- A consortium of three developers paid HK$12.74 billion for Area 4A Site 1, with the winning bid coming in below the low end of market valuation
- The consortium comprises K. Wah International Holdings, Wheelock Properties and China Overseas Land & Investment
Hong Kong's government sold the biggest plot of residential land at the former Kai Tak airport at a discount to valuations, as seven consecutive weeks of increasingly violent street protests drove many developers to the sidelines and sapped their appetite for long-term investments.
Dragon Star H.K. Investments, a consortium comprising K. Wah International Holdings, Wheelock Properties and China Overseas Land & Investment, paid HK$12.74 billion (US$1.63 billion), or HK$11,841.70 per square foot, for Kai Tak Area 4A Site 1, according to the Lands Department.
The winning bid came in below the low end of valuers' expected price range between HK$13 billion and HK$16.1 billion. Wheelock and its partners bought an adjacent plot on the runway at the former Kai Tak airfield sold four months ago for HK$9.89 billion, or HK$13,701 per square foot.
"The price is cheaper than what we paid for last time," said Wheelock's chairman Stewart Leung Chi-kin, in a telephone interview with South China Morning Post. "The times are different."
The sale, the biggest residential portion of the government's plan to redevelop the abandoned airfield into Hong Kong's second business district, comes at an inopportune moment, as the city's business and investment sentiments are dampened by a combination of the year-long US-China trade war, and almost two months of deteriorating civic order in one of Asia's safest urban centres.
The result comes three days after men in white T-shirts stormed into the city's Yuen Long subway station in the city's northern New Territories, indiscriminately attacking people with sticks and iron rods. Incessant rallies and protest marches continued to disrupt daily life in the city, causing sporadic delays in public transport and forcing banks, shops and restaurants in affected districts to close.
The land parcel, with a gross floor area of 1.08 million square feet, can accommodate between 1,500 and 2,500 luxury flats that sell for more than HK$26,000 per square foot, or HK$26 million for a 1,000-sq ft unit.
Under the terms of the tender, the winning bidder must incorporate facilities for an elderly care home, and a childcare centre in the development plan.
Dragon Star will have to invest about HK$20 billion in the project, Leung said, adding that the consortium partners had considered the possibility that Kai Tak would be delayed in becoming Hong Kong's second business district due to the lack of transport infrastructure and amenities.
The developers were later convinced that buses and taxis would suffice in serving the area, said Leung, who is also the executive chairman of Hong Kong's Real Estate Developers Association (REDA).
The consortium is "very happy" to win the "exquisite" waterfront parcel that has "rich development potential," according to a press release.
Still, the winning bid was the lowest price since 2016, when mainland Chinese developers like the HNA Group began outbidding the market to snap up Kai Tak's land, said JLL's chairman Joseph Tsang, adding that "the recent social instability has been felt the hardest in the luxury housing market."
Average land cost on Kai Tak had fallen since those heady days three years ago. On June 11, two days after an estimated 1 million marched on the streets to oppose the controversial extradition law, Goldin Financial Holdings walked away from its HK$11.1 winning bid for a smaller residential site at Kai Tak, forfeiting HK$25 million in deposit.
Citing "social contradiction and economic instability," the developer would rather lose its deposit than commit to a long-term investment estimated at HK$20 billion.
"Unless the market's sentiment and social (atmosphere) deteriorates further, the land price at Kai Tak should have bottomed," said Knight Frank's executive director Thomas Lam, adding that the government is unlikely to sell any large commercial plots in the next two to three months at the former airport.
Commercial land parcels that require large investments may have to be withdrawn from sale if the government does not adjust the reserve price downwards according to the market sentiment, he said.
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