China stymies sale of US consulate staff compound in Hong Kong

Hong Kong

HONG Kong developer Hang Lung Properties said it was unable to complete the purchase of a property owned by the US consulate as scheduled on Wednesday, because it involved foreign affairs between China and the United States.

The latest twist in the HK$2.57 billion (S$439 million) deal in an upscale location in the financial hub comes amid growing tension between the world's two biggest economies over a host of issues.

The move comes at a time of frayed ties between China and the US, with the Trump administration criticising Beijing's efforts to suppress dissent in the Asian financial hub, and imposing sanctions on top officials like Chief Executive Carrie Lam.

Beijing has accused the Hong Kong consulate of interfering in the country's internal affairs, as part of an unprecedented tit-for-tat this year that saw both sides close consulates and oust diplomats.

Hang Lung, which agreed in September to buy the property used to house US consulate staff, said in a stock exchange filing on Wednesday that it received a letter from the Land Registry last week that stated the property is "not an ordinary real estate property".

The letter said that the Chinese government has advised the Hong Kong government that if the US Consulate-General intends to rent, purchase or sell any real estate in Hong Kong, the US government must make a written application to China at least 60 days before the deal, and the deal shall not proceed without the written consent of the Chinese government.

"The matters as stated in the letter were exceptional and were not made known to or anticipated by (Hang Lung)," the developer noted.

It said that after informing the US, the US on Tuesday contested the necessity to comply with the diplomatic obligations and did not produce the evidence as demanded.

The group is currently evaluating and taking legal advice on the various appropriate actions, including exploring the feasibility of extending the time for deal completion.

The compound in Shouson Hill, on the southern side of Hong Kong Island, comprises six low-density apartment buildings spread over almost 95,000 square feet, and offers ocean views over Deep Water Bay.

Hang Lung planned to pour a further US$4 billion into the site to develop luxury detached houses.

Shouson Hill is one of the city's most exclusive neighbourhoods, where some of the richest tycoons, including Li Ka-Shing, own houses. The US government purchased the property in 1948, records lodged with the Land Registry show.

A US consulate spokesperson told Reuters that additional time is needed for the buyer and seller to complete the administrative processes required for closing on the property, and the department is not at liberty to comment on the specific terms of ongoing contractual transactions.

During the tender of the property, property consultants said many developers in mainland China and Hong Kong were hesitant to venture an offer because it was seen as politically sensitive. REUTERS, BLOOMBERG