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Sandy Li

Henderson Land Development chairman Lee Shau-kee has underlined his long-term confidence in Hong Kong's property market, saying his flagship will spend about $8 billion on land premiums for its projects this year.

 Like other developers, it would take advantage of the depressed property market to bargain for lower premium payments, he said.

 His estimated $8 billion premium bill appears to reflect the plunge of up to 40 per cent in property prices since June last year.

 Mr Lee said land premiums recently agreed to by developers and the Government had dropped 30 per cent compared with those paid last year.

 Land premiums usually are payable for rezoning or modification of sites for higher commercial-value uses, such as converting industrial lots or agricultural land for residential or commercial developments.

 Mr Lee said the company so far had paid a $1 billion land premium for its residential project in Tai Tong Road, Yuen Long.

 He said the land premium for the second-phase development at the Mass Transit Railway Corp's airport rail station in Central would be about $3 billion.

 The project is owned by a consortium led by Henderson Land and Sun Hung Kai Properties and including Hong Kong and China Gas and Bank of China Group.

 The consortium in January paid $5.8 billion, or $6,300 per square foot in land premium for the $40 billion project's first phase.

 Henderson Land also was negotiating on the land premium for its joint-venture housing project in Lok Wo Sha, which Mr Lee estimated at $4 billion.

 The premium for its residential project in Lam Tei, Tuen Mun would be about $1 billion, he said.

 Hong Kong Ferry (Holdings), which is controlled by Henderson Land subsidiary Henderson Investment, expected to pay a $2 billion premium for its Tai Kok Tsui shipyard redevelopment.

 If the company failed to strike an agreement on some projects with the Government this year, the $8 billion might not be used up, he said.

 The company recently obtained government approval to increase the plot ratio at its Tai Tong Road residential project to five times from three times, he said.

 The rise in plot ratio was expected to generate about a million sq ft of extra floor area, bringing the total to three million sq ft.

 The company later would have to pay an additional premium of several hundred million dollars for the extra floor area.

 Mr Lee said the negotiations for Hong Kong Ferry's land premium for the office development at Central pier was unlikely to be completed this year.

 The Government had asked for a premium of $2.7 billion, which exceed Mr Lee's estimate of between $500 million and $1 billion.

 Hong Kong Ferry proposed to redevelop the Central pier into a 590,000 sq ft retail, office and serviced-apartment development.

 Leading developers are appealing for sharp reductions in land premiums to minimise their risk amid the SAR market uncertainties.

 Early this month, Cheung Kong (Holdings) and Far East Hotels and Entertainment agreed to pay a land premium of $785 million, or $1,400 per sq ft, for a project, substantially lower than previous offers.



Henderson Land set to pay $8b premiums