Hong Kong redevelopment specialist reveals HK$15 billion plan for new business centre
CSI Properties to develop office-retail-hotel project with Wing Tai Properties
CSI Properties unveiled a plan for an office-retail-hotel project, to be developed as a joint venture with Wing Tai Properties on a recently acquired plot next to SoHo, at an estimated cost of HK$15 billion (US$1.9 billion).
“The site will be connected to IFC Central, arts and design venue PMQ and Lan Kwai Fong by footbridge [the Central-Mid Levels escalator]. The area will undergo a dramatic change when our project is completed,” said Mico Chung Cho-yee, the company’s chairman, who was a right hand man to PCCW chairman Richard Li Tzar Kai for five years. He left in 2003 and established CSI Properties, which had a market capitalisation of HK$3.96 billion as of December 12. Chung owns a 47.9 per cent stake in CSI Properties.
The company teamed up with Wing Tai Properties to beat eight competitors, which included Hong Kong’s largest developers such as Sun Hung Kai Properties and CK Asset Holdings, to the Urban Renewal Authority (URA) tender for the site in October.
The win bid was not disclosed, but market watchers put a price tag of HK$11.6 billion on the site, believed to be the most valuable plot ever offered by URA for tender.
“Lots of locals and tourists visit the area during weekends. As we see the site has great potential to become a new Central, we submitted a bid at the high end of our own estimation,” said Chung.
The lot, which could yield a floor area of 433,520 square feet, is bound by Graham Street, Gage Street and Cochrane Street. Wing Tai Properties will hold a 65 per cent stake in the proposed project, and CSI Properties the remaining 35 per cent.
“Small and big developers have coexisted in the Hong Kong property industry for about 100 years. It is hard to say it is more difficult for us to survive than big players, as we are targeting a different markets,” said Chung. He added that the company had bought four sites in Central through private negotiations, and had formed an alliance with bigger players such as Sino Land to build up its land bank.
In the past seven years, CSI Properties has won four plots through government tenders, working in partnerships, since it extended its reach to property development, he said. Chung added that he believed the company was one of the most active purchasers of commercial sites in Central.
It acquired 18 office floors, ground-floor shops and the rooftop of the Oriental Crystal Commercial Building on Lyndhurst Terrace in Central for HK$700 million. It also has two commercial redevelopment sites at 2-4, Shelley Street and 46 and 48, Cochrane Street under construction.
By leveraging its strength in repositioning and enhancing the value of commercial properties for higher rental yields, CSI Properties has increased its total assets from HK$300 million in 2004 to more than HK$23 billion. These assets include well-known projects such as Novotel Hotel in Mong Kok.
But Chung did concede that surging land prices had compressed investment returns to single digits.
“Developers have to bet on home prices to continue to rise to achieve a better investment yield,” he said.
Hong Kong home prices are at record highs, buoyed by low interest rates and excess liquidity, and have risen 11 per cent so far this year. They are also up 430 per cent since the slump in 2003, following the outbreak of the severe acute respiratory syndrome.
“Hong Kong is still a good place to sell flats, as both locals and high-net-worth individuals have a strong desire to buy properties,” he said.