Company is selling commercial properties in Admiralty, Tsim Sha Tsui and Causeway Bay, as well as luxury residential assets

Hong Kong property investment firm Gale Well Group is set to offload assets worth around HK$3 billion (US$386 million) amid banks’ wary attitude towards the real estate market, according to the firm’s founder.

“Many banks have looked down on the property market and kept on calling investors’ loans,” said Jacinto Tong Man-Leung, the firm’s founder, vice-chairman and CEO. “As a result many investors are in a very bad financial situation and have to sell some of their properties at a price lower than the market price.”

As rental incomes sink and valuations shrink, more property owners are struggling to meet their debt obligations amid high rates, leading to a surge of distressed assets. In 2024, roughly three out of four property transactions were distressed sales, according to a property agent.

In addition to calling loans – demanding immediate repayment – banks are also adjusting mortgages on commercial buildings to narrow loan ratios, Tong said. “They want you to top up the difference, as prices have dropped, or they would ask you to put down enough for six to 12 months of principal and interest,” he said.

While Gale Well had not had any loans called, “we must comply with the bank’s borrowing ratio”, Tong said.

Gale Well was selling around 10 per cent of its property portfolio to make its loan ratio more secure and “put the bank’s mind at ease, although we are not very aggressive investors”, Tong said.

Last month, the company sold the 26th floor of The Sun’s Group Centre in Wan Chai, which was its headquarters, for HK$80 million, or around HK$10,800 per square foot.

It also put up several other properties for sale in the same month. In Admiralty, it offered the 39th Floor of the Far East Finance Centre at an indicative price at HK$250 million, or HK$23,148 per square foot, and it put a 12,158 sq ft office space on the 39th floor of Lippo Centre Tower 2 up for sale at HK$277 million, or HK$22,800 per square foot.

It also appointed agents to sell two luxury residential sites on the south side of Hong Kong Island last month.

The first is a 10,800 sq ft land site at 68-70 Chung Hom Kok Road, put on the block for HK$380 million. A property agency said adjacent properties of similar size sold for HK$900 million in 2021.

The second property, Jade Beach Villa at 3-7 Horizon Drive, Chung Hom Kok, comprises 12 flats and 18 houses on a site area of around 102,000 sq ft. The asking price is HK$2 billion, according to a property agency.

Gale Well has also been seeking buyers for its 21-storey Austin Plaza in Tsim Sha Tsui at HK$880 million since January, as well as the 26-storey Butterfly on Morrison Boutique Hotel in Causeway Bay at HK$630 million since last November.

“As rental incomes plummeted and were not enough to cover the interest, selling the properties was the solution,” Tong said.

One part of the company’s portfolio that is not for sale is three floors of The Center in Central – once the city’s most expensive skyscraper when it was shrewdly sold by the city’s wealthiest man, Li Ka-shing, at a property market peak. Gale Well bought the floors between 2018 and 2021 for more than HK$2 billion.

Additional tariffs imposed by US President Donald Trump on trading partners including China are widely expected to stoke inflation, scuppering any significant interest-rate cuts by the Federal Reserve.

If the Fed prolongs a pause on its policy easing moves, interest rates in Hong Kong will remain significantly higher than their level in 2021, when both property sales and secondary home prices recorded their peaks.

Hong Kong’s mortgage and borrowing rates hovered at a 23-year high until September, after 11 increases between March 2022 and July 2023. A downward cycle began with cuts in October and December.

Market sentiment had improved compared with September last year, Tong said.

“We are receiving offers from potential buyers who are really interested in buying as the property market is more stabilised now”, he said. As banks were less active in lending for commercial properties, these buyers were either cash-rich mainlanders or conservative businesspeople in Hong Kong who were able to pay in full, he said.

Tong expected to see banks’ attitudes towards borrowing relax in the second half of the year, but he said he would not start buying at the moment. “To protect the company’s capital is of utmost importance,” he said.

Gale Well is in good company unloading assets amid the current environment.

Late Macau “King of Gambling” Stanley Ho Hung-sun’s property at 20 Kimberley Street in Tsim Sha Tsui has been put up for sale at HK$88 million, a property agency said on Tuesday. Meanwhile, singer and actor Nicholas Tse Ting-fung recently leased out a shop in Central at a 40 per cent discount after it remained vacant for more than a year, agents said.