How developer Rykadan turned a Hong Kong basketball court into ‘tiny’ flats for big profits
William Chan, chairman of Hong Kong-listed property company Rykadan Capital, feels no shame in describing how small the company’s first and only residential development was.
Indeed, he is proud to tell how he turned the site in Jordan, which was smaller than a basketball court, into a 66 “tiny” flat development known as The Paseo that generated property sales of more than HK$390 million for the company last year.
“When I brought my wife to see the site the first question she raised was, ‘Is it a basketball court?’,” Chan recalled, adding that the site was even smaller than a standard basketball court, which is 94 feet by 50 feet.
Rykadan bought the 2,920 sq ft site at 7 Kwun Chung Street from the government for HK$194 million in December 2012 after beating 12 bidders.
“We have transformed from fitting-out work into property development since 2012, starting from commercial property. At the time, we wanted to have a try in residential development so we picked a tiny site,” he said.
Rykadan Capital was formerly known as Sundart International, which listed in 2009, and originally specialised in providing professional fitting-out work for residential properties and hotel projects in Hong Kong and Macau. Its name was changed to Rykadan Capital in September 2012 after Chan, also a major shareholder of the company, sold the integrated fitting-out business and shifted its focus on property development.
“With such a small site, we can only build one flat on each floor, or two or three. That is the strategy we needed to decide on. But the housing market was hot at the time and buyers did not care about selling price per square foot. They were eager to enter the market as long as the lump sum was affordable,” said Chan.
“Our architect had suggested to me to be innovative by building four flats per floor, with each just more than 100 sq ft in size. But it was extremely small and I couldn’t imagine how people could live in [that space]. Eventually, we decided on a unit in size of slightly more than 200 sq ft.”
Rykadan sold all 66 flats for average prices from HK$5 million and HK$6 million each, equivalent to between HK$22,000 per sq ft to about HK$30,000 per sq ft. They were even more expensive on a square foot basis than some units at nearby luxury developments such as The Austin.
The Paseo apartments were all designed as studios and the project incorporates three storeys of shops.
“We monitored the market trend very well. The housing market started softening after we sold the project,” he said.
However, Chan said the company now has reservations about residential developments in Hong Kong, citing the weakening outlook as a reason.
Analysts said “tiny” units would be the first to be hit in a market downturn due to the high price per sq ft and their large supply of stock.
“Home prices will go up and down. If buyers are speculators, they will complain when prices drop. But if they are long term investors, they can still get a stable income because of the good location,” Chan said.