Henderson Land Development Co.’s refusal to meet Hong Kong lawmakers won’t stop legislators discussing the collapsed sale of 20 luxury apartments worth HK$2.67 billion ($343 million), the subject of a police investigation.
“It is up to the company to decide whether to attend or not, but we will hold the meeting even without their participation,” Legislative Council housing panel Chairman Wong Kwok-hing said in a phone interview today.
Hong Kong’s government increased its scrutiny of property developers after Henderson’s October announcement that one of the apartments sold at 39 Conduit Road had fetched a record HK$88,000 a square foot. Twenty of the 24 sales in the development were later cancelled. The government has sought details on the sale agreements.
Members of the housing panel on July 5 voted 7-to-1 to invite the developer, controlled by billionaire Lee Shau-kee, to the July 12 meeting. Henderson said a Legco appearance is “inappropriate” because it has “sufficiently disclosed” details on the transactions and an investigation is still under way, according to a press release last night.
Hong Kong police and other law enforcement agencies are investigating the sales at the project, Transport and Housing Secretary Eva Cheng told lawmakers during the Legco session. Cheng declined to specify the other agencies and give a schedule for the investigation.
The police declined to comment on the investigation, spokesman Horace Chan said by phone today.
“This probably won’t hurt their reputation much as the failed transactions themselves have already done enough damage,” said Raymond So, a professor at the Chinese University of Hong Kong’s department of finance. “It’s now up to the legislators whether they want to keep chasing this.”
The lawmakers have also invited representatives of the Land Department, Hong Kong Housing Authority and Securities and Futures Commission to attend the meeting next week, Wong said. Henderson submitted its responses to the government’s queries on the sales to the Council on July 5.
Henderson yesterday said it is a “common practice” in the industry to sell flats to shell companies. When the sales collapsed, it retained only 5 percent of the deposits and didn’t seek the price difference because it wants to avoid legal claim procedures and release the apartments back to the market “immediately.”
Henderson rose 2.3 percent to HK$47.10 at 3:04 p.m. in Hong Kong trading today, cutting its loss this year to 19 percent.
This treatment is more “in line with business logic,” Henderson said in the release. Even if the claim is successful, it is “hard to obtain anything” from a shell company, it said.
Henderson on July 2 took out full-page advertisements in most local newspapers, claiming all transactions were “genuine” and “buyers weren’t connected to the company.”
Henderson used standard contractual terms in the transactions and booked the sales according to Hong Kong accounting standards, the statement said.
Henderson was questioned last month for a seventh time by the city’s government, which asked the company to provide copies of title deeds and additional details on how it calculated the interest penalty for late payments.
Hong Kong housing prices have risen 9 percent this year, adding to 2009’s 29 percent advance. Financial Secretary John Tsang in February announced a higher stamp duty on luxury properties and has pledged to raise the supply of land as it seeks to reduce the risk of a property bubble.
The Democratic Party proposes to invoke Legco’s powers and privileges ordinance to order the government to table all correspondence with Henderson on the Conduit Road project, the party’s lawmaker Li Wah-ming said by phone today.
“We will keep chasing the Henderson’s case,” Li said.