A consortium of Hong Kong-based Sino Land and mainland builder China Merchants Land has won the tender for a redevelopment site in Kowloon’s To Kwa Wan area with a lower-than-expected bid of just under HK$2.39 billion ($300 million).
The Urban Renewal Authority announced Thursday that the partnership had bested six other offers to win the contract for the Wing Kwong Street/Sung On Street Development Project, earning the right to develop as much as 278,613 square feet (25,884 square metres) of gross floor area, including 46,177 square feet to be reserved for retail space.
The winning bid computes to HK$8,571 ($1,092) per square foot of potential floor area, representing a nearly 25 percent markdown to the HK$11,381 per square foot paid by Li Ka-Shing’s CK Asset Holdings to secure its own nearby site in To Kwa Wan after winning a URA tender in March — a drop termed “shocking” by Alex Leung, senior director at CHFT Advisory and Appraisal.
Market expectations for the Wing Kwong Street/Sung On Street site were anywhere from HK$9,500 to HK$13,000, Leung said. “Comparing the small to medium-size flat prices in the secondhand market, there was a drop of about 7 percent between February and early October,” he told Mingtiandi. “But the implied drop in land price was much higher and was out of the market expectations.”
The 30,957 square foot site spans 44 to 54A Ngan Hon Street and 72 to 118 Wing Kwong Street in To Kwa Wan, a redevelopment hotspot north of Hung Hom and southwest of Kai Tak.
Alkan Au, senior director of valuation advisory services at JLL in Hong Kong, noted that the neighbourhood’s access to the recently extended MTR Tuen Ma Line has unlocked redevelopment potential, which had previously attracted the interest of major developers.
“However, developers turned conservative in land bidding recently due to the weakening housing market and uncertain economic outlook,” Au said. “The winning bid is nearly 10 percent below the lower end of market expectations.”
The URA plans to publish the unsuccessful tender amounts on an anonymous basis within the next three weeks, as is customary. The exercise drew six failed bids from local heavyweights Henderson Land Development, CK Asset Holdings, Wheelock Properties, Sun Hung Kai Properties, Emperor International Holdings and Great Eagle Holdings.
Upon completion, which could happen as early as 2026, the project is estimated to yield as many as 560 new homes, according to Leung. Based on an average home size of 340 square feet of saleable area, flats in the project could sell for HK$9 million to HK$10 million, Leung told Mingtiandi in August, when the tender attracted 31 expressions of interest.
State-controlled China Merchants Land is one of the few mainland developers still in investment mode during the country’s real estate crisis, as Beijing has adopted a strategy of using government-owned companies to rescue the embattled property sector. The Shenzhen-based builder posted unaudited third-quarter sales totalling RMB 12.94 billion (now $1.8 billion), up 56.5 percent year-on-year.
Earlier this year, sister company China Merchants Bank inked a deal to lend RMB 23 billion to state-controlled China Resources Land to finance property acquisitions.
Up to now, developer interest in To Kwa Wan has been surging as improved connectivity and government initiatives have made the section of Kowloon City a focus of new homebuilding.
In February, HKEX-listed Hysan Development and privately held Empire Group agreed to each acquire a 25 percent stake in the URA’s Bailey Street/Wing Kwong Street project in To Kwa Wan from Henderson Land for a combined HK$6.1 billion after Henderson had won the project in a URA tender in September last year for HK$8.1 billion.
The Bailey Street/Wing Kwong Street project is located just two blocks west of the Wing Kwong Street/Sung On Street project awarded to Sino Land and China Merchants Land.
Also in To Kwa Wan, Henderson is set to acquire full ownership of four adjoining sites through compulsory sales for redevelopment, which would make way for it to build a residential and commercial project worth as much as HK$9 billion upon completion.
Last month, Henderson secured the third of the four sites with the HK$1.2 billion compulsory sale of an ageing building.