Little-Known Player Outbids Wheelock, Vanke to Win Kowloon Site for HK$467M

Local Hong Kong developer Capital Group Development Limited has won a residential site in Mong Kok for HK$467 million ($60 million), according to an announcement yesterday by the Lands Department.

The privately held firm, which was previously best known for having developed the high-end residential project Costa Bello in Sai Kung in 2003, placed a bolder bid than giants Wheelock and Company, China Vanke and 24 other contenders to win the 625.5 square metre (6,733 square foot) site on a 50-year land grant.

Capital Group, which is controlled by investor Wong Po-lyun (黃寶戀) made the winning tender through its Bring Bright Limited unit, with even that winning bid coming near the low end of the HK$420 million to HK$640 million price range which analysts had projected for the site.

“This reflects developers are relatively conservative on pricing at the moment against the backdrop of ongoing pandemic, global economic and employment uncertainties,” Thomas Lam, head of valuations and advisory at Knight Frank said of Capital Group’s cut-rate triumph.

Outbidding the Big Boys

In addition to offering a higher value for the Kowloon plot than Wheelock and Vanke, Capital Group also outbid major local developers CK Asset, Sino Land and Wing Tai Properties, as well as Shenzhen developer Kaisa Group.

Based on the maximum gross floor area of 4,691.25 square metres (50,495 square feet) square feet for the parcel at the intersection of Soy Street and Shanghai Street, the firm will be handing over the equivalent of HK$9,252 per square foot — a price that is 11 percent more than the lower end of market expectations.

KB Wong, executive director of valuation and advisory services at Cushman & Wakefield, said that the timing, risk and development costs of the small scale residential project are relatively low, brought it within the budget range and business goals of a host of small to medium-sized companies.

“That might explain why Bring Bright Limited is more keen to snatch up the property into its land bank as compared with other big developers who are more resourceful and more interested in larger projects,” Wong noted.

Developing Starter Homes

Located four minutes’ walking distance from Mong Kok MTR station, the site is expected to be developed into around 120 to 130 flats with an average size of 300 square feet, according to market analysts.

Once completed, the flats could fetch between HK$17,000 and HK$21,000 per square foot, appealing to first-time home buyers or private investors looking for easily accessible locations with proximity to local amenities, according to property consultants in Hong Kong.

Under the terms of the award, Capital Group Development is required to develop two senior citizen centres with a combined gross floor area of 10,000 square feet on the site.

Snapping Up Land as Prices Fall

The news comes as city land prices have fallen amid the downturn in the Asian financial hub, with developers braving the downturn to snap up sites while prices are low.

Just six days ago, Chinachem Group won a tender to develop a residential parcel in West Kowloon — two stations west of Mong Kok — for HK$912.8 million at the equivalent of HK$8,770 per square foot just six days ago.

Two weeks before that award, a unit of Hong Kong-listed Eagle Legend Asia, which is said to be backed by Shenzhen’s Kaisa won a 2,718 square foot plot in Mong Kok for HK$85.9 million. With the project being awarded at the equivalent of HK$3,512 per square foot it represented the the lowest-priced land sale in the Mong Kok area since 2004.

Cushman & Wakefield’s Wong told Mingtiandi that after some government land auctions were cancelled last year for lack of bidders, the success of the recent tenders shows that developer appetites for urban redevelopment sites remains keen.

“The market should be expecting that the pandemic will only affect the market temporarily,” Wong said, adding that demand for housing stands a good chance of stabilising once the pandemic is contained.