Henderson Land Wins HK$1.36B URA Project in Sham Shui Po

Hong Kong’s Urban Renewal Authority on Tuesday announced on its website that Henderson Land had won a tender for a mixed-use project in Kowloon’s Sham Shui Po area with a bid of HK$1.368 billion ($175 million).

The victorious bid by Henderson, amid growing concerns over a slide in Hong Kong’s real estate market, gives the blue-chip developer rights to build around 260 homes, totalling 125,400 square feet (11,650 square metres) by gross floor area, at a land price which fell below market expectations by more than 22 percent.

The sale of the site five minutes walk from the Cheung Sha Wan MTR station in a traditional residential section of Kowloon attracted bids from 17 developers, but the lower than expected price, which works out to around HK$10,909 per square foot of finished housing, is seen as another indicator of declining confidence among Hong Kong’s home builders.

Building a Complex to Sell the Homes

Henderson’s purchase from the quasi-governmental URA gives it possession of a 1,650 square metre site at the intersection of Castle Peak Road and Un Chau Street in the western Kowloon neighborhood. The requirements of the project sale allow for construction of both residential and commercial space, however, the terms of the deal also require Henderson to build space for the for-profit organisation free of charge.

The total project is approved for construction of up to 14,840 square metres (159,736 square feet) by gross floor area. Of the total space, 125,400 square feet is approved for construction of homes, with Henderson required to share a percent of its profits with the URA for every HK$3.01 billion that it takes home from selling apartments.

The terms of the deal also require that, upon completion, Henderson Land will provide to the URA 18 homes free of charge, while also handing over to the organisation the project’s 26,660 square foot commercial podium.

Land Sale Falls Short of Expectations

Brokers and consultants cited in local media reports leading up to this week’s sale of the Sham Shui site predicted a winning bid of HK$1.757 billion to HK$1.917 for the project — some 22 percent more than Henderson’s offer.

The below-expectation tender fits into a trend toward disappointing land sales in Hong Kong, with a tender the same day in Ho Man Tin having received a total of only seven bids, after attracting 31 expressions of interest from developers.

In Sham Shui Po, 16 other developers bid for the western Kowloon prize, including Sun Hung Kai Properties, Sino Land, CK Asset Holdings, Wheelock and Company, New World International Holdings, K Wah International Holdings, Hang Lung Properties and ITC Properties Group.

Other recent site sales have proved less appealing, with the government auction earlier this month of a site on Victoria Peak, which had been expected to bring in $4.1 billion, being cancelled when no bidders met the auction reserve price.

A tender for a small plot in Tuen Mun in the New Territories closed last Friday after receiving just three bids.

Western Kowloon Gets More Homes

Sham Shui Po and neighbouring Cheung Sha Wan, in the northwestern part of the Kowloon peninsula, are traditional residential areas in Hong Kong which have been the sites of several land sales in the past two years.

Last November, a consortium of five Hong Kong and mainland developers won a tender for a 19,348 square metre waterfront site in Cheung Sha Wan for HK$17.28 billion, breaking price records for residential land in that area of the city. The winning consortium included Hong Kong firms Sino Land, Wheelock Properties, K Wah International and SEA Holdings as well as mainland developer Shimao Property.

Four months before the Cheung Sha Wan consortium deal, developer Hong Kong Ferry bought a Sham Shui Po plot from the URA for HK$1 billion. That project, which will yield a maximum gross floor area of about 13,410 square metres, also requires Hong Kong Ferry to share profits with the URA should sales of the project reach HK$1.8 billion.