Creditors Marketing Mainland Developer’s $890M Hong Kong HQ After Default

A Hong Kong commercial building seized from China’s Cheung Kei Group in March has been put up for sale by the company’s creditors, adding to the list of distressed trophy assets being marketed in the city.

Savills is the sole agent for the disposal of One HarbourGate East Tower, formerly known as Cheung Kei Center, located on the Tsim Sha Tsui waterfront promenade in Kowloon’s Hung Hom area. The property, comprising an office tower and a two-storey retail building with 155 car parking spaces, had a market valuation last year of HK$7 billion (now $890 million), the consultancy said Monday in a release.

Mingtiandi reported earlier that Hang Seng Bank was taking over Cheung Kei Center and had appointed receivers from PriceWaterhouseCoopers to control the asset. Cheung Kei, a private mainland developer controlled by Shenzhen tycoon Chen Hongtian, had acquired the 17-storey property for HK$4.5 billion (then $580 million) in 2016 to use as its corporate headquarters.

“High-quality trophy assets on both sides of Victoria Harbour are always sought after and scarce,” said Godfrey Cheng, deputy senior director for investment at Savills Hong Kong. “With an occupancy rate of 84 percent, the property yields a stable rental return, poising it to capture the market’s attention once more.”

Tycoon’s Fall From Grace

The March repossession of the 300,000 square foot (27,870 square metre) property came as part of a raft of moves by creditors to seize assets linked to Chen. The garments-to-property tycoon first made waves in Hong Kong in 2016 when he spent a record HK$2.1 billion for a home in the city’s Peak area, after complaining that his 5,154 square foot apartment at Opus Hong Kong in the Mid-Levels was too small.

Chen has now lost those two homes, and Bloomberg reported in March that Cheung Kei had defaulted on a loan used to purchase an office building in London in 2017, with debt failure on a second property in the Canary Wharf financial district said to be imminent.

One HarbourGate East Tower was completed in 2016 by developer Wheelock Properties. Described by Savills as one of few buildings in the core Kowloon area with triple Grade A office specs and high-level certifications for sustainability, the property also boasts a large LED advertising wall that can be seen across the harbour.

Raymond Wan, chief senior director for investment at Savills Hong Kong, noted that the East Tower serves as the headquarters of Canada’s Sun Life Insurance while the complex’s West Tower houses the headquarters of China Life, showing the asset’s appeal to multinationals and suitability for both investment and self-use purposes.

“We believe that this sale will once again attract the interest of major enterprises,” Wan said. The tender is expected to close on 28 August.

Go-To Fire Sale Agent

The tender for Cheung Kei’s former Hung Hom home is the latest in a string of Savills-managed sales of Hong Kong trophy assets seized from mainland investors. The agency last year succeeded in finding a buyer for the Goldin Financial Global Centre after a two-year struggle over the Kowloon East office tower.

The 28-storey building was sold on behalf of creditors stiffed by defaulting mainland conglomerate Goldin Financial, with a joint venture of PAG and Mapletree Investments picking up the property for HK$5.6 billion ($713 million).

Meanwhile, Savills has thus far failed to find a buyer for the China Evergrande Centre in Wan Chai, the former Hong Kong headquarters of the world’s most indebted developer. Evergrande in 2015 had paid a record-setting HK$36,232 ($4,615) per square foot for the property, which was seized by creditors last September.