Henderson Land Development won a tender for a residential project in Hong Kong’s To Kwa Wan for HK$8.1 billion ($1.04 billion), as the city’s quickening housing market and a newly extended MTR line drive developers to buy up redevelopment sites in the Kowloon neighbourhood.
Outbidding developers such as CK Asset Holdings and Sun Hung Kai Properties, Henderson added to its supply of redevelopment projects in To Kwa Wan with the acquisition of an Urban Renewal Authority project between Bailey and Wing Kwong streets.
The blue-chip developer acquired the mixed residential and commercial project, which is approved for construction of up to 717,458 square feet (66,654 square metres) of gross floor area, for the equivalent of HK$11,414 ($1,467) per square foot of GFA.
Upon its expected completion between 2025 and 2026, the project is predicted to yield around 1,150 units, with a gross development value between HK$16 billion and HK$17 billion, said Alkan Au, senior director for valuation and advisory at JLL in Hong Kong.
Located along Ma Tau Wai Road, the URA project stretches from Wing Kwong Street south to Bailey Street along the popular thoroughfare just west of Kowloon Bay. The site aggregates seven neighbouring addresses and occupies a 79,718 square foot site.
Once completed, selling prices for the project’s residential units are expected to begin at HK$25,000 per square foot, said Thomas Lam, executive director and head of valuation and advisory at Knight Frank.
Despite being located in a popular area for redevelopment, Henderson’s HK$8.1 billion purchase came in at the lower end of market expectations of between HK$8 billion and HK$10.7 billion, according to JLL’s Au, with tender conditions set by the URA seen as dampening developer demand.
The six bids tendered for the Bailey Street project represented the lowest number of offers received for a large-scale URA redevelopment project since 2014. Under the terms of the tender, the URA will retain 30 percent of the commercial portion of the project and will jointly manage the space with Henderson for 10 years, with the developer not allowed to sell its stake in the shopping area during that period, the URA’s managing director, Wai Chi Sing, said in a blog post published on the group’s website.
Henderson’s victory fits into a continued effort to consolidate sites for redevelopment in Kowloon, after the developer bought up the last units of 22, 22A and 24 Whampoa Street for HK$482 million ($62 million) in March.
According to its 2020 annual report, as of 31 December, Henderson had two redevelopment projects fully acquired and already in progress and another 23 newly acquired projects in which the developer had secured at least an 80 percent ownership.
Among the new redevelopment projects acquired by the developer last year, a plot consisting of five neighbouring sites is also located in To Kwa Wan, just half a kilometre away from the Bailey Street property.
Earlier this month, in Hong Kong’s biggest weekend of property sales in nearly a year, Henderson Land’s The Henley III in Kai Tak sold 68 out of 100 units in the first released batch of the project.
A New Face for To Kwa Wan
As Hong Kong home prices are expected to increase by 2 to 3 percent for the rest of 2021, To Kwa Wan is attracting developers as a hotbed for redevelopment.
This month, the developer Grand Ming acquired a housing project on 41-45 Pau Chung Street in To Kwa Wan for HK$320 million. Last December, Hong Kong Resorts International agreed to purchase the Daily News Centre in the area for HK$310 million.
Apart from the Bailey Street project, the URA owns 10 more redevelopment projects in To Kwa Wan. Knight Frank’s Lam believes that the increased transport connectivity in the area will attract more developers for redevelopment projects, either through partnerships with the URA or by compulsory sales for redevelopment.
As the URA’s largest residential project in the area, Henderson’s project should set a trend for similar developments in To Kwa Wan in the future, Lam said.