Hong Kong’s Lands Department announced on August 12 that Far East Consortium International won a tender for the smallest plot of commercial land at Hong Kong’s former Kai Tak airport at a price of HK$2.45 billion ($312 million).
The local developer won the plot at a tariff 9.4 percent less than the lower end of the HK$2.7 billion to HK$3.6 billion range that market analysts had projected the site in Kowloon East would sell for, as ongoing protests push doubt into the city’s ever-optimistic real estate investors.
The tender for the site, which is designated for hotel and commercial development, also attracted nine other bidders including local players CK Asset Holdings, Wheelock and Company, Sino Land Company, Sun Hung Kai Properties and Great Eagle Holdings. Hong Kong-listed China Overseas Land & Investment was the only mainland developer to submit a bid.
10 Weeks of Protest Drive 9% Discount
The discounted sale of New Kowloon Inland Lot No. 6607 came after protests have rocked China’s primary financial gateway for 10 weeks. In the days just after the results of the tender for the site, which can yield up to 344,448 square feet (32,000 square metres) of built area, the city’s airport has been shut down on consecutive days by protestors demanding greater freedom in what was once a stronghold of liberalism in Asia.
“To a certain degree the market appeared to be affected by global trade tensions and recent social movements in Hong Kong,” Thomas Lam, head of valuation & advisory for Knight Frank Hong Kong told Mingtiandi. “Developers were turning more conservative in their bids for commercial plot with strata sale restriction such as this Kai Tak sale.”
In the end, this conservatism helped Far East Consortium, helmed by second-generation tycoon David Chiu, win the site at the equivalent of HK$7,100 per square foot. The price for the site, which is located at Shing Kai Road adjoining the proposed Kai Tak Sports Park, is the lowest in the Kai Tak area since Lifestyle International Holdings, the operator of Sogo department store, bought a commercial parcel near Tak Long Estate for HK$7.39 billion, or HK$6,773 per square foot, in November 2016.
Combining Offices With a Hotel
Far East Consortium’s Chiu, told the local media that the company, including the land premium, the company plans to invest an estimated HK$4.5 billion to develop the site into a project that combines a four-star hotel of 300 to 400 rooms along with office space.
Analysts see the project as a way to cater to demand driven by facilities currently under development in the Kai Tak area. “While the Kai Tak area is still at early stage of development and may take some 10 years to mature, this could mean a long-term investment. The main target customers could be visitors from nearby Kai Tak Sports Park,” Knight Frank’s Lam pointed out.
The Kai Tak Sports Park will have a 50,000-seat main stadium with a retractable roof, an indoor sports center with 10,000 seats and a public sports ground with 5,000 seats. Groundbreaking for the project was held in April, and the HK$30 billion facility is expected to be finished by June 2023.
In late July, a joint venture invested by Wheelock Properties, K Wah International Holdings and China Overseas Land and Investment won the tender for the biggest plot of residential land on the former runway of Hong Kong’s Kai Tak airport for HK$12.74 billion ($1.63 billion), or HK$11,841.70 per square foot of housing.
That sale also came in below the market expectations, following three days after a weekend of violent protests that hammered the city’s economy.