Rise and fall of Hong Kong's 'shop kings': How plunging rents, debt crushed their empires

They were the "shop kings" of Hong Kong, owning dozens of properties in the same district and even the same street. But over the past few years many of these landlords have gone bankrupt, hit by the collapse in post-pandemic rents and tighter bank lending.

Shop prices in the city have fallen more than 40% from their 2018 peak, but they may not have hit rock bottom yet, according to Centaline Commercial.

"There does not appear to be any clear sign of a turnaround today, nor any glimmer of hope on the horizon that might trigger a rebound," said Stanley Poon, managing director at the agency.

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According to Colliers' data, in the first three quarters of this year, the total value of loss-making transactions involving street shops priced at over HK$100 million ($16.2 million) reached HK$485 million – surging 81.6% compared with HK$267 million in the same period last year.

One of the highest-profile names in the sector was Tang Shing-Bor – known locally as "Uncle Bor" – who owned more than 200 properties that were once valued between HK$70 billion and HK$80 billion. Tang ranked 19th on the Forbes 2021 list of Hong Kong’s richest people, earning him the nickname "king of shops".

Originally a neon light repairman, Tang later became a real estate broker and started investing in commercial property in the 1970s.

He later handed over management of the family business to his youngest son, Stan Tang Yiu Sing, who tried to expand into other sectors such as hospitality, F&B and co-working spaces – often using high-leverage financing.

Starting in 2021, the family was embroiled in loan defaults and lawsuits, with some creditors initiating legal action directly against the administrators of the estate seeking to settle outstanding debts. The elder Tang died in May 2021.

Last week, an industrial building in Sai Kung owned by The Tang family for nine years was sold to the Hong Kong University of Science and Technology for HK$141 million, representing a decline of over 60% from the original purchase price.

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Another so-called shop king is David Chan Ping-Chi, also known as Hong Kong's "cassette king" because he built his fortune on making cassettes and compact discs. In the 1980s, Chan began shifting capital from his industrial business into the local property market, focusing on commercial buildings, retail shops and car parks.

Chan reached the pinnacle of his investment career in 2017, but it was short-lived. After 2019, the commercial property market took a sharp turn downwards, and his "deal of the century" involving The Center in Central ended up as a loss-making investment.

More recently, Chan faced a full-blown financial crisis. In addition to offloading a large volume of assets at a discount, his own luxury residence was repossessed by the bank, and he faced a bankruptcy petition filed by creditors.

Andy Kong, director at Midland Shops, said some seasoned investors acquired retail premises in the past to generate rental income and benefitted from capital appreciation, or they bought shops for owner occupation to support business growth when Hong Kong’s tourism and retail sectors thrived.

"They then used the gains from asset appreciation to expand their investment portfolios, gradually accumulating a substantial portfolio of retail properties," he said.

When the central government launched the Individual Visit Scheme following the 2003 Sars outbreak, it triggered a massive influx of mainland tourists to Hong Kong. That turbocharged the commercial property sector.

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"Many major international brands spared no expense to open multi-storey flagship stores, pushing local mass-market retailers and restaurants to secondary streets, and driving up street shop rents across Hong Kong," said Poon from Centaline Commercial.

Investors did not solely rely on mortgages during the market's heyday. They also utilised commercial loans or bridging loans offered by banks. This short-term financing – or standby lines of credit – operated on a "pay-only-when-used" basis, thereby giving investors highly flexible access to capital.

"When investors bought these retail units, interest expenses were not a primary concern. They prioritised the property's capital appreciation potential over immediate rental yields," Poon said.

"Investors leveraged the financial standing and audit reports of their property investment businesses to secure commercial loans. The amount they could ultimately borrow depended primarily on the individual investor's relationship with the bank."

Hong Kong’s ultra-low interest rate environment persisted from late 2008 to mid-2022. Banks aggressively competed for mortgage and commercial loan business, making it easy for investors to secure financing.

"When investors took out loans back then, the interest rate was roughly 1% to 2%," Poon said. "Even a casual purchase of a retail shop for rental income could yield a return of 2% to 4%."

By 2014, the market had peaked, and starting from 2015 "rents began to quietly retreat", according to Poon.

The situation deteriorated after the onset of the first US-China trade war in 2018, followed by the large-scale social unrest in Hong Kong in 2019. The final blow was the pandemic that broke out in 2020, which led to a drastic change in consumer lifestyles and consumption habits.

After borders reopened, the surge of Hong Kong residents travelling abroad and spending time and money on the mainland dealt a further blow to the retail property market.

The property revaluations triggered a downward adjustment, with Poon estimating that the total volume of non-performing commercial real estate loans across Hong Kong could reach HK$200 billion to HK$300 billion.

"Once market conditions reverse or prices for commercial, industrial, and retail properties plummet, banks will need to cut losses or mitigate risk," he said. "There's no point in negotiating over today's foreclosed properties. It’s a case of having 10 buckets but only one lid – you simply can’t cover them all."

Thomas Chak, head of capital markets & investment services at Colliers Hong Kong, said banks still held portfolios of assets and non-performing loans that needed to be addressed.

"I believe banks will continue to handle the repossessed commercial properties currently on their books over the next six to 12 months," Chak said. "In particular, if interest rates rise, banks might accelerate the disposal process."

But Chak also said that foreclosed properties would not necessarily drive down market prices because they would adjust to a reasonable level that offered value to attract investors back to the commercial property market.