Billionaire Builders Hit Hardest By HK’s Headwinds

26-Feb-2021 Intellasia | Porbes | 7:31 AM Print This Post

Hong Kong’s high-flying real estate sector was hit hard as the pandemic dealt another blow to a market already weakened by the US-China trade conflict and political unrest. Since last year’s list, the benchmark Hang Seng Properties index fell 2%, while the main index rose 5%. All of the list’s property tycoons suffered losses in their real estate holdings, but several of them were propped up by non-property investments.

Retail and office suffered the most, hammering the wealth of the list’s property tycoons. The absence of overseas spenders coupled with local shoppers anxiously tightening their purse strings pushed down prime retail rents 28 percent in 2020 from a year earlier, according to Colliers. “The story in retail is relatively simple,” says Rosanna Tang, head of research for Colliers International in Hong Kong.

The impact was relatively mild on the Kwok family of Sun Hung Kai Properties, whose company owns 12 million square feet of retail space in the city. Its shares fell 9 percent since last year. A 2.2 percent drop in net worth caused majority owner Kwong Siu-hing, widow of Sun Hung Kai cofounder Kwok Tak-seng, to fall to No. 9 from No. 7 last year. All told, Kwok family members saw losses of 1 percent to 2 percent of their net worth.

The work-from-home trend similarly emptied offices, where average rents fell 16 percent in 2020, according to Colliers. “The main theme among office occupiers is cost optimisation,” says Tang, as tenants fled Hong Kong’s pricey central business district to cheaper outlying areas.

Among those most impacted in the office sector was Pan Sutong of Goldin Properties, whose net worth fell 58 percent to $1.8 billion. In July, the group disclosed that Goldin Financial Global Centre, its flagship office tower in Kowloon, was in receivership with $1.3 billion in debt. In late December, the company said receivers struck a deal to sell the 27-story building, which will allow Goldin to settle its outstanding debt, said Goldin spokesperson Hill Ho, in an emailed statement.

Residential real estate was the most resilient, says Tang, partly due to a long-term imbalance in supply. Peter Woo got a boost after he privatised his holding company Wheelock & Co., which had long been trading at a conglomerate discount. Seen as a defensive move against a weakening real estate sector, the privatisation gives Woo more flexibility as the company’s main holdings, Wharf and Wharf REIC, pursue ambitious projects in mainland China and Hong Kong. The latter includes luxury housing around Hong Kong’s prestigious Victoria Peak. Woo’s net worth is up 47 percent to $17 billion.

Other tycoons, despite having large property portfolios, also saw gains in net worth, such as Hong Kong’s richest person Li Ka-shing, up 20 percent to $35.4 billion. A 27 percent drop in the value of his CK Asset shares was offset by Li’s stake in the surging value of US videoconferencing company Zoom. Li was an early investor in the Nasdaq-listed company, which has a market cap of over $120 billion. New World Development’s Henry Cheng and his family were up by 7 percent to $22.1 billion, as shares in their Chow Tai Fook Jewellery Group rose.

Diversification of investments by No. 2 Lee Shau Kee also allowed him to hold steady, with his net worth gaining a slim $100 million to $30.5 billion. While Lee’s Henderson Land Development saw its net profit tumble more than 60 percent in the first half and its shares drop 17 percent since fortunes were last measured, those losses were offset by gains in holdings outside Hong Kong.

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Category: Hong Kong

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