Nuns in the property habit
20 November 2015
The Mother Superior of the Soeurs de Saint Paul de Chartres (Hong Kong) (SRSPC), a statutory body, has conditionally agreed to fork out HK$390m for a pair of vacant residential sites at 8 and 10 Lomond Road, Kowloon, which is across the street from the private hospital they run, St. Teresa's. The company that owns the land changed hands in January for just $298m, so it is up 30.9% since then.
The vendor is Super Group Development Ltd (SGD) which is 100% owned by Goldee Holdings Ltd (Goldee, BVI). Goldee is 51% owned by Celebrate International Holdings Ltd (Celebrate, 8212), which acquired the stake from then-100% owner Champion Prospect Ltd (Champion Prospect, BVI), the owner of which has not been disclosed. You might think that is odd, but HK Listing Rules do not require companies to say whom they are really dealing with, allowing them to hide behind BVI shells. Celebrate announced the sale by SGD yesterday.
Celebrate began the acquisition process with an announcement on 2-Dec-2014 when it signed a non-binding memorandum of understanding to buy 100% of Goldee for HK$315m, but this was superceded by an agreement on 16-Mar-2015 to buy 51% for $160.65m, implying the same valuation of $315m for 100%.
The announcement revealed that Goldee had acquired SGD for $298m in a transaction which completed on 14-Jan-2015. We pause to note that this is a common method of avoiding the punitive 8.5% Double Stamp Duty and 15% Buyer's Stamp Duty which would otherwise apply to acquisitions of residential sites by companies, saving 23.5% or $70.03m. Instead, stamp duty of 0.2% ($0.59m) was payable on the transfer of SGD, being shares in a HK company. SRSPC will have to pay 23.5% on the direct land purchase, but can claim a refund after it obtains planning approval to redevelop the sites under section 29DD of the Stamp Duty Ordinance.
SGD was incorporated on 8-Jan-1997 and acquired 10 Lomond Road for HK$34m on 21-Apr-1997. Starting 13 years later, the identically-sized next-door site, in 3 apartments, was acquired between 23-Aug-2010 and 21-Oct-2011 for a total of HK$76.4m. So the two sites combined cost SGD HK$110.4m, plus holding costs.
A Celebrate circular on its acquisition of 51% of Goldee went out on 26-May-2015 and the deal was completed on 17-Jun-2015.
A clue as to the owner of the vendor, Champion Prospect, lies in the directors of Goldee and SGD. Michael Ng Kwok Wing was appointed as a director of SGD on 14-Jan-2015, the day that Goldee completed the acquisition of SGD, and he was the only director of Goldee from its incorporation on 26-Sep-2014 at least until 28-Feb-2015, the cut-off date in the circular. He was still a director of Goldee when on 13-Oct-2015 Celebrate lent him HK$5m, and it disclosed that the other 49% of Goldee was owned by a company "controlled" by him.
SGD had probably been flipped at least once before that though, because all but 1 of its directors changed on 17-Jun-2013, when Mr Mak Law Mo, Mr Ng Kam Tong and Mr Tam Fung King resigned, and a Mr Chan Chi Keung and Mr Denthur Lee Kwok Yin were appointed, both resigning on 14-Jan-2015. Denthur Lee Kwok Yin was once a member of "key management" at Convoy Financial Holdings Ltd (1019) but sold his 20.35% stake in its controlling shareholder, Convoy Inc., on 13-Mar-2013. The founder of Convoy group was one Chan Chi Keung, who sold his 19.69% stake in Convoy Inc. on 22-Feb-2013. One person was a director of SGD throughout the track record period from 1-Jul-2011 to 28-Feb-2015, Mr Wong Hok Sum, a name which briefly appeared in 2008 as a representative of Convoy Asset Management Ltd.
The leasehold interest in 8-10 Lomond Road runs for 75+75 years from 1937 (if you believe the valuation report, p177) or 1939 (if you believe the Letter from the Board, p23) and is restricted to "semi-detached houses of European type" with a maximum height of 35ft and not within 10 feet of Leven Road (now known as Lomond Road). The combined site area is 846.85 sq.m. (9115.5 sq. ft.) and the existing building plan from 1953 allowed a saleable area of 1012.6 sq. m. in two semi-detached 3-storey buildings. However, the Group B zoning in the Outline Zoning Plan allows for a plot ratio of 5, so if they pay a lease modification premium then they should be able to develop a gross floor area of 45,577 sq. ft.. That means that SRSPC has already paid about $8557 per gross square foot, plus construction costs and lease modification premium.
Up the road at 20-22 Lomond Road, the Sisters in 2009 obtained approval (more) and developed a 15-storey nurse training centre and residential quarters at a plot ratio of 5, visible with the red roof in the Google maps view above, so perhaps they have similar plans in mind for their latest acquisition.
© Webb-site.com, 2015
Organisations in this story
- Celebrate International Holdings Limited
- Convoy Global Holdings Limited
- Goldee Holdings Limited
- MOTHER SUPERIOR OF THE SOEURS DE SAINT PAUL DE CHARTRES (HONG KONG) (THE)
- ST. TERESA'S HOSPITAL
- SUPER GROUP DEVELOPMENT LIMITED
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