As Hong Kong edges into its fourth month of social unrest, the city government announced yesterday that it had cancelled the latest sale of a plot on a former airport runway in Kowloon East.
The Lands Department said it had rejected all tenders received for the commercial site known as Kai Tak Area 4C Site 4 as all five bids offered came in below the government’s reserve price.
The waterfront plot’s failure to launch came after a sale in May of the same 10,692 square metres (115,087 square feet) had been aborted soon after take off. The original buyer of the development project, Goldin Financial, had backed out of its record HK$11.1 billion ($1.42 billion) purchase of the property in June after paying a HK$25 million deposit.
CK Asset, Sun Hung Kai, Sino Land Put in Low Bids
“The government will not speculate on the reasons accounting for the bids placed by tenderers,” the Lands Department said in a statement yesterday. “Bids put forward depend on a myriad of factors, such as the attractiveness of the site to individual tenderers, as well as how individual tenderers consider the market conditions, their respective corporate positions and development strategies.”
Developers CK Asset Holdings, Sun Hung Kai Properties, Sino Land, Chinese Estates Holdings, and Great Eagle Holdings all of which submitted solo bids that fell short of the undisclosed reserve, did not comment on the failed sale publicly, although their subpar bids may reflect concerns about the mid to long-term outlook for the city’s economy.
The 10,692 square metre site carries with it the rights to develop up to a maximum gross floor area of 80,190 square metres of commercial space, with at least 30 percent of that required to be allocated for hotel use, while the retail component is not to exceed 4,010 square metres.
Land Sale Objectives Will Not Be Affected
The government’s failure to sell the site in Kowloon East comes as office vacancy levels in Central, the city’s prime commercial district rose to a three-year high in July, according to JLL, and hotel occupancy has also taken a hit as visitor totals for August fell 40 percent compared to the same month last year.
In July, RevPAR, a hotel performance metric based on occupancy and room rate, had plunged by 12.6 percent, coinciding with a 4.8 percent year-on-year drop in visitor numbers, according to CBRE.
“It is the government’s policy objective to provide a steady and sustained land supply to the market to cater for the community’s demand for housing, commercial and business sites,” the Lands Department said in a statement yesterday, adding that this objective would not be affected by the results of its most recent land sale failure.
Government Drive for Cash Meets Market Pricing
Goldin had cancelled its earlier purchase of the Kait Tak plot two days after an estimated one million people took to the streets of Hong Kong to protest a proposed extradition bill.
In a statement to the exchange at the time, the developer headed by mainland magnate Pan Sutong indicated that the company’s directors had made their decision to walk away from the plot purchase due to changes in market conditions.
Goldin’s cancellation came after the government drew criticism in January for setting prices too high when an auction of another Kai Tak commercial land plot was cancelled after bids failed to meet the reserve price.
That sale had been predicted to receive offers in the region of HK$11.51 billion, or HK$18,800 per square foot for the 9,480 square-metre site known as Area 4C Site 5, according to The Standard.
Stewart Leung Chi-kin, vice-chairman of developer Wheelock and Company, was quoted by The South China Morning Post in January as saying its tender for the commercial plot was within the market price, adding that he felt the government had set the auction reserve too high.
Last October saw the Lands Department cancelled its sale of on Victoria Peak, the city’s most exclusive district, when bids for that luxury residential project also failed to meet government requirements.
According to the Lands Department, six tenders for land sales – including Kai Tak Area 4C Site 4, Area 4C Site 5 and the Peak site – have had to be cancelled since 2014 due to bids coming in below the reserve price.
Three of the sites – at Yuen Long, Tsing Yi and Pak Shek Kok – have been re-tendered and sold. The government said it will consider the disposal arrangements of the three remaining sites at an appropriate time.