A consortium led by local builder Sino Land has won a tender for a residential plot in Hong Kong’s Kai Tak area with a bid of HK$5.35 billion ($680 million), representing a nine-year low for a government land premium at the site of the former international airport.
Sino Land joined state-backed China Overseas Land & Investment (COLI), HKEX-listed Great Eagle Holdings and Joseph Lau’s Chinese Estates Holdings in besting five competing bids from some of the city’s largest developers in the tender that ended Wednesday.
The win gives Sino Land and crew the right to develop the 145,302 square foot New Kowloon Inland Lot No. 6590 into a maximum 992,271 square feet (92,185 square metres) of gross floor area, plus government accommodation facilities.
Sino Land’s price for New Kowloon Inland Lot 6590 pencils out to HK$5,392 ($689) per square foot of potential gross floor area, making it the lowest figure for a Kai Tak plot since K Wah International Holdings’ winning bid of HK$5,330 per square foot in a tender that ended in February 2014, according to Alex Leung, senior director at CHFT Advisory and Appraisal.
By comparison, the record high at Kai Tak is HK$19,636 per square foot paid for a harbour-facing plot on the former airport runway in a tender awarded to a consortium of COLI, Chinachem, Empire Group, Henderson Land, New World Development and Wheelock Properties in May 2019, Leung noted.
Cool Response to Land Sales
The tender for the 50-year land grant plot also drew bids from CK Asset Holdings, Henderson Land Development, Nan Fung Development, Sun Hung Kai Properties and Wheelock Properties. The reserve price, the name of the runner-up bidder and the details of the other failed bids were not immediately disclosed, as is customary.
The downbeat exercise took place as government land sales in the Asian financial hub have been facing a cool reception from developers.
In July, Wheelock Properties won a residential site in Hong Kong Island’s Kennedy Town at a lower-than-expected price of HK$1.72 billion ($220 million). Based on the price per square foot of maximum buildable area, Wheelock paid 30 percent less for its plot than Grand Harvest (HK) Development had shelled out for a nearby parcel in the same district last November.
Last month, the tender for a residential site in the New Territories’ Tsuen Wan area was scrapped after a single bid from local developer Grand Ming Group fell short of the government’s undisclosed reserve price.
Local Supply Glut
By the end of July, 15,900 residential units in Hong Kong had been issued pre-sale consents by the government and were awaiting sale, Leung told Mingtiandi, citing sources from local agency Midland Realty. Among those units, Kai Tak alone accounted for about 52 percent.
The government expects the newly awarded plot to provide 1,325 homes. “We expect the developers would provide smaller-sized flats than the government’s expectation, which would give a higher number of flats,” Leung said.
The site of Hong Kong’s former airport continues to pique the interest of Sino Land’s partner COLI, which has previously bid on several Kai Tak residential plots.
State-backed COLI teamed with Wheelock Properties and Henderson Land Development in March 2019 to win a former runway plot with a bid of HK$9.89 billion. Then in July of that year, COLI joined forces with Wheelock and K Wah International to bag the biggest former runway plot for HK$12.74 billion.
In a December 2020 tender, COLI single-handedly beat nine rivals to secure a waterfront Kai Tak plot for HK$4.27 billion. Twelve months later, the red-chip builder agreed to sell a 30 percent stake in the project to investors including China State Construction Engineering Corporation, the state-run engineering giant that ultimately controls COLI, and China Overseas Holdings Ltd, the unit of CSCEC that is COLI’s direct parent company.