Wheelock, K Wah and COLI Win Kai Tak Site for HK$12.74B

A joint venture invested by Wheelock Properties, K Wah International Holdings and China Overseas Land and Investment has won a tender for the biggest plot of residential land on what was once the runway of Hong Kong’s Kai Tak airport for HK$12.74 billion ($1.63 billion).

According to an announcement by the Lands Department, Kai Tak Area 4A Site 1, which is approved for construction of just over one million square feet (100,000 square metres) of completed homes, was awarded to the tri-party joint venture at a premium of HK$12.74 billion, or HK$11,841.70 per square foot of housing.

The results of the sale of the the 176,366 square foot plot came at price well below projected valuations and followed three days after a weekend of protests and a violent triad attack rocked Hong Kong and hammered the city’s economy.

Cut-Rate Bid Wins Luxury Site

The winning bid came in below the market expectations and provided an indicator of perceptions of recent social movements and global trade tensions among the city’s developers, Thomas Lam, executive director of valuation and advisory at Knight Frank Hong Kong told Mingtiandi. “Such factors may also affect the timing of eventual flat sales and the future market outlook,” the veteran property advisor added.

The sale of the biggest residential plot on the former airfield came at a time when the city’s business and investment sentiment are dampened by fears of the US-China trade war, and almost two months of deteriorating civic order in what is typically one of Asia’s most stable urban centres. Builders are also seen to be deterred by recent policies put in place to discourage speculation in housing.

“With the impending vacancy tax, a slow flat sales performance would potentially dampen developers’ profit, as such discounts have been taken into account in land bid prices,” said Lam. “Nonetheless, we believe most developers are still confident in the market outlook.”

The land parcel can accommodate between 1,500 to 2,500 luxury apartments that upon completion are expected to sell for more than HK$26,000 per square foot. The winning bidder is also required to incorporate facilities for an elderly care home and a childcare center in the development, which is expected to require a total investment of approximately HK$20 billion.

On the basis of the price per square foot of finished space, this latest Kai Tak land sale is the cheapest since now-financially troubled HNA in late 2016 single-handedly boosted Hong Kong’s land sale market to snap up the first of a set of four Kai Tak sites which eventually cost the conglomerate a total of HK$27.2 billion.

In February this year, HNA sold off its last piece of land at Hong Kong’s former airport to Wheelock at a HK$740 million ($94 million) loss.

Wheelock Now a Kai Tak Frequent Flyer

All three parties in the winning joint venture had been among the buyers of earlier residential plots on the the Kai Tak runway, with Wharf’s Wheelock unit emerging as the biggest shoppers for land at the former airport.

In May of this year, Wheelock and state-backed mainland developer China Overseas Land & Investment Limited had teamed up with top Hong Kong players Henderson Land Development, New World Development, Chinachem Group and Empire Development – a company controlled by the family of the late Walter Kwok – to win the third largest residential plot at the former Kai Tak airport for a record HK$12.6 billion ($1.6 billion).

Wheelock has now been a party to four land purchases on the Kai Tak strip, having also been among the winning bidders for a 9,583 square metre  site in March of this year, as well as joining with Henderson, New World and Empire in November 2018 to purchase a 104,475 square foot parcel for HK$8.33 billion.

The developer has also purchased two sites at the former airport from HNA, having acquired Kai Tak Area 1L Site 1 (New Kowloon Inland Lot No. 6564) from the Hainan-based group for HK$6.36 billion in March of last year, in addition to its purchase this past February.

China Resources Land is also making a return trip to the former airport after earlier having partnered with mainland comrade Poly Developments to win the tender for the second-biggest parcel of land on the former runway for HK$12.9 billion in June of this year.