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Hong Kong Police Seize Henderson Files, Shares Fall

The 39 Conduit Road residential building
The 39 Conduit Road residential building, developed by Henderson Land Development Co., center rear, rises above the surrounding buildings of Hong Kong. Photographer: Jerome Favre/Bloomberg

July 15 (Bloomberg) -- Hong Kong police seized documents from Henderson Land Development Co. as part of an investigation into collapsed luxury apartment sales. The shares fell.

Officials took the documents from a Henderson office and invited “a number of people” to assist the investigation, the police said in a faxed statement late yesterday, without elaborating. Henderson, controlled by billionaire Lee Shau-kee, is at the center of a government probe after 20 luxury unit sales worth HK$2.67 billion ($343 million), including one it claimed would have fetched a record price, fell through.

The raids on Henderson came a day after Chief Executive Donald Tsang told lawmakers he will strengthen rules if needed to regulate home sales. The government is facing an outcry amid concerns about housing affordability in the former British colony where home prices have surged 38 percent since the beginning of 2009.

“It is hard to prove if anyone has criminal liability in this case, but the government is sending out a clear warning signal to the developers: please discipline yourself or I will impose more restrictions on home sales,” said Raymond So, a professor at the Chinese University of Hong Kong’s department of finance.

Shares of Henderson fell 2.1 percent to HK$46.70 at the close in Hong Kong. The stock is down 20 percent this year, the worst performer among seven of the city’s biggest developers tracked by the Hang Seng Property Index. The index lost 5.7 percent in 2010 and dropped 1.1 percent today.

Premature Conclusions

The investigation doesn’t impact the company’s operations and it hopes the issue will be clarified “as soon as possible,” Henderson said today in a statement to the Hong Kong stock exchange. The developer welcomes the police probe and will “fully cooperate” in providing information, it said.

“At this stage it’s really hard to tell what’s going to come out from the investigation,” said Eddie Hui, a professor at the building and real estate department of the Hong Kong Polytechnic University. “Even if the police took some documents from their office, it still doesn’t mean they’ve committed any wrongdoing. We have to be careful in drawing any premature conclusions.”

Henderson’s $500 million of 5.5 percent bonds due 2019 were trading at 99.62 cents on the dollar to yield 5.552 percent as of 4:12 p.m. in Hong Kong, down from 100.23 cents on the dollar and a yield of 5.467 percent yesterday, according to Royal Bank of Scotland Group Plc prices.


Henderson has repeatedly denied any wrongdoing in the way it handled the transactions as the government has sought details on the sale agreements after 20 of the 24 sales at 39 Conduit Road in the Mid-Levels district on Hong Kong Island were canceled. One of the aborted sales would have set a world record price of HK$88,000 ($11,300) per square foot.

Nobody has been arrested in connection with the investigation, Commissioner of Police Tang King-shing said in comments broadcast on local television yesterday.

Officers from the police commercial crime bureau also took documents from a law firm related to the transactions, the English-language South China Morning Post reported today, without citing anyone. Police spokesman Horace Chan declined today to confirm whether they had raided a law firm.

“A raid on a law firm is very unusual,” said Nick Gall, a partner at Hong Kong law firm Gall & Lane. “They could be looking to get a sense of the identity of these buyers and whether they were connected to Henderson Land. Henderson is a long-established company in Hong Kong with a good reputation. I don’t see the government would lightly raid a law firm.”

Special Meeting

“The company strongly rejects” allegations that there have been irregularities in the sale of the apartments, it said in a statement published in the English-language South China Morning Post newspaper this week.

The city’s lawmakers July 12 held a special session in parliament to discuss the transactions. The developer declined to attend the meeting.

“This is a very high-profile case involving one of the biggest and richest companies in Hong Kong,” said James To, a Democrat Party legislator. “It goes without saying the police are being extra-cautious in handling the case. The fact that they were able to obtain the search warrant from the Department of Justice means they have some reasons to believe there are wrongdoings.

“Having said that we have to bear in mind there’s a big difference between seizing documents from their office and having enough evidence to formally prosecute them for any criminal activities.”

New Rules

The developer said June 16 it has sold four of the units at 39 Conduit Road and will record a charge of HK$734 million in its half-year results.

The government in June introduced nine rules on new home sales, including the use of walk-through models of apartments, known as show flats, that developers use to entice buyers before a building is completed. Hong Kong last year raised down-payments on luxury homes to 40 percent from 30 percent and clamped down on marketing techniques.

Lee, with a fortune Forbes magazine estimated at $18.5 billion in March, is Asia’s fourth-richest individual and Hong Kong’s second behind Li Ka-shing, chairman of Cheung Kong (Holdings) Ltd.

To contact the reporters on this story: Kelvin Wong in Hong Kong at

To contact the editor responsible for this story: Andreea Papuc at

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