Lawmaker Takes Loan at 18% Interest to Buy Hong Kong Property
(Bloomberg) -- Just how attractive is Hong Kong property? A stock exchange filing from Tuesday evening shows that some people will continue to pay up for the chance to buy in.
Hong Kong businessman and lawmaker Peter Wong Man Kong will pay an 18 percent interest rate on one of three loans to buy a property in Deep Water Bay, an area known for luxury homes.
The details were reported to the exchange because Wong is an independent director of finance company Sun Hung Kai & Co. A unit is extending the HK$155 million ($19.8 million) of loans, making the deal a “connected transaction” requiring public disclosure.
Wong’s deal comes as Hong Kong’s property market, on a bull run for most of the past 15 years, is showing signs of cooling. While much of the money he’s borrowing is at 7.6 percent, one loan is at 18 percent and an installment of another loan is at 19.6 percent.
While stock exchange rules allow the arrangement, activist investor David Webb doesn’t like it. “It’s hard to be independent of someone who has a mortgage on your property,” Webb said by email. “Investors should not consider him to be independent, even if the stock exchange does.”
A non-executive director’s independence is more likely to be questioned if the director is financially dependent on the listed issuer or its units, according to HKEX’s listing rules. “I’d say someone who finds it necessary to borrow from a non-bank lender at high interest rates is “financially dependent” on that lender,” Webb said.
For its part, the company reiterated to Bloomberg what it told the stock exchange: that the terms of the loan agreement were after arm’s length negotiations between Sun Hung Kai Credit and Wong, and in line with the unit’s ordinary business practices.
No comment was immediately available from Wong, who’s a life honorary chairman of Hong Kong’s Chinese General Chamber of Commerce and a delegate to the Chinese legislature, according to the chamber’s website. He serves as independent non-executive director for listed companies including MGM China Holdings Ltd. and Far East Consortium International Ltd.
Sun Hung Kai & Co. is separate from property giant Sun Hung Kai Properties Ltd.
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