Big Players Cash Out of Hong Kong Property

March 26, 2013, 3:00 p.m. ET

Big Players Cash Out of Hong Kong Property


HONG KONG—With the government growing confident that it has halted the meteoric rise in property prices, some of this city’s biggest real-estate investors are getting out.

Several of Hong Kong’s wealthiest families are planning initial public offerings of hotels, offices and other real-estate assets in coming months, while others are lowering prices on luxury apartments to entice buyers.

“Developers are selling assets at the very top of the market, when appetite is big, and interest rates are low,” said Christopher Wong, senior investment manager at Aberdeen Asset Management ADN.LN +4.03% in Singapore.

ueled by low interest rates and a flood of money from wealthy Chinese, Hong Kong’s real-estate market has boomed, with residential prices up 120% and commercial real-estate prices up 90% since the start of 2008, according to government data.

Among the sellers is New World Development Co. 0017.HK +0.93% Ltd., a conglomerate run by the Cheng family with interests ranging from hotels to offices to jewelry stores. The family hopes to raise up to $1 billion in an offering of some of its hotel properties, people familiar with the matter said. The company owns the city’s Grand Hyatt and other well-known hotels, but it’s not clear which properties would be included in the offering.

Another of Hong Kong’s big conglomerates, Hopewell Holdings Ltd., 0054.HK -1.09%has applied to raise about $800 million in an offering of its properties, people familiar with the matter said. Great Eagle Holdings Ltd., 0041.HK +3.21% the owner of The Langham hotel chain, is also seeking to raise $800 million selling off hotels in Hong Kong, people familiar with the matter said.

Great Eagle declined to comment. New World Development and Hopewell Holdings didn’t respond to requests for comment.

The wave of IPOs comes after a two-year drought for real-estate offerings in Hong Kong, as developers held on to their assets while prices soared. The government had little success slowing the rise in prices until late February when it laid out its harshest set of actions, doubling the stamp duty on most transactions to as high as 8.5%, among other measures.

Government officials say the latest measures are starting to bite. “The market has started to cool down and show signs of stabilization,” the city’s chief executive Leung Chun-ying said last week. Analysts at Deutsche Bank AG DBK.XE -0.26% are predicting a 20% drop in home prices over the next two years.

“By spinning off noncore assets, developers can generate one-off gains and prepare for an earnings slowdown,” said Louis Wong, director of Phillip Capital Management in Hong Kong.

In Singapore, where the government has also tried to reign in property prices, some big investors are selling as well.

Indonesia’s billionaire Riady family is planning to raise $800 million in Singapore through a property arm for a portfolio of hotels in that city later this year. The family, which controls the Lippo Group, and has business interests in real estate, publishing and banking, earlier this month spent $367.5 million buying the U.S. Bank Tower in Los Angeles, the tallest building on the west coast.

A spokeswoman for the property arm declined to comment.

Singapore has already seen a wave of real-estate offerings this year including its biggest ever real-estate investment trust listing earlier this month, a $1.3 billion offering of real estate in China from state investment fund Temasek Holdings Pte. Ltd. A Temasek spokesman declined to comment.

In January, the Singaporean government imposed its seventh set of measures in two years to bring down home prices, which are up 59% since a recent trough in the second quarter of 2009. February data showed the curbs are having an effect, with sales of private new homes slumping 65% from the previous month. The measures included raising the stamp duty and increasing down-payment requirements.

Other big Hong Kong property developers are taking different routes to unload real estate. Li Ka-shing, Asia’s richest man, is lowering prices on apartments developed by his flagship Cheung Kong (Holdings) Ltd. 0001.HK +0.71% The company cut prices at a luxury development in the city’s industrial Lai Chi Kok district this month and offered to rebate on the stamp duty. The Kwok family’s Sun Hung Kai PropertiesLtd., 0016.HK +0.67% cut prices at a luxury residential project over the weekend.

Mr. Li is even trying to sell individual hotel rooms. Weeks before the latest measures to cool the red-hot market, Mr. Li sold 360 hotel rooms to eager investors, even though such sales are legally murky. Hong Kong law prevents buyers from using hotel rooms as regular residences, making buyers potentially liable for prosecution and even jail time. But critics say it would be difficult in practice for authorities to monitor how buyers are making use of these purchases.

Cheung Kong didn’t respond to requests for comment, but in his twice-yearly news conference on Tuesday, Mr. Li warned that investors, “definitely shouldn’t go into property speculation” at this time because of the financial-market volatility.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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