Posted by
OffThePeak
11 yrs ago
Insider favors: Apex Horizon : CK's Experiment in selling hotel rooms at 10% below Residential prices
==================
(Let's keep a record of these shameful episodes)
Kicking the thread off with this one:
"banks are refusing to provide finance to buyers of units in Apex Horizon"
I heard that too, from an agent friend yesterday. But Ricacorp told me two days ago that at least 3 banks were will to finance. But I do not know which ones.
I was at Hung Hom on Tuesday, and observed "the scrum" firsthand. What a circus. But we did not buy.
I did not like the way that somelike like 100 of the 360 "hotel room" went to Cheung Kong insiders. Many of which are now keen to resell at $200-400,000 profits to end suckers - whoops, I mean end buyers.
Can you imagine if Cathay offered seats on a popular flight at christmas time first to its own pilots, and then the pilots were reselling the tickets at a 5-10% mark-up. This is insider dealing, and should be illegal. This episode was truly Hong Kong and Cheung Kong at its worst.
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Posted by traineeinvestor (3 mins ago)
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@ OffThePeak - sounds about right. I wouldn't mind being one of the insiders on these deals but since I am not, I will join the chorus and object to it - basically these deals represent a transfer of wealth from the shareholders of the vendor to the insiders.
== UNQUOTE ==
The Apex Hotel rooms were priced at a discount of about 10% to similar privately own flats in the same development. The purchases are "not withut risk", but it seems like the discount has been capture by the early buyers who are reselling.
The way the purchase process worked for non-insiders was quiote different than it was for CK insiders:
+ I presume that CK employees were able to buy whatever they wanted, choosing their flats, and handing over $200,000 checks as a deposit. On the other hand:
+ Outsiders (like me) were asked to come with a $200,000 cheque made out to CK's lawyers, and the Cheque and an ID card were handed over to the agents, who put them into a plastic envelope and gave these packages to CK, as early as about 4pm. Two big firms hired restaurants for the whole evening and allowed their clients to sit there and wait,
+ If you were "lucky", then you were assigned a specific property and told you had to buy that one, or reject it, (the agents told me: "No one has yet refused their assignment.");
+ The "unlucky" people sat there for hours waiting to see if they would be assigned a property or not. The odds wee against it, because there were maybe 500 cheques, and only about 200 flats left, after 100 CK employees had their pick of the litter;
+ This was all done in a chaotic and noisy environment, where no one really seem to understand what was going on.
+ At about 9-10 pm, people began to tweak that their so-called "purchase order" were not going to be processed, and that CK had simply managed to create another feeding frenzy, where their own employees had an inside track, a privileged position.
HK at its worst! Was my feeling at the end of the evening. A rigged game, where only the insiders knew what was happening, and could take full advantage.
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Why is it HK's shame? Because the gov't allows such things?
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Yes.
Why should insiders be able to buy a product on better terms than non-insiders?
As TI has said, this looks like it will wind up costing CK's shareholders money, since the roorms could have been sold at a higher price (5% discount?) to outsiders.
And if we saw this in any other industry (see my air ticket example), there would be an outcry
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There's more than ONE STORY in the Apex episode, and the press seems to be totally focused on the suitability of Hotel investments - I think it may be the wrong story, but hey, the press are like lemming sometimes.
Here's what the Press is talking about:
Probe launched on sales in Apex hotel over stamp duty
Cheung Kong insists sales of units at hotel in Kwai Chung are not a way to avoid stamp duty
"Buyers of Apex Horizon do not need to pay buyer's stamp duty or special stamp duty, as this is a commercial property," executive director Justin Chiu Kwok-hung said. Chiu insisted the sale was not aimed at circumventing the special 15 per cent duty on non-locals and businesses and up to 20 per cent duty if the properties were resold within three years - measures introduced last October to cool the market.
"It's never been our intention to sell units to home seekers," he said. "Living in a hotel unit is totally different from living in a residential flat. You have to comply with Hong Kong hotel rules.
===
/more: http://www.scmp.com/property/hong-kong-china/article/1153484/investors-avoid-stamp-duty-buying-cheung-kong-hotel-project
The CK Insiders seem to be preoccupied in buying the flats to flip them to outsiders, and with this way have a vested interest in the way the probe goes.
Perhaps CK did it this way (through insiders first) to get as many people involved in the transaction as possible so the government would find it hard to overturn the transactions. Yes, they are that clever.
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Here's the RISK that the flippers (of the Apex hotel units) are so eager to pass on to end-suckers, whoops: end-buyers:
"The government is studying the potential risk faced by buyers, for instance having to share renovation costs for the hotel. They may also have to pay a hefty premium when the land lease of the hotel expires.
Cheung Kong has exploited a legal loophole, not plugged until July 2003, that allows hotels to be sold in parts. It sold all 360 units in the Apex Horizon hotel in Kwai Chung on Monday and Tuesday. The units are classified as commercial properties so buyers do not have to pay stamp duty, including the 15 per cent special duty introduced on non-locals last year to cool the market."
===
/more: http://www.scmp.com/news/hong-kong/article/1154943/sale-cheung-kong-hotel-suites-face-more-scrutiny
NOTE THAT:
Normal residentila units cannot be resold in this fashion, because each level of buyer would have to pay a stamp tax.
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The gov't already issued a statement that CK didn't break any rule/law. The problem is on the buyers who can't treat the unit they bought as an ordinary residence. However, it seems that the buyers understood this already (or they're betting it can change in the future?).
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Most who were there seem to be buying:
+ Because they were cheap
+ They reckon that a "big company like Cheung Kong" would have done the necessary legal work
+ They were told be their agents that they would soon be able to resell at a profit
+ The lower Stamp Duties that apply to Commercial properties would mean they are attractive to mainland buyers (the ultimate bag holders?)
