Victoria City / Bloomberg
Hong Kong’s exclusive club of residential property developers will have to make room for a new entrant after billionaire Pan Sutong’s Goldin Financial Holdings Ltd., beat out other bidders including Cheung Kong Property Holdings Ltd. to win a land site for HK$6.38 billion ($821 million).
Goldin, a relatively unknown company that’s among the worst performers in Hong Kong’s stock market this year, could build about 500 units in Hong Kong’s Ho Man Tin site with a maximum gross floor area of 54,444 square meters, the city’s Lands Department said. The price was in line with the expectations at Savills Plc and JPMorgan Chase & Co., while exceeding the estimate at CLSA Ltd.
The foray into Hong Kong’s residential market is the first for Pan, a self-made businessman who made his fortune as an electronics manufacturer and breeds racehorses in Australia. Pan controls a sister company, Goldin Properties Holdings Ltd., whose sole project is a 228-hectare site in the northern Chinese city of Tianjin. Goldin Financial owns one other site in Hong Kong’s Kowloon Bay, where it plans to open a 27-story grade-A office complex.
“They are quite an unlikely candidate and this is a big amount of money. In terms of pricing it is slightly on the high side,” said Nicole Wong, head of property research at CLSA, who estimates property prices could drop between 25 and 37 percent in the next three years. “It is surprising that a non-typical developer got this.”
Goldin Financial’s shares fell 1.9 percent as of 11:53 a.m. in Hong Kong on Thursday, after gaining as much a 5.5 percent earlier, and Goldin Properties fell 5 percent in Hong Kong. Shares of Goldin Financial have tumbled 51 percent to rank as fifth-worst performer on the Hang Seng Composite Index in 2016, while those of Goldin Properties slumped 58 percent to rank as third-worst.
The Ho Man Tin site was the first time Goldin had bid on a Hong Kong residential site, the company said.
“We believe the land parcel is attractive because it is in the core city center and in a traditional luxury residential area,” the company said in a statement. “This doesn’t come by often and we don’t see many comparable parcels in the upcoming pipeline.”
Charles Chan, managing director of valuation and professional services at Savills, said Goldin paid about 5 percent less than he expected the site to fetch. He said factoring in construction costs of about HK$6,000 per square foot, the units will sell at HK$20,000 to HK$25,000 per square foot, similar to neighboring residential prices.
Other bidders apart from Cheung Kong, the developer spun off from billionaire Li Ka-shing’s conglomerate, include Sun Hung Kai Properties Ltd., Hong Kong’s largest developer by market value, and New World Development Co., controlled by the family of Hong Kong billionaire Cheng Yu-tung.
Goldin’s purchase comes against a backdrop of a correction in the housing market in Hong Kong, where prices have fallen 11 percent since September amid sagging sales and a slowing economy. Analysts such as Bocom International Holdings Co.’s Alfred Lau are expecting declines of as much as 30 percent in 2016.
Goldin Properties in December raised $2.8 billion selling part of its Tianjin project, a move that freed up cash for more investment. At the time, Pan said the company would seek to purchase commercial real estate in Hong Kong’s Central business district, undeterred by signs of a slowdown in the city’s economy.
Pan is estimated to have a net wealth of about $3 billion, according to the Bloomberg Billionaires Index. His fortunes have fluctuated as shares of his companies have gone on a roller-coaster ride in the past year, causing Pan’s fortune to swing by billions of dollars in a day.
Pan decided against making a general offer to buy all the shares of Goldin Properties, according to a statement in December. The tycoon, who owns about 64 percent of the developer, first notified the Hong Kong stock exchange he was considering taking it private in March 2015.