Kai Tak Commercial Sites
The business and hotel site booking event in the Kai Tak Runway area last week, together with the first similar land use flow mark at the end of January and the delay in the government’s delay in the closing of another residential land, further delayed the development of the entire runway area. This article analyzes from three perspectives: (1) governance of listed companies; (2) risk considerations for real estate development; and (3) government land sales arrangements.
The buyer of the government’s land for Kai Tak was originally a wholly-owned subsidiary of Hong Kong-listed company Gao Yin Finance (0530). The action was triggered by an independent non-executive Director, Mr. Shi Liqian, convening an emergency board meeting (held on June 10), and an independent auditor and company lawyer attended the meeting.
The results of the discussion were approved by a large number of votes (six votes to two). The resolution was suspended to provide financial assistance to the subsidiary to settle the remaining land price; the vote was against the chairman of the board and the company’s major shareholder Pan Sutong and another independent non-executive director. . The company issued an announcement under the Securities and Futures Ordinance and the Listing Rules on the day following the Board’s (the latest deadline for the payment of the land price on June 11). The announcement pointed out that the management has proved to the Board that sufficient and available funds are available to cover the remaining land price (about $11.1 billion) and that an independent auditor is present. This message helps to release the market and investors are concerned about the development. Do not have enough funds for doubts.
According to another market message, the project has obtained bank loan arrangements, and preparations for development planning are still actively carried out before the board meeting. The company’s lawyers also provided legal advice to the board of directors, including the fact that the listed company did not provide guarantees to the subsidiary company. The government’s recovery target was the subsidiary, and the company’s financial loss or burden was paid a deposit of 25 million yuan. Will be confiscated by the government.
The board of directors decided to give up within one month (from the winning bid to the board meeting). From the perspective of risk management, the reason was that “the recent social conflicts and economic instability will have a negative impact on the growth of the commercial real estate market in Hong Kong." . In terms of value, this reflects a significant downward revision of the company’s estimate of the project’s land price. The revision of the Fugitive Offenders Regulations caused large-scale demonstrations and conflicts between police and civilians. Coupled with the warming of the Sino-US trade war, the investment climate was indeed weak.
According to another report, Shi Liqian said that the commercial development of the region is not yet mature, which is one of the reasons why he thinks it is not worth investing. The project originally planned to build a landmark high-class hotel (the minimum floor area requirement is about 259,000 square meters or 30% of the total) and the office building. The overall commercial office area of the runway area is limited; plus this project has non-dismanable contract restrictions. These are all challenges that need to be addressed.
The chairman of the Bank of Finance said that in the future, the land must be auctioned in the name of individuals. The bid may cost 15 billion yuan (about 35% higher than the original price) to win the bid, reflecting the true nature of its “friends."
There is no other bidding data available in the market to compare with the company’s bid price. The reason is that the government policy is to announce the remaining bid price after the completion of the bid-winning transaction. However, the transaction will not be completed, and the other five prices should not be announced. As for the early The price of the nine adjacent shares was not disclosed in the commercial property of the former adjacent hotel.
The proposed event is expected to bring pressure on the government to review the payment of government land payment arrangements. For the 25 million yuan deposit, it is only 0.22% of the winning bid price. The general real estate transaction deposit in Hong Kong is generally 10% of the transaction price (in a short transaction period of one month), and the long-term deposit ratio can be increased to 20%. 30%. Compared with the general market practice, the deposit ratio of this project is indeed very small.