Sale of US government’s Shouson Hill Road property in Hong Kong proceeds after Beijing approves transaction

‘With the consent from the Central People’s Government of China, the transaction will proceed’: Hang Lung Properties
Approval for sale comes amid less contentious relations between Washington and Beijing under Joe Biden

Hong Kong property

Cheryl Arcibal

Published: 8:00pm, 18 Feb 2021

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Hong Kong has approved the sale of one of the United States government’s most valuable assets in the city to local developer Hang Lung Properties, after the US state department obtained permission from Beijing.

The transaction, a multimillion-dollar thorn in the side of US-China relations, was confirmed by Hang Lung on Thursday, which said the seller had fulfilled diplomatic protocols and “now with the consent from the Central People’s Government of China, the transaction will proceed”.

A US Consulate General spokesperson said on Thursday that the State Department was not at liberty to comment on the specific terms of ongoing contractual transactions.

The HK$2.6 billion (US$330 million) sale of six multistorey villas at 37 Shouson Hill Road has been registered by the Land Registry. It has been acquired by Delta Bridge Limited at a 20 per cent discount on its valuation. Ronnie Chan, Hang Lung’s chairman, is a director at Delta Bridge.

Approval for the sale comes at a time of what are being viewed as less contentious relations between Washington and Beijing, under the administration of President Joe Biden, who took office last month. On Tuesday, Biden said he had a two-hour phone conversation with his Chinese counterpart, Xi Jinping, recently. It was the first phone call between the two world leaders.

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The six mansions, each with as many as 10 bedrooms, measure about 47,382 sq ft (4,400 square metres) in total, according to a tender document seen by the South China Morning Post . Hang Lung paid HK$257 million as a 10 per cent deposit for the villas, and another HK$770 million to Hong Kong’s government as stamp duty, according to its financial results filed with the Hong Kong stock exchange.

“This could bode well for the relationship between the two countries, but it could very well just be a commercial decision. The Hong Kong government needs money for its day-to-day operations, and has a huge budget deficit. But this transaction allows the market some room for wishful thinking, that both countries would like to improve their relations in the coming days,” said Louis Tse Ming-kwong, the managing director of Wealthy Securities.

Hang Lung said in December last year that the sale had run into a diplomatic snag and could not be registered because of “diplomatic obligations” imposed by Beijing on the US consulate in Hong Kong.

Relations between the US and China had hit a new low during the administration of former president, Donald Trump, who initiated a trade war with Beijing and imposed various sanctions on mainland Chinese and Hong Kong government officials.

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While Trump was right to take a tougher stance on China, Biden will take a different approach to dealing with Beijing, according to Secretary of State Anthony Blinken.

On Thursday, Hang Lung said that it was now “working with the seller on the completion and will make an announcement at the appropriate time”.

Late last year, the developer described the snag as “exceptional” and said that it had not been anticipated by either Hang Lung or the tenderer of the property at the time of the sale. It had also said it would proceed with the deal after “careful consideration”, if the US consulate could comply with the diplomatic obligations.

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The US government bought the land at 37 Shouson Hill Road in June 1948 for an unknown price when Hong Kong was still a British colony. Construction on the site was completed in 1983. Hang Lung, which mainly develops shopping centres and offices, said it will redevelop the site into multiple luxury detached houses by 2024.

Details of the tender came to light on May 30 hours after Trump announced that he would revoke Hong Kong’s special customs status, in response to the Chinese legislature’s announcement introducing the national security law for the city.

This article appeared in the South China Morning Post print edition as: Sale of U.S. site wins approval of beijing