Hong Kong developer Emperor International Holdings’ struggles reflect the highs and lows the city’s property sector has endured over the past few years. Just over five years ago, residential and commercial real estate prices and rents were hitting record highs. Developers reported robust earnings and had access to cheap financing, boosting their confidence – and that of investors – to spend more on new projects or acquire existing income-generating properties. But this golden era ended abruptly. Social unrest in 2019 and the Covid-19 pandemic that followed triggered an economic recession, reducing demand for commercial property at a time when new projects were being launched. The downturn also coincided with a sharp rise in Hong Kong’s interest rates, which were raised 11 times between March 2022 and July 2023 to over 5 per cent from 0.5 per cent, before falling slightly last year. Emperor’s full-year loss of HK$4.74 billion (US$600 million) for the year ended March 2025, more than double the HK$2.04 billion a year earlier, reveals the severity of the crisis facing the sector. The group, controlled by 82-year-old tycoon Albert Yeung Sau-shing, disclosed that bank borrowings totalling HK$16.6 billion were overdue and some associated loan covenants had been breached. “The broad issues faced by Hong Kong developers in the current environment would be weak property valuation and soft earnings from poor sales,” said Xavier Lee, an equity analyst at Morningstar. Lee did not specifically comment on Emperor’s predicament, but gave a general overview of the challenges developers face in the current environment. “Banks that are willing to lend may seek more collateral to protect their own interests,” Lee said. “Developers with poor earnings may also fail to meet debt covenants, such as interest coverage ratios, making it even harder for them to secure loans. As such, some developers may find it difficult to meet their debt obligations.” One of Emperor’s major acquisitions came in 2005, when it paid HK$212 million for a 3,600 sq ft property on Russell Street in Causeway Bay. In 2013, it paid about HK$1.6 billion for what was then known as Wing Hang Finance Centre at 60 Gloucester Road. The 27-storey commercial property, which has since been renamed China Huarong Tower, has a total gross floor area of 95,557 sq ft. Two years later, Emperor acquired Wincome Centre on Des Voeux Road in Central for HK$1.3 billion, which was subsequently renamed Emperor Commercial Centre in 2018. The following year, it reportedly acquired CentreHollywood in Sheung Wan for HK$595 million. The property is now known as Emperor Hollywood Centre. In addition, it also completed the revitalisation of an industrial asset in Tuen Mun’s Kin Fat Lane, turning it into an office, retail and dining complex in 2021. Office property prices in Hong Kong declined by 43 per cent from their peak in June 2019 to April this year, according to government data. Retail property prices, meanwhile, fell by 35 per cent since May 2019. Recently, a shop belonging to Emperor on Russell Street that was formerly occupied by Italian luxury lingerie brand La Perla was leased to pharmacy owner Yu Shing for an estimated HK$1 million a month. La Perla had signed a long-term lease for HK$7.5 million a month in 2015, but vacated the four-storey building in September 2020 during the Covid-19 pandemic. Emperor did not reply to the Post’s request for comment. Yeung’s empire began with a jewellery store on Nathan Road in the late 1960s, which has grown into a diversified conglomerate. Apart from Emperor International, the group’s Emperor Entertainment arm is a major force in Cantopop and films known for artists like Joey Yung, Leo Ku and Nicholas Tse. Despite the crisis, some analysts believe banks may avoid immediate foreclosure. Joseph Tsang, chairman of JLL in Hong Kong, said that banks were hesitant to foreclose on properties belonging to borrowers who have defaulted on their loans. “Even if they sell the properties, the proceeds often fall short of covering the outstanding loans,” Tsang said. This was largely due to the significant decline in the values of office, retail and industrial properties, he added.