison 188 Maroubra” in Sydney will open to buyers later this month, its first overseas project to be ready, aimed according to Chan, mainly at locals. He added in the first half it generated 4 billion yuan (US$585.26 million) from offshore projects.
“Our decision to explore overseas markets is the correct one,” said Chan.
“We are keen to diversify our asset portfolio and income source, while mitigating the operational and policy risks.”
Aoyuan’s targeting of Hong Kong’s commercial property market is typical of larger mainland companies, as smaller-scale rivals struggle to maintain their liquidity.
“We’ve entered the top 10 list of developers in Sydney within three years, which is incredible,” added Chan.
“However, our purchases there pale in price compared with what we are having to pay in mainland cities. We expect to see more such purchases in the fourth quarter [of the year], especially from smaller businesses.”
In the first half the developer bought into 31 projects in mainland China, representing more than 7 million square meters of land.