Sun Hung Kai Properties has bested three competing bidders to win a tender for a retail site in Hong Kong’s Kowloon East, at a price more than 50 percent less per square foot than what Link REIT paid in late August for an adjacent land parcel.
The tender for Lot 1077 in Survey District 3 on Anderson Road in Kwun Tong district, was awarded to a subsidiary of SHKP for HK$296 million ($37.9 million), the Lands Department said in a press release Wednesday, giving the company the right to develop up to 10,246 square metres (110,290 square feet) of gross floor area on the site.
Victor Lui Ting, deputy managing director and executive director of SHKP, told local media that the company will invest about HK$1 billion to build a community shopping mall at the Kwun Tong site to meet demand from the growing population in the Kowloon East neighbourhood.
The tender award marks SHKP’s second land sale victory of the week after it was announced as the sole and winning bidder for a commercial project in the West Kowloon Cultural District on Tuesday.
Out of Expectation
SHKP’s Anderson Road project is part of a government plan to develop 12 hectares (29.7 acres) of land in the traditional industrial area to create 9,400 new homes.
At the agreed land consideration, SHKP is paying roughly HK$2,684 per square foot of gross floor area to develop the site on a 50-year land grant. This is 51.2 percent less than Link REIT’s winning bid of HK$5,501 per square foot for a larger site on the same road about three months ago, and about 20 percent below market expectations.
“Both the low price and the identity of the successful bidder are totally out of expectation of the market, including myself,” Alex Leung, senior director at CHFT Advisory and Appraisal, told Mingtiandi. “I am also surprised that the government did not withdraw this tender due to the low bids. The awarded price (in term of AV) is 51 percent lower than the last award price and 16 percent lower than the former second highest bid”
Increases in interest rates compared with August do not justify the price drop, CHFT’s Leung said. “The mall in this location should mainly serve the local residents whose shopping demand should be more stable,” he said.
Link Goes Low
Link REIT appeared to share the new market value for the site, with Asia’s largest real estate investment trust listed as one of the unsuccessful bidders for the project. Other developers which lost out to SHKP were Sino Land and Li Ka-shing’s CK Asset.
Lot 1077 measures 5,330 square metres, making it around 10 percent smaller than Link REIT’s adjacent property, and is located opposite from a planned city hall, sports centre and public library.
Link said in August that a covered footbridge and lift system, to be built by the government, will connect its planned community mall to the Sau Mau Ping Shopping Centre and other residential estates in Sau Mau Ping district.