+ If they become "easy to trade chips", then may soon trade at a premium to ordinary residential flats (with all their stamp duties)
I seemed to be just about the only gwailo there, so perhaps this will not be discussed in the same detail in the English press
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In today's papers, some buyers are now more nervous that their investments are too risky, and not as promised (e.g. buyer can live in the unit they bought)...
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CX does offer inside deals to pilots - who get better deals than other CX staff, and who get much better deals than customers. Most companies offer better deals to staff. Find someone who works at I.T and they get great discounts on clothes, presumably they can sell on (even if not supposed to). Presumably if you work for say BMW the same - wonder if a lockup period? Apple, ditto. HSBC, ditto. Most companies will be really annoyed if you buy a competitor's product - try wearing adidas to a nike event or vice versa!
So insiders buying can usually be considered a good thing, if true insiders (ie employees/ directors/ sharesholders etc). Look at Woodstock for Capitalists - one big sales day for the Berkshire companies to sell stuff to insiders. I don't think anyone should be calling the ICAC just yet.
But if just preferential buying by not real insiders, but people with a potential inside track, smells a bit. But if you wanted to sell your apartment to Asiaxpat readers at 5% off before you released to market, we wouldn't care. I think TI is right, we only annoyed because we aren't special.
If people line up at Macau to gamble or Hung Hom to buy a hotel unit by lucky dip and have the chance to re-sell, I really don't give a toss whether they win or lose. Spend your money and take your chances. The whole thing is just greed and doesn't interest me much.
The core problem, as pointed out be David Webb is that the ones making the stamp duty rules own property via offshore companies and can just sell the shares and not be subject to the rules they announced. If you did this you won the jackpot, if you didn't you didn't. Notice how they did not make such transactions subject to stamp duty. That the true work by insiders. That needs a bit of a look at.
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I wonder how long before we see Apex sales at breakeven?
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by hkxxxpat (1 hr ago):
"CX does offer inside deals to pilots - who get better deals than other CX staff, and who get much better deals than customers. Most companies offer better deals to staff. Find someone who works at I.T and they get great discounts on clothes..."
No big problem with that. They are not buying in order to "flip" them to outsiders at a 10% markup, as the CK insiders were doing. If there were restrictions on resale by insiders, I would have been less critical.
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The Lands Department has threatened to take legal action if it finds buyers of Cheung Kong's controversial hotel project living in the units.
The warning came as 95 per cent of the investors in the 360-room Apex Horizon hotel had signed, or arranged to sign, the sales contract yesterday, according to the property giant. The rest have asked for a postponement.
Lands director Bernadette Linn Hon-ho said: "Anyone trying to hide the fact that they keep the hotel rooms for private residential use, whether it's the developer or buyers ... don't think we will do nothing.
"We won't rule out taking some cases to the court."
She added that officers would be dispatched to patrol the hotel to check for any misuse.
. . .
Officials were unable to tell the panel how many other hotels could be sold in a similar way and what policy change could be enacted to prevent such sales.
A receptionist at Apex Horizon yesterday said all rooms were fully occupied, and that it would take no further reservations.
===
http://www.scmp.com/news/hong-kong/article/1159310/apex-horizon-hotel-use-under-scrutiny
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"Officials were unable to tell the panel how many other hotels could be sold in a similar way and what policy change could be enacted to prevent such sales."
The agents told us that CK has two more hotels that can be parceled out in a similar way
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Apex Horizon hotel room buyer fails to auction off suite
(from 4 days ago)
– One of the buyers in last month's high-profile sale of suites in the Apex Horizon hotel has been unable to auction off the purchase, even at a reduced price...
. . .
"Unlike auctioning a property, we would be auctioning something like a rental licence," he said, although he declined to elaborate on exactly what risks were involved.
The asking price of the auctioned unit was HK$3.08 million - reportedly about 4 per cent lower than its purchase price, reflecting a sharp decline in buyer enthusiasm.
http://www.scmp.com/news/hong-kong/article/1180381/apex-horizon-hotel-room-buyer-fails-auction-suite
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To bring the story to a conclusion...
Horizon sales lapse
In a startling about-face, Cheung Kong Holdings (0001) has revoked the sale of all 360 rooms at its controversial Apex Horizon Hotel project and said it will reimburse the deposits.
/TheStandard : http://thestandard.com.hk/news_detail.asp?we_cat=11&art_id=133718&sid=39658060&con_type=3&d_str=20130514&fc=2
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CK's decision would appear to clean up the mess, but not quite:
But buyers of rooms in the secondary market face uncertainly. According to the Land Registry, 31 rooms have been resold with most of the sellers pocketing about HK$85,000- HK$502,000. Some, however, lost up to HK$335,000 on the transactions.
Cheung Kong said it will only deal with the original buyers of the rooms who then have to settle with those who bought the unit from them.
Cheung Kong, however, could not provide any details on how it would reimburse room buyers the commission they paid to agent.
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What a mess.
The obvious question is whether CK actually has the right to unilaterally revoke the original contracts and, if so, on what terms? I don't know.
If this had happened a couple of weeks earlier, the disenfranchised buyers of Apex units could have joined with the port workers protesting outside Cheung Kong Centre.
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Haha.
I think most folks were "underwater" by the time the Plug was Pulled.
Did you see this:
" Some, however, lost up to HK$335,000 on the transactions."
Probably CK saw the drop coming, and wanted to wait until they could terminate the deal with little protest.
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Civic Party member and barrister Ronny Tong is already saying they can sue for compensation. Wouldn't like to be in Cheung Kong's law firm. Cheung Kong should do what DBS did a few years back when it accidently chucked out a load of safe deposit boxes. Offer money back plus a few hundred thousand per contract to clean up. Will they? No.
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