How I Underwrote a $40M Land Banking Bet in Hong Kong

I underwrote a $40M land banking bet in Hong Kong.

A group of family offices has already placed $20M...

- 400k sq ft site in the Northern Metropolis
- The land is currently zoned agricultural
- Borrower wants to build public housing
- Plot ratio uplift could take it from 1x to 8x
- Investors get up to 40% of the SPV

This is a deal I rarely see.

It's a bet on government approval, led by a team with 50+ years combined experience inside Hong Kong's land rezoning process.

If approval lands, land value jumps fast. If it doesn't, the sponsor has backup zoning plays lined up.

To fund deals like this, I always ask 4 questions:

1) What stage of risk are we in?

- There are no approvals yet; this is pre-rezoning
- Capital must be raised to commence the process
- "No Objections" letter expected in 6-9 months
- Multiple land owners involved in negotiations
- This is the riskiest point in the deal's life

2) What makes the location work?

- The government is approving rezoning in this area
- Known as a 'New Development Area' for residential
- Positioned next to the Chinese-Shenzhen border
- Housing demand is 14-18x supply in this region

3) How is the downside protected?

- Land is bought well below the market price
- If public housing is not approved, 3x optional pivots
- Worst case, the land gets sold back to the HK govt
- Best case, mainland developer buys at 5x premium

4) Can we control the exit?

- Investors can exit at rezoning approval
- Investors can roll into Stage 2 of development
- The exit value jumps immediately after rezoning
- Exit pre-development or post-development

This whole deal lives or dies on government approval.

The team has deep former-government connections in rezoning and is confident it clears once funding closes, but contingencies are in place either way.

My Verdict:

- Medium fit for Private Lenders 
- Strong fit for Family Offices
- Weak fit for Institutions

If you allocate to real assets, let's connect 👋