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Bargain HK$5.56b bid wins auction for SHKP

Controversial Kowloon site goes for less than expected

A waterfront residential site in West Kowloon was sold to Sun Hung Kai Properties for a less than expected HK$5.56 billion yesterday, amid a pending judicial review and a town planning application aimed at reducing the size of the permitted development on the plot.

Surveyors had expected the 122,204-square-foot site to fetch as much as HK$6.4 billion or HK$7,000 per square foot, higher than the HK$6,147 per square foot for another West Kowloon non-waterfront site sold last month.

The sale price yesterday equalled HK$6,066 per square foot.

After the sale, Chris Millis, the auctioneer and assistant director of the Lands Department, said that while he could not comment on the impact of the judicial review on the auction, it 'had been well heralded, [and] the developers should have taken it into account when they were bidding'.

Alexander Lui Yiu-wah, the managing director of K Wah Real Estates, said parent firm K Wah International Holdings' offer was affected by the legal overhang. 'It created uncertainty for the development of the site.'

A joint venture between K Wah, Sino Land and Nan Fung Development - which had previously teamed up to bid aggressively at other land auctions - topped out at HK$5.25 billion yesterday.

With a protest going on outside the Convention Centre hall, Cheung Kong (Holdings), Chinachem Group, New World Development, Wharf (Holdings) and Hang Lung Properties also bid for the site.

A Sham Shui Po resident on Monday filed for a judicial review claiming that allowing a skyscraper to go up on the waterfront site would block ventilation in the area, countering city planning guidelines about ensuring a livable environment.

There was also an application calling for a reduction of the site's plot ratio to five from 6.5, and the implementation of a 30-metre height limit.

Most people in the property industry think there is little chance either submission will affect the development but they warned that the site was likely to become a lightning rod for civic groups.

Charles Chan Chiu-kwok, a managing director at Savills Valuation and Professional Services, blamed the judicial review for the price coming in at 10 per cent less than expected. 'I worry pressure groups might become the tools of developers to beat down prices.'

While the legal overhang had some effect, Chan Cheong-kit, a director at Lanbase Surveyors, said the low price also underscored the divide in the market. 'Since the potential growth for mass residential is lower than luxury, developers will suffer higher investment risk. That made them conservative in the bidding.'

On the 33rd bid, after Mr Mills lowered the increments to HK$20 million from HK$50 million, Sun Hung Kai Properties topped an offer by Wharf with a price that was 32.4 per cent higher than the opening bid.

Surveyors expect the developer could make reasonable profit if the average flat price is HK$7,500 to HK$8,000 per square foot.

Sun Hun Kai said it expected costs for the site including land price, construction and interest would be HK$10 billion or HK$10,910 per square foot - or about HK$4,844 per square foot for construction cost and interest. This is still higher than the HK$1,170 per square foot average for such projects, quoted by Levett & Bailey Quantity Surveyors.

Many flat owners at nearby Park Avenue and Island Harbourview in West Kowloon were willing to cut their asking prices by 3 per cent after the auction, a property agent said.

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