bodyType

customContents

entityId

entityUuid

articlePageQuery

filter

article

articleBaseAdvertisingInfoArticle

articleListArticle

articleSeoArticle

hooksArticleAcknowledgementGateOverlayArticle

hooksTrackPageViewArticle

hooksContentInterestArticle

articleLinkingDataContent

hooksAmpRedirectArticle

articleSchemaContent

liveArticle

advertZone

sentiment

contentLock

topics

types

sections

paywallTypes

createdDate

publishedDate

sponsorType

urlAlias

moreOnThisArticles

commentCount

authorLocations

authors

corrections

displaySlideShow

multimediaEmbed

printHeadline

seriesContainer

articleSpeeches

socialHeadline

headline

images

flag

firstTopic

glossary

flattenTypeIds

image

relatedLinks

relatedNewsletters

__typename

sponsor

pdfFiles

seriesReverseOrder

series

disableOffPlatformContent

published

updatedDate

summary

subHeadline

body

keywords

readingTime

customTimezone

liveContents

Developers are expected to bid conservatively for the large property project at Tiu Keng Leng Station in Tseung Kwan O.

The Mass Transit Railway Corp (MTRC) tender of the 2.7 million square foot residential and retail development closes on Friday.

The cost of the two-phase development is estimated at HK$6 billion. Analysts expect the project to draw cautious bids, given the ample supply of land and flats in Tseung Kwan O.

The uncertainty in the economy and the property market would cause all but the biggest developers to hesitate to commit to such a huge investment, they said.

According to the tender document, the winning bidder must pay the government a land premium of HK$1.02 billion for the 1.32 million sq ft phase one development, while reimbursing the MTRC HK$770 million for foundation work and the cost of building a shopping mall.

MTRC property director Thomas Ho Hang-kwong said the tender would go to the company that offered the best terms to the MTRC. The tender documents require that at least 25 per cent of sales profits go to the MTRC.

He said the division of the project into two phases would keep the initial investment manageable.

'The winner has to pay the land premium for phase one and reimburse HK$385 million to the MTRC after the contract has been signed.

'The remaining reimbursement can be paid after 2.5 years while the land-premium application for phase two is taking place,' he said.

The developer would be free to decide the timing of the phase-two land-premium application, Mr Ho said.

Nan Fung Development project director Donald Choi agreed that splitting the land premium and reimbursement into two installments would benefit the winning developer by limiting its capital tie-up.

'It's good to divide the land premium into two phases. If the market is going up, the paid land cost will be seen as cheaper. On the other hand, the developer is insured if the market is going down,' he said.

He said the premium charge and the reimbursement cost appeared to be reasonable.

Mr Choi said the project would be profitable with development costs of about HK$2,500 per sq ft, against a selling price in the low HK$3,000 per sq ft range.

He said Nan Fung was studying the possibility of forming a consortium to bid.

'It should be considered very carefully due to the huge investment involved.

'The developers will be conservative [in bidding] as they have many choices,' he said.

But Nan Fung would be more aggressive in bidding for the luxury residential sites to be auctioned by the government in December and next February, Mr Choi said.

New World Development senior property development manager Andrew Choi Fook-ming said the group had the project under detailed study.

'We might consider a possible venture partner.

'The development has transportation potential but should be considered very cautiously,' he said.

He estimated that average flat prices in Tseung Kwan O were below HK$3,000 per sq ft, and market sentiment was deteriorating due to oversupply and economic stagnation.

Surpass Property Strategy Consultant managing director Charles Lai said property prices in Tseung Kwan O were under pressure, meaning developers would not bid keenly for the project.

'Prices in Tseung Kwan O are declining. They could slide to below HK$2,500 per sq ft,' he said.

However, 'the development can be attractive in terms of its relatively low premium,' he said.

The land cost for the phase one development is about HK$770 per sq ft - 10 per cent less than the HK$850 per sq ft premium set in June for a development at Hang Hau Station which, like Tiu Keng Leng, is on the Tseung Kwan O MTR line.

Mr Lai expected a profit margin of more than 30 per cent for the phase-one development, given an estimated development cost of HK$2,300 per sq ft and a sale price of about HK$3,000 per sq ft.

SK Pang Surveyors managing director Pang Shiu-kee estimated the average cost for the project at HK$2,200 to HK$2,500 per sq ft. Finished flats at the nearby Ocean Shores development are priced at HK$3,200 to HK$3,500 per sq ft.

'It will be profitable, but only a few major developers are interested or able to commit to such a huge investment,' he said.

Mr Pang said the completed foundation work would save much development time and cost, enhancing the attractiveness of the project.

Sixteen developers had expressed interest in the Tiu Keng Leng Station development.

They include Cheung Kong (Holdings), Sun Hung Kai Properties, Swire Properties, Henderson Land Development, Wharf (Holdings), New World Development, Hang Lung Properties, Sino Land, Kerry Properties, Nan Fung Development and HKR International.

Phase one comprises 1.32 million sq ft of developable area and includes 1,676 residential units and a 180,000 sq ft shopping mall. Phase two comprises a buildable area of 1.4 million sq ft to accommodate 2,096 residential units.

The MTRC has already awarded two property projects this year, one at Hang Hau Station and the other at Tseung Kwan O Station.

The Urban Renewal Authority also successfully tendered two projects in Tsuen Wan and Western.

Kowloon-Canton Railway Corp also plans to tender two projects - Tsuen Wan West Station along the West Rail line and Ho Tung Lau redevelopment in Sha Tin - but the process has been held back by premium settlements.

Graphic: proj16gwz



Damper on MTRC tender