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Sun Hung Kai Rode Boom to Become World’s Second Largest

Sun Hung Kai Rode Housing Boom to Become World’s Second Largest
The Sun Hung Kai Centre building stands in Hong Kong, China. Photographer: Jerome Favre/Bloomberg

Sun Hung Kai Properties Ltd., the Hong Kong developer at the center of a corruption probe, started by investing in industrial buildings and survived a family brawl to become the world’s second-largest real estate company by value.

The builder of Hong Kong’s tallest office tower listed on the city’s stock exchange in 1972 and went on to benefit from a three-decade surge in home prices. The company’s stock market value stands at more than $30 billion, with assets of HK$442 billion ($56.9 billion) as of December. It lost $4.9 billion of market value today after anti-graft investigators arrested the billionaire brothers who run it.

The former British colony, where six of the 10 wealthiest individuals control listed developers, is the world’s most expensive place to buy a home, according to Savills Plc. Home prices in the city have surged more than 70 percent since early 2009 on record low mortgage rates and a lack of new supply.

“Just like their major competitors, Sun Hung Kai was in the right industry during the biggest housing demand boom in Hong Kong’s history,” said Eddie Hui, a professor in the Department of Building and Real Estate at the Hong Kong Polytechnic University. “They’ve rode on that momentum and have come a long way.”

Sun Hung Kai is known for its high-end apartments, which have helped distinguish the company, Hui said.

Graft-Squad Arrests

The shares plunged as much as 15 percent, the most since January 1998, and were 13 percent lower at HK$96.50 at the close of trading in Hong Kong after a suspension yesterday. The stock has dropped 17 percent since the company said March 19 Executive Director Thomas Chan Kui-Yuen was arrested by the Independent Commission Against Corruption.

Simon Property Group Inc., the biggest U.S. mall owner, is the world’s biggest real estate company by market value with $44.3 billion, according to data compiled by Bloomberg.

Hong Kong’s anti-corruption agency arrested Sun Hung Kai billionaire co-chairmen Thomas and Raymond Kwok in connection with a probe into offenses suspected to have been committed under the Prevention of Bribery Ordinance, the company said in a statement late yesterday.

The company accounted for more than a third of all new-home sales in Hong Kong last year, according to Centaline Property Agency Ltd. The builder also has projects in at least 10 other Chinese cities.

Family Wealth

The two Kwok brothers and their mother lost almost $2 billion on paper today, according to data compiled by Bloomberg. The shares, a 42.9 percent stake in Sun Hung Kai, are in a family trust held by HSBC Holdings Plc and are worth $13.9 billion.

Walter Kwok, 60, became chairman in 1990 after his father’s death and was ousted in 2008 following a boardroom fight led by brothers Thomas, 59, and Raymond, 58. Their mother Kwong Siu-hing took over as chairman before Thomas and Raymond replaced her and now share the position. Their ages are as cited in the company’s latest annual report.

Walter applied to the court in 2008 to prevent the board from removing him from office, alleging that his brothers opposed his inquiries into impropriety in the way the company awarded construction contracts, and other corporate governance issues. Walter is still a non-executive director of the company.

Henderson Land

Walter was ousted from the family’s trust that controls Sun Hung Kai in 2010. He has since set up his own property fund.

Kwok Tak Seng co-founded the company with billionaire Lee Shau-kee, who now controls Henderson Land Development Co. and is the city’s second-richest man, and Fung King Hei in 1963. Lee remains a non-executive director of Sun Hung Kai.

Hong Kong’s richest man Li Ka-shing, who helms Cheung Kong (Holdings) Ltd., the city’s second-biggest developer by market value, is worth $24.4 billion, according to the Bloomberg Billionaires Index. The second wealthiest is Henderson’s Lee at $19.5 billion.

Sun Hung Kai built and runs the 118-floor International Commerce Centre, which at 484 meters (1,588 feet) is Hong Kong’s tallest building. The developer also manages luxury apartment projects including the Arch in West Kowloon and the Larvotto in the Island South district.

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