HK Land Wars Rage as Sogo Operator Pays Record $952M for Kai Tak Site

While Hong Kong’s Lifestyle International is best known for putting on sales at its Sogo department stores, the publicly listed company has been doing a bit of shopping of its own in the city’s red-hot real estate market.

The department story operator pushed aside some of Hong Kong’s biggest developers to pick up a HK$7.39 billion ($952 million) commercial site near the former Kai Tak airport in Kwun Tong district last week.

The acquisition set a new record price for a commercial land plot in Kwun Tong, surpassing the HK$5.8 billion ($747 million) Link REIT and Nan Fung Development handed over for a plot on 77 Hoi Bun Road in 2015. That project was in the news recently when JP Morgan revealed it was leasing nearly 25 percent of the complex to establish a second office in Hong Kong.

While the price smashed the record spent by the Link REIT and Nan Fund, it was actually in the middle of market expectations, as developers showed some unexpected bidding discipline. Lifestyle’s bid bested offers from a number of other Hong Kong developers including Cheung Kong Property and Sun Hung Kai Properties. Unlike other recent land sales in Hong Kong, only one mainland firm, China Overseas Land & Investment, submitted a bid.

The site is expected to yield a gross floor area of 1.09 million square feet (101,264 square metres) and will host a SOGO department store along with other commercial, entertainment and dining facilities. Vincent Cheung Kiu-cho, the executive director of valuation and advisory services for Asia at Colliers International told the South China Morning post that the site has been earmarked for a twin-tower project.

Sky High Land Prices In Kai Tak

It seems only fitting that Kai Tak was home to Hong Kong’s old international airport as land prices in the neighborhood are now sky high. Earlier this month, HNA Group, the operator of more than a dozen airlines including Hainan Airlines, spent HK$8.8 billion ($1.13 billion) for a residential land plot setting a new land price record in the process.

The site was tendered at HK$13,500 ($1,750) per square foot, doubling the former highest price paid which was done by mainland developer Poly Property  in 2014.

Just down the road, Wheelock Properties bought a HK$6.39 billion ($823 million) site on Kwun Tong Sin Fat Road in November. The 196,550 square foot (18,260 square metre) site made headlines for being the first residential land plot sold since the introduction of the latest property cooling measures.

More Land In Kwun Tong Up For Grabs

Land sales in East Kowloon aren’t abating just yet. The area, which has been selected by the government as a new central business district, is set to see another bidding war take place for a residential site near the MTR Ho Man Tin station.

Swire Properties, CK Properties, Nan Fung and mainland player China Vanke are among those chomping at the bit to get their hands on the 150,696 square foot (14,000 square metre) plot located close to the Hong Kong Coliseum and Harbour Plaza Metropolis.

The land premium for the site is said to be HK$6.28 billion ($809 million) with Wheelock vice chairman Stewart Leung telling The Standard that the price seems to be reasonable. The winning bidder will be required to give Hong Kong’s MRT 35 percent of the profits on the project.