HK$2.1 billion Peak home purchase partly funded by Shenzhen property transfer in deal that has Hong Kong real estate buzzing

Purchase will be paid partly in cash and partly by the transfer of a commercial property in a non-core area of Shenzhen

PUBLISHED : Thursday, 16 June, 2016, 10:07pm
UPDATED : Friday, 17 June, 2016, 4:07pm

The HK$2.1 billion record transaction for a home on Hong Kong’s The Peak has raised questions if it could serve as a benchmark in the super-luxury property market due to its uncommon payment method, according to industry experts.

A company controlled by Shenzhen billionaire Chen Hongtian has agreed to buy the house at 15 Gough Hill Road.

The purchase will be paid partly in cash and partly by the transfer of a commercial property in a non-core area of Shenzhen, according to an announcement released by the seller on Wednesday night.

“It is not a normal way we have seen in the transaction of luxury residential properties ,” said Koh Keng-shing, chief executive of Landscope Christie’s International Real Estate.

“We usually see direct cash deals.”

While pointing out the transaction process is completely legal and it has not suggested any wrongdoing, Koh said it does make it difficult to assess the true value of the property, because other assets were included.

In a filing with the stock exchange on Wednesday night, Chen Family Asset Management, a British Virgin Islands-registered firm owned by Chen , said it had agreed to buy the 9,212 square-foot house, at 15 Gough Hill Road, from Hong Kong-listed Chuang’s Consortium International for HK$2.1 billion.

The buyer will pay 80 per cent, or HK$1.68 billion, of the price in cash with the remaining 20 per cent paid for by the transfer of the Shenzhen property.

Joseph Tsang, managing director of international property consultant JLL Hong Kong, said whether the house is worth at HK$2.1 billion depends on the quality of the Shenzhen property.

Chuang’s Consortium said the preliminary market valuation of the Shenzhen site was appraised by an independent property valuer at HK$420 million in May 31, 2016.

The Shenzhen property comprises floors 1-3 of Peng Building, located on Wenjin North Road in the Luohu District of the city. It has a total gross area of 5,317.8 square metres, and is in the centre of Shenzhen’s gem and jewellery district.

The first and second floors are being used by Baolin Group, a local jewellery and property company, as a trading and distribution centre, according to Lin Wenlong, a tenant who has been operating his jade and gold business for years from inside the building.

“We have heard little about Chen Hongtian,” Lin said.

Baolin Group was unavailable for comment on Thursday.

In an exclusive interview with South China Morning Post early this month, Chen said his purchase of the HK$2.1 billion house was because an apartment he bought in August for HK$380 million (in Opus Hong Kong in eastern Mid-Levels) was “too tiny”.

Property agents say they consider the Peak house a record price, even if the value of the Shenzhen property was not included, as a price tag of HK$1.68 billion would still be equivalent to HK$182,370 per square foot .

In the latest sign of an active super-luxury home market, a 1,361 square feet apartment at the luxury Severn Villa development on The Peak sold for more than HK$170,000 per square foot, setting a new record as the most expensive flat in Asia. Unit 3A was sold to Lai Hoi Man for HK$232 million, according to The Land Registry data, released on June 15.

The transaction per square foot surpassed a duplex unit sold for more than HK$100,000 per square foot at Henderson Land Development’s 39 Conduit Road in Mid-Levels in December last year.

In January, Hong Kong-listed Applied Development Holdings sold four units and six car parks at Severn Villa to Shenzhen-based property firm Horoy Qianhai International Holdings for HK$636.8 million. Lai Hoi Man is one of the four directors at Horoy Qianhai International Holdings.