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Hang Lung’s HK $ 2.6 billion purchase of 37 Shouson Hill Road villas from the US government runs into diplomatic hurdle in the US-China dispute
37 Shouson Hill Road, The Peak, on Hong Kong Island on May 30, 2020. Photo: Edmond SoSINGAPORE (EDGEPROP) – One of Hong Kong’s largest real estate transactions of 2020 has been caught in the crossfire of diplomatic relations between the United States and China. as the US consulate failed to get its sale of luxury villas at The Peak recognized by the city’s Land Registry The sale of HK $ 2.6 billion (US $ 330 million) on September 10, Six multi-story villas at 37 Shouson Hill Road could not be registered by the Hong Kong Land Registry due to “diplomatic obligations” imposed by the Chinese government on the US consulate, buyer Hang Lung Properties said Wednesday in a exchange statement. Hang Lung bought it at a 20 percent discount on the appraisal. The developer said he was informed by the Land Registry on Dec. 21 that the US consulate is not a commercial entity and that the Shouson Hill villas are not ordinary real estate. The transaction involved foreign affairs between China and the US and should not be considered as ordinary business activity, he added. Read More: Most Chinese Investors, The World’s Largest Buyer Group, Will Not Buy Overseas Property In Next 12 Months Due To Covid -19: CLSA Survey US Government Must Submit Application in writing to the Chinese government through the Chinese Foreign Ministry Commissioner’s Office in the city at least 60 days in advance, Hang Lung said, citing a notice from the Chinese government to the local authority. “There is a possibility that the transaction will be canceled,” said Vincent Cheung, managing director of Vincorn Consulting and Appraisal in Hong Kong. “The letter made it quite clear that the deal is not just a property transaction, it has political significance. Whether it can move forward only depends on the relationship between the United States and China. If the Chinese government gives its approval, it would represent a gesture of goodwill “. The inconvenience was “exceptional” and was not disclosed or anticipated to Hang Lung or the bidder for the property at the time of sale, Hang Lung said. Still, Hang Lung said he is “willing and able to proceed” with the deal after “careful consideration” if the United States can meet diplomatic obligations. The Chinese government intervened on Wednesday afternoon. “The US embassies must apply for the purchase and sale of real estate,” Foreign Ministry spokesman Wang Wenbin said during a regular press conference in Beijing. Hang Lung investors appear to have been lukewarm about buying from the developer. The company’s shares have fallen 2.4 percent since Hang Lung won the tender on September 9, below the 10.3 percent gain on the benchmark Hang Seng index. The shares rose 2.1 percent to HK $ 20.15 after today’s statement, the highest in more than a month, and reversing their previous slide. Such a setback “is unprecedented, and a lot should have been done before the sale,” said Polly Chu, a partner at the Withers law firm in Hong Kong. The buyer should seriously consider whether to purchase or request a review of the tender terms to extend the end date, with the right to rescind if written consent is not obtained, he said. The US consulate said it had complied with the relevant obligations and requirements. while arguing that “the diplomatic obligations applicable to the sale of the property are matters between sovereignties and would not affect the title of the property,” Hang Lung said, citing a letter yesterday from the US representative office. The developer and bidder are “evaluating and taking legal advice” on appropriate actions, “including exploring the feasibility of extending the time” to complete the deal, said Hang Lung. “Additional time is needed for the buyer and the seller complete the administrative processes required to close the property. ” said a spokesman for the U.S. consulate office in Hong Kong, declining to say whether a written request had been sent to the Chinese government for the s.Hang Lung’s chairman, billionaire Ronnie Chan Chi-chung, is a frequent interlocutor on China-related issues and has no qualms about having verbal jousts with journalists on political issues, including Hong Kong’s year-long anti-government protests and national politics. Security law enacted by the Chinese legislature for Hong Kong. Born in 1949, Chan is also chairman of the board of directors of the Asia Society in Hong Kong, a non-profit organization founded in 1956 by John D. Rockefeller III, with a mission to educate the world about Asia. Hang Lung has been investing in China since the 1990s, starting with its flagship Plaza 66 and Grand Gateway 66 projects in Shanghai. It has been expanding its presence in secondary cities such as Shenyang, Jinan, Wuxi, Tianjin, Dalian, Kunming, Wuhan and Hangzhou with projects under the brand “66”. The company earned HK $ 4.54 billion in revenue from leasing properties in China, accounting for 53 percent of the company’s total revenue in 2019. The US government bought the land at 37 Shouson. Hill Road in June 1948 for an unknown price when Hong Kong was still British. colony, according to public records in the Property Registry. Construction on the site was completed in 1983 and Hang Lung, which primarily develops shopping malls and offices, said it will rebuild the Shouson Hill Road site into multiple luxury single-family homes by 2024, with plans to invest HK $ 4 billion in the draft. The tender came to light on May 30, hours after US President Donald Trump announced that he would revoke Hong Kong’s special customs status, in response to the Chinese legislature’s announcement to introduce the national security law. For the city. “It’s more about the Chinese government trying to impose obstacles for the United States to sell the property,” said Kevin Tsui, associate professor in the John E. Walker department of economics at Clemson University in South Carolina, adding that the latest downside is a watered-down version of the US asset freeze in Hong Kong. . “Maybe [the Chinese government] sees it as proof of the new [Biden] administration, “using it as a bargaining chip, he said. The asset sale has to” wait until Biden becomes president and [the US and China]]begin their negotiation, “Tsui said, and the saga will last until” their relationship improves. The United States can still use the asset, but is not authorized to sell it. “This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, explore the SCMP app or visit the SCMP Facebook and Twitter pages. Copyright © 2020 South China Morning Post Publishers Ltd. All Rights Reserved. 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