Something strange is going on in the neighborhood.
Beijing’s Liaison Office in Hong Kong reportedly sold its two office units at Shun Tak Centre in Sheung Wan for HK$148 million.
At HK$28,000 per square foot, the Liaison Office gained HK$100 million for the property above the Hong Kong-Macau ferry terminal, which it bought almost 30 years ago.
Why sell in a booming market? Is there something that director Zhang Xiaoming knows that we don’t?
Or is this what he meant when he advised Hong Kong officials to “brave the wind, sail the ocean” at the annual spring reception?
This is not the first time that the Liaison Office is cashing out amid the property hype. Last November, it sold a house at 6 York Road in Kowloon Tong, which it acquired in the mid-80s, for HK$238.4 million.
The house was famously next to the two residences owned by former chief secretary Henry Tang Ying-yen, whose illegal basement was one of the chief reasons he lost the chief executive race three years ago.
So what’s the score?
Is another round of cooling measures in the offing for the property market? That makes sense following news that the residential property market jumped 13 percent last year, and tripled in the last six years.
Also this week, the Monetary Authority hinted at tightening mortgage rates should there be a sharp increase in home prices.
We suppose the Liaison Office is in no shortage of money to spend. Beijing is likely to be extra generous to the special administrative region in order to maintain stability in the post-Occupy era. Existing pro-Beijing groups are expected to get more funding, while new organizations who can come up with viable plans for a patriotic movement are assured of ample rewards.
So cashing out of Hong Kong appears to be a bit out of line, if not politically incorrect, given that cash-rich Beijing is closely monitoring property deals that may be tainted with graft.
We would hugely underestimate the Liaison Office if we view it like a tiny listed company that will cash out for tiny gains. No way. It must be after something big.
Are the good people of Beijing’s representative office raising a war chest for a grand plan? Are they joining a tender and planning to build small apartments for the disenchanted Hong Kong youth at low prices? Lots of brand mileage there.
Or are they planning to expand in Sai Wan, taking advantage of the recent Kennedy Town extension? If so, listing is not out of option, or at least some developers can pay a political insurance by selling their land in the area at a discount.
What about coordinating their efforts with China Overseas Land or Fosun, both of which have participated in land auctions in the city in the past two years? That could challenge and break the local property oligopoly.
Like any state-owned enterprise, Liaison Office is also open for reforms. Selling properties is only the first step. For the next, they will probably keep us guessing.
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