CK Asset Paying $1.1B to Buy Second Hong Kong Residential Site in One Week

CK Asset Holdings has picked up a residential development site in Hong Kong’s Kai Tak area for HK$8.7 billion ($1.1 billion), according to a Wednesday announcement, breaching the low end of market expectations by about 23 percent as home prices continue to slide in the city.

In acquiring New Kowloon Inland Lot (NKIL) 6649 the developer controlled by Li Ka-shing has won the right to build up to 1.1 million square feet (104,189 square metres) of housing on the site, with the terms of the 50-year land deal also requiring the winning bidder to construct 296,473 square feet of public amenities as part of the project.

The top five Hong Kong builder is paying the equivalent of HK$7,758 per square foot of maximum gross floor area for the non-public part of the project, or around 43 percent of what Sun Hung Kai Properties paid to acquiring a nearby residential site at the height of the market in 2018.

The acquisition by CK Asset is its second Hong Kong land sale victory in less than a week and its fourth acquisition via a government project tender in its home city this year, as the company refills its pipeline of projects in the SAR.

Touch and Go in Kai Tak

CK’s latest Kai Tak pick-up gives it the opportunity to build more than 2,000 residential units on the plot just west of the city’s one-time airstrip, assuming an average unit size of about 700 square feet (65 square metres), said Hannah Jeong, head of valuation and advisory services at Colliers Hong Kong.

The purchase required the company to outpace five other bids, all coming from hometown competitors, including Nan Fung Development, Henderson Land Development, Wheelock Properties, Early Light Land and a joint bid by K Wah International, Sino Land and Great Eagle Holdings.

The 214,408 square foot site, which sits less than a 10-minute drive from the former Kai Tak airstrip, marks the last government land parcel to be sold this year, according to Colliers, which noted that residential plots of this type would normally receive at least ten bids.

The plot falls under the Residential (A)5 zoning, which is intended for high-density residential development, with analysts predicting the city’s second-largest developer by market capitalisation will invest around HK$24 billion in total on the project.

CK Asset’s new prize is one of a set of Kai Tak plots to have been rezoned from commercial to residential use, after having failed to sell in 2020 as developers submitted bids below the reserve price set by the city, according to a land sale update published by Colliers this month.

Under the conditions of sale, CK Asset must complete the project by 30 September 2029, during which time it must build an underground shopping street that will become part of a larger project connecting the Sung Wong Toi and Kai Tak MTR stations, as well as government facilities including a senior living facility, a family resources centre and a child care unit.

Airstrip Oversupply

Noting that Sun Hung Kai Properties had paid the equivalent of HK$17,776 per square foot to purchase New Kowloon Inland Lot 6649, the government land sale site closest to this latest project by geography and usage guidelines, Alex Leung, senior director at CHFT Advisory and Appraisal saw the sign of more cautious buying among Hong Kong builders.

“Developers (have been) very conservative in bidding for development land due to the poor market sentiment,” said Leung.

Leung added that new homes in Kai Tak currently sell for around HK$22,000 per square foot of saleable area. However, a number of developers with projects in Kai Tak originally scheduled for launch in 2022 have held those over until next year as home sale transactions fell by around 30 percent this year according to a recent report by property agency Centaline

The same report pointed out that the supply of new homes entering the Hong Kong market in 2023 could reach 28,000 units – more than double this year’s total.

Pipeline Expansion

CK Asset’s Kai Tak buy comes less than a week after it won a residential site on Hong Kong Island through a tender by the Urban Renewal Authority for HK$1.16 billion. In October the company pushed past four competing bids to acquire a residential site in Tuen Mun, in the New Territories, for HK$4.6 billion.

In March of this year, the developer triumphed over six competing bids to purchase a 58,534 square foot residential site in the redevelopment hotbed of To Kwa Wan for HK$5.99 billion.

In the first quarter of last year, the developer bested four tenders to win another residential site on the Kai Tak runway for HK$10.28 billion.