Sun Hung Kai Properties had been awarded the tender for a commercial project in Hong Kong’s West Kowloon area after the blue-chip builder submitted the sole bid for the development site earlier this month.
SHKP won the right to develop and operate Artist Square Towers for a period of 47 years under a build-operate-transfer arrangement and will be responsible for the design, construction, financing, marketing, leasing, management, operation and maintenance of the project, the West Kowloon Cultural District Authority announced Tuesday evening in a release.
The 40 hectare (98.8 acre) AST site is planned for three towers spanning 699,654 square feet (65,000 square metres) of office and retail space. The WKCD Authority didn’t disclose the amount of the winning bid entered by SHKP, the HKEX-listed developer controlled by the Kwok family.
“Having considered the average valuation provided by three independent valuers engaged by the Authority and other relevant factors, the Authority considers the tender price offered by SHKP is commensurate with the market level and accepted the tender bid,” it said.
When the latest AST tender was announced in September, Vincent Cheung, managing director at Vincorn Consulting and Appraisal, had predicted that the project could draw up to four bids reaching as high as HK$2.45 billion ($310 million).
“SHKP is one of the major owners in West Kowloon, as they own the ICC together with elements of the to-be-completed commercial complex atop the high-speed train terminus,” Cheung said Wednesday. “They are familiar with the leasing conditions and the potential renters. Their successful bidding on this asset can enhance their commercial synergy in terms of rental setting/adjustment and tenant mix in the district.”
The AST site, located adjacent to Kowloon MTR station, is in an area known as Artist Square and sits close to arts and cultural facilities, including M+, Asia’s first museum of contemporary, global visual culture, and the Hong Kong Palace Museum. It is also less than a 1 kilometre (0.62 mile) walk to the 11 hectare Art Park in front of Victoria Harbour.
Upon completion, AST will link directly to the MTR Corporation-developed Elements shopping mall in Kowloon, according to Hannah Jeong, head of valuation and advisory services at Colliers in Hong Kong. The entire project is to encompass 672,044 square feet of office space, with a further 26,909 square feet reserved for retail.
The WKCD Authority said it would continue to unleash the potential of commercial land in the district, which it is positioning as a world-class arts and cultural hub of the Greater Bay Area and the Asian region.
“The Authority looks forward to working with SHKP to make the AST project a success,” said CEO Betty Fung.
Downturn Spoils Land Sales
The AST tender marked the second attempt by the WKCD Authority to market the site amid a local property market downturn, having made the same project available last November.
The earlier tender was cancelled this year without a successful bid, likely due to developers having submitted bids lower than the reserve price, according to analysts who spoke with Mingtiandi.
Tenders for the city’s commercial sites have underwhelmed this year, including Chinachem’s acquisition of a Lantau Island project at a rate below most analyst projections and CITIC Pacific’s lowball bid for a residential site in the New Territories. The recent surge in interest rates and construction costs is leading most developers and investors to freeze their decision-making process, Jeong told Mingtiandi earlier this month.
With land sale revenues in retreat, Big Four accounting firm Deloitte estimates that Hong Kong’s budget deficit for fiscal 2022-23 could reach HK$170 billion, according to documents seen by Mingtiandi.