SHKP close to striking deal to take development private

Sun Hung Kai Properties (SHKP) will soon reach an agreement with the government to convert Sham Wan Towers, a mixed housing development in Ap Lei Chau, into a private project for sale.

Executive director Michael Wong Yick-kam said a deal for the conversion might be struck next month.

He did not give details of the likely agreement, but said the settlement would be similar to the arrangement for a similar mixed development undertaken by Hang Lung Properties.

This means SHKP will probably share the proceeds from the sale of Sham Wan Towers with the government.

Sham Wan Towers was one of two mixed housing development projects awarded to private developers in 2000 under a pilot scheme aimed at improving the quality of subsidised housing.

The other mixed development, being built by Hang Lung Properties, is in West Kowloon.

The two sites were sold at a discount to encourage developers to take part in the pilot scheme.

A third of the finished flats were originally supposed to be sold to qualified buyers under the Home Ownership Scheme (HOS) at discounted prices, with the remainder for private sale.

However, the government last year indefinitely suspended the HOS, which led to talks with developers on the fate of the two mixed projects under construction.

The question is whether developers will have to pay an additional premium or find a way to repay the government the difference arising from the discounted land value if the project is to be made purely private.

Last month, Hang Lung Properties won an approval to convert its 1,616-unit project by sharing the sales proceeds with the government.

Sham Wan Towers consists of 1,040 units of about 600 square feet to 950 sq ft in three high-rise towers. SHKP is awaiting the pre-sale consent. It is one of the six large residential developments scheduled for sale by SHKP before the end of the year.

SHKP plans to release about 4,000 units in six projects to generate HK$9 billion in proceeds. They include YoHo Town in Yuen Long, Park Island in Ma Wan and 18 Farm Road in To Kwa Wan.

Meanwhile, Mr Wong said the existing consent system for the pre-sale of unfinished residential projects was sound and effective, and that the recent failure of the Villa Pinada development in Tuen Mun was an isolated case.

He said the system had been in place for more than 10 years and had sufficient controls to ensure the financial capability of developers before pre-sale consent for a project was granted. Villa Pinada was the first project to have struck financial problems.

Mr Wong said the Villa Pinada incident should not affect buyer confidence in purchasing unfinished flats from developers. Villa Pinada is being built by small developer True Gold Investments. A total of 204 flats were pre-sold, generating more than HK$500 million. But True Gold was placed in receivership last Friday after it failed to repay about HK$200 million in syndicated loans to the Bank of China.