Henderson Land Development’s level of enthusiasm for the Hong Kong harbourfront has become clearer after the government revealed that the firm’s winning bid of HK$50.8 billion ($6.5 billion) for the Site 3 plot in Central had topped the next-highest offer by 37 percent.
The runner-up bid at the November tender exercise came in some HK$13.7 billion less than Henderson’s offer at HK$37.1 billion, while four other bids failed to hit the reserve price set by the government, the Development Bureau said Thursday in a release.
The reserve price, the name of the runner-up bidder and the details of the other failed bids were not disclosed, as is customary. The five qualifying bidders besides Henderson were local heavyweights Sun Hung Kai Properties, CK Asset Holdings and Wharf; a team-up of MTR Corporation and Chinachem Group; and a consortium of Sino Land, Great Eagle Holdings and China Merchants Group.
The bid for the coveted Site 3, which leads to Hong Kong’s famed Star Ferry, saw Henderson repeat its role as the most aggressive buyer in Central after paying HK$23.3 billion ($3 billion) in 2017 to make a car park on nearby Murray Road the city’s priciest piece of land.
Cost of Complexity
With its record-shattering HK$50.8 billion bid, the developer controlled by the family of billionaire Lee Shau-kee won the 50-year land grant for the site adjoining the IFC complex in Central and with it the rights to develop some 1.6 million square feet (148,645 square metres) of commercial space, plus additional community areas, in Hong Kong’s traditional downtown core.
At least one market observer wasn’t surprised by the HK$13.7 billion distance between the two top bids.
Vincent Cheung, managing director of local brokerage Vincorn, attributed the yawning gap to a combination of the two-envelope system, which takes into account each bidder’s unique design proposal, and the complicated terms and conditions inherent in a large-scale project on a 516,312 square foot site.
“When we look back to the Kowloon Station commercial land plot successfully bidded by Sun Hung Kai Properties, there was also a huge price difference between SHKP and the first runner-up,” Cheung told Mingtiandi.
Physical Restrictions
Site 3 is subject to height restrictions that limit Henderson’s project to 50 metres in height at the western side and 16 metres at the eastern side, forcing the developer to build a more horizontal complex, with the structure also required to bridge roads running through the plot.
Henderson must develop the site in two phases due to the relocation of the General Post Office, resulting in longer development and investment payback periods compared with other commercial sites, said Alkan Au, senior director of valuation advisory services at JLL in Hong Kong.
“These factors combined with the large investment cost and building height restriction on the site have also affected potential offers,” Au said.
The first phase — featuring 270,000 square feet of office space, 340,000 square feet of retail, dining and entertainment spaces, and about 900 parking spaces — is to be completed by 2027, Henderson said. The second phase, with an additional 390,000 square feet of office space, 600,000 square feet of retail space and an underground connection to Central MTR station, is scheduled to finish by 2032.
In addition, the developer will add a 300,000 square foot multi-level urban park connecting Central with the waterfront promenade and reinstate the Star Ferry Clock Tower and associated piazza space.
“Henderson Land will invest HK$63 billion to develop Site 3, creating not only one of Hong Kong’s most iconic landmarks but also a social destination dedicated to public enjoyment along the harbourfront promenade,” chairman Martin Lee said after winning the November tender. “Site 3 will significantly elevate Henderson Land’s presence in Central and expand the company’s reach beyond Hong Kong, cementing Hong Kong as one of the exemplary world-class cities.”
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