The depreciation in half a year is 20% with the actual loss at HKD2.57 billion, and the buyer is an oversea company.
Goldin Financial (0530) had announced earlier that its Kai Tak residential site was negotiated for purchase. Finally, the company declared yesterday that the site was sold to an oversea company for about HKD7.04 billion, lower by HKD1.86 billion or 20.9% than the purchase price of HKD8.9 billion in November 2018. The sq ft floor area land price has decreased from nearly HKD15,500 to about HKD12,250, which is a rare land transaction in recent years. According to Goldin's announcement, the loss is expected to be about HKD2.571 billion, and the company considers to keep more cash, because of the massive amount of money needed in this project, the unclear property market outlook, and the economic slowdown in Hong Kong. The proceeds are to be used for repayment of borrowings and general working capital.
Journalist Ngan LunLok
Goldin announced yesterday that it had sold the No.4 residential site of Kai Tak District 4B to Top Family Group Limited for about HKD7.04 billion. The project can build a floor area of about 574,700 sq ft. Foundation work has not begun yet. It is known that the land site was owned by Goldin and a major shareholder Poon So-Tung in the form of a joint venture company, and each party holds 60% and 40% interests, respectively. The announcement states that the net proceeds from the sale were about HKD7.04 billion, which was intended to be used to repay borrowings and general working capital.
They are worried about economic contraction and would like to hold more cash.
The groups express that the challenges posed by the weak global economy in the business environment is increasing, and Hong Kong's economic activity has declined, showing signs of economic contraction. Therefore, the directors believe that there are still uncertainties in the long-term development of the Hong Kong property market. The property is in the initial stage of development, there would be huge capital required for the project, the property market outlook is uncertain, and the overall economy in Hong Kong slows down. Considering the above factors, the company finally takes a prudent approach to retain more cash for the group's existing business.
Going through the data, Goldin bought the site for more than HKD8.9 billion in November 2018. The book loss this time is HKD1.86 billion, with a loss of over 20%. The announcement states that the sale was expected to record a loss of about HKD2.571 billion. The project was initially scheduled to be completed and available for occupancy on or before September 30, 2024. The market estimates that the transaction may affect the completion time. Goldin Financial stock fell 2.1% yesterday to close at HKD1.39.
The interim results turn to loss by nearly HKD500 million.
The proceeds from the sale will mainly be used to reduce the group's borrowings. It is understood that the group's bank loans and other loans due within one year are about HKD8.83 billion on its financial statements as of the end of December 2019, and the cash on hand is only about HKD2.38 billion. According to the interim results announced at the end of February, Goldin recorded a loss of HKD478 million, turning from profit to loss compared with a net profit of HKD742 million in the same period last year. The sale of Kai Tak land this time is expected to relieve the company's financial pressure.
It is not the first time Goldin giving up the land development in Kai Tak. In June last year, it had abandoned the transaction of the No. 4 commercial land in District 4C (the purchase price was more than HKD11.1 billion), which was the first in Hong Kong 's history of land sales. The company explained at that time that they worried about the impact of social instability. Goldin has no any development project in Kai Tak after this transaction. The projects invested by Goldin and related parties in the area around Kowloon in recent years have dropped from four in peak to current two, which are Grand Homm, Sheung Shing Street, Ho Man Tin, and Ho Man Tin Station Phase 1.
It should also be noted that Grand Homm, which has been launched in October last year, had announced nine sales arrangements related to bidding before and after. Unfortunately, only 18 units among a total of 401 units have been sold until today. The sales are rather bleak.
The prices for land sites in the former runway area has dropped by nearly 24% in half a year.
No. 4 land site in Kai Tak District 4B is located in the area of the former runway area, viewing Kwun Tong city view. In November 2018, the market considered Goldin grabbing land at a high price because its bid was higher than the cost of the previous site in the same area, viewing city view, by 7%. It almost was a loss transaction for buying the site, affected by the amendment crisis and the Sino-US trade war. According to data, in July last year, the sq ft floor area land price of No.1 land site also viewing townscape in District 4A on runway area, Kai Tak has decreased to HKD11,842, which means the land value has fallen by nearly 24% in just half a year. The outbreak of the COVID-19 epidemic this year has caused turmoil in the global market, and the property market has become even more depressed. Base on the market downturn for ten consecutive months, and this transaction with loss, we can imagine that the land price in this area will only be lower.
