The New York Times
Special Report : Great Homes and Destinations
27 May 2010
By ALEX FREW McMILLAN
A handful of small-scale developers are renovating old-style tenements and creating real-estate gems
CAPTURING THE CHARM
Mr Bell, an interior designer, worked with Dare Koslow, an American advertising executive, who wanted to recreate his New York SoHo apartment in Hong Kong - so when he had to sell his loft in 2003, it gave him the impetus, and HK$1 million, to create it here
WHEN Sean Clifford returned to Hong Kong for a friend's wedding in 2005, he couldn't believe the kind of rental returns he estimated he could achieve in a year after renovating an apartment in one of the city's old walk-up buildings.
'I went out and looked at property, and I was shocked,' he recalled. 'It was a 25-30 per cent return on your cash if you took an apartment and renovated it' in an appealing way.
The New York native, who had worked here from 1997 to 2000, started buying up old flats with special features like a rooftop or terrace.
He began with just HK$2 million (S$360,320). Now he has about 30 apartments, marketed under the brand name Soho Lofts, that he estimates are worth around HK$300 million.
Mr Clifford is one of a handful of small-scale developers who renovate apartments in the old tong lau-style tenements and walk-up residential buildings built in Hong Kong from the 1940s through the 1970s. By stripping them down, removing most of the interior walls and restoring them, sometimes with period features, the developers create real-estate gems from apartments that have decayed along with the buildings that house them.
Victoria Allan, the Australian founder of Hong Kong property brokerage Habitat Property, is reworking an eight-floor building in Kennedy Town, Hong Kong Island's westernmost neighbourhood along Victoria Harbour.
After six years and a blizzard of governmental paperwork, she has now gutted the building and expects the work to be completed by year's end.
In addition to adding elevator service, each floor will be an open-plan, one-bedroom apartment spread over125 square metres - net, not gross, as is often quoted in Hong Kong. The views look across the street and over the harbour to the new Stonecutters Bridge.
Ms Allan, 40, originally from Perth, felt that there was a lack of interesting upscale apartments in the city. 'The whole idea behind it is to find space that I liked - to have something quite cool and a more unusual layout for Hong Kong, and a quirky location,' she said, adding that she is taking one of the apartments.
She and a silent partner, whom she declines to identify, spent HK$8 million in 2004 to acquire the top seven floors of the building, which were available as a single purchase. It then took five years to move out the tenants and to buy the commercial space on the ground floor.
Now that the value of the site has appreciated, the partners have mortgaged the building to cover the renovation costs, which are expected to run around HK$25 million. 'I'm sure it's a different approach from what a major developer would do,' she said. 'The idea is to have a really usable apartment, and to restore an old building.'
The partners probably will rent the units for at least HK$45,000 per month, although selling them also is a possibility.
Although the partners could have torn down the building and constructed something like a 20-floor tower, a common approach in Hong Kong, current zoning regulations would have restricted the footprint to 60 per cent of the site. And they would have lost the charm of the original building, which has a pleasant curve to the sea-facing side and an Art Deco feel as well as an overhanging balcony that is not counted as part of the footprint.
While Ms Allan chose to invest in Kennedy Town, a 15-minute drive from the city's financial centre in Central, Mr Clifford hunts for properties exclusively in Hong Kong's Soho. The area, south of Hollywood Road, has a cluster of bars, restaurants and specialty food stores that draw the young professionals, particularly expatriates, whom he targets as tenants.
Mr Clifford, 47, paid HK$30 million to buy No 4 Shelley Street, a walk-up building right next to the Mid-Levels escalator that brings a steady stream of people to Soho. He has been renting out the apartments in the building, which is now for sale. The units rent for as much as HK$55,000 per month for a top-floor 750-square-foot apartment, complete with roof, that he calls 'The Rock Star'.
With an eye on developing an entire building from scratch, Mr Clifford has put No 4 Shelley Street on the market, in a public tender due to close at the end of June. Colliers International, the agency in charge of the sale, estimates the building will fetch HK$160 million.
Mr Clifford often works with Andrew Bell, an Australian who left advertising to work in interior design. 'We are very focused on our target audience, and we don't deviate at all,' said Mr Bell, 54. 'It's a young Western or American expat, probably earning more than they ever have before, and he wants to be in the middle of what he sees as exotic Hong Kong.'
Mr Bell specialises in recapturing the apartments' period charm by replacing features like the old wrought-iron windows with modern reproductions. 'I feel it is a pity that this low-rise area is not regarded as valuable except by a few people,' he said.
But that appears to be changing. Mr Bell also works with Dare Koslow, who owned a loft in the SoHo district of New York City before he moved to Hong Kong. Mr Koslow, an American advertising executive, wanted to recreate that apartment in Hong Kong - so when he had to sell his loft in 2003, it gave him the impetus, and HK$1 million, to create it here.
'I had this available cash around SARS time in Hong Kong,' Mr Koslow, 47, said, referring to the outbreak of severe acute respiratory syndrome that ravaged the Hong Kong economy. 'It was coincidentally the ideal time to buy.'
Mr Koslow now owns 25 apartments, having bought, renovated and sold another five to help with financing. He has a full-time job as the regional brand marketing manager for the mobile phone company Vodafone but he spends much of his free time redeveloping walk-ups.
'It's become an addiction, actually,' Mr Koslow said. 'And at the time I started doing it, there were not that many others doing it.'
Mr Koslow currently is mired in a drawn-out struggle with the Urban Renewal Authority, a quasi-governmental entity that wants him to move out of his current place on Bridges Street, also in Soho, so it can 'regenerate' the area. Mr Koslow says he already is doing that, combining two flats to carve out a 1,500-square-foot apartment with bare beams and an industrial-chic style.
Both Mr Koslow and Mr Clifford say their apartments command such high rents or prices because they are an alternative to the boxy high-rise apartments that have become the norm in Hong Kong.
'Every day there is a new one going up - they're all white boxes, with tall glass faces,' Mr Koslow said. 'They're all exactly the same and so boring and bland.'
Small-scale developers are renovating apartments like this one in old tenements and walk-up residential buildings in Hong Kong.
The developer Dare Koslow’s home on Bridges Street.
A Hong Kong home that has been redecorated by the interior designer Andrew Bell, who specializes in recapturing period charm by replacing old features with modern reproductions.