China Stymies Sale of U.S. Consulate Staff Site in Hong Kong

(Bloomberg) -- China has halted the sale of the U.S. consulate staff compound in Hong Kong, citing Washington’s failure to secure approval from Beijing for the $332 million deal.

Hang Lung Properties Ltd., which in September agreed to pay HK$2.57 billion ($332 million) for the site, said Wednesday it was unable to complete the purchase. Hong Kong’s Land Registry has informed the developer the sale involves foreign affairs between China and the U.S. and can’t be regarded as an ordinary commercial transaction, Hang Lung said in a stock exchange filing.

China’s Foreign Ministry said any real estate transaction involving U.S. embassies and consulates in China, including Hong Kong, requires a written application to the government. “Only after getting an approval in writing can they proceed with relevant procedures,” ministry spokesman Wang Wenbin told a briefing in Beijing on Wednesday.

The U.S. government must make such an application at least 60 days before any intended deal. The Land Registry hasn’t received any such documentation and is unable to register the sale, Hang Lung said. It wasn’t immediately clear how long the requirement had been in effect or how broadly it applied.

The move comes at a time of frayed ties between China and the U.S., with the Trump administration criticizing Beijing’s efforts to suppress dissent in the Asian financial hub, and imposing sanctions on top officials like Chief Executive Carrie Lam. Beijing has accused the Hong Kong consulate of interfering in the country’s internal affairs, as part of an unprecedented tit-for-tat this year that saw both sides close consulates and oust diplomats.

On Wednesday, China sentenced 10 Hong Kong activists who made a dramatic attempt to flee by boat to as long as three years in prison, defying calls for their release from the U.S. and others.

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Hang Lung said it wasn’t aware of the requirement for China’s approval at the time of the sale and is “evaluating, and taking legal advice on various actions” including exploring the feasibility of extending the time to complete the transaction.

A spokesperson for the U.S. consulate said “additional time is needed for the buyer and seller to complete the administrative processes required for closing on the property.”

The compound in Shouson Hill, on the southern side of Hong Kong Island, comprises six low-density apartment buildings spread over almost 95,000 square feet (8,825 square meters), and offers ocean views over Deep Water Bay. Hang Lung planned to pour a further $4 billion into the site to develop luxury detached houses.

Shouson Hill is one of Hong Kong’s most exclusive neighborhoods where some of the city’s richest tycoons, including Li Ka-Shing, own houses. The U.S. government purchased the property in 1948, records lodged with the Land Registry show.

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