Far East picks up ‘smallest’ land plot at Kai Tak at discount, as public unrest deters developers from long-term investments
- Far East Consortium has won the tender for the commercial plot next to the proposed Kai Tak Sports Park at a discount to valuers’ expectations
- Far East will pay HK$2.45 billion, or HK$7,100 per square foot, for the plot
Hong Kong’s government sold a land parcel at the former Kai Tak airport at a discount to market expectations, as the city’s 10 consecutive weeks of public unrest deterred developers from committing to long-term investments.
The commercial site is the smallest plot in terms of gross floor area that it can yield. Located next to the proposed Kai Tak Sports Park, the plot sold for HK$2.45 billion (US$312 million), 9.4 per cent less than the lower end of the HK$2.7 billion to HK$3.6 billion range that valuers were looking for. Far East Consortium International won the tender, the Lands Department said.
The price for the plot that can yield a gross floor area of up to 344,448 square feet works out to about HK$7,100 per sq ft. It is the lowest since Lifestyle International Holdings, the operator of Sogo department store, bought a commercial parcel in November 2016 near Tak Long Estate for HK$7.39 billion, or HK$6,773 per sq ft.
David Chiu, chairman of Far East, said the company planned to develop a four-star hotel with 300 to 400 rooms and an office tower on the site at a total investment of HK$4.5 billion, which includes the land cost.
“We were really keen to get the site as it is next to the [upcoming] sports park where Rugby Sevens and concerts will be hosted. Demand for hotel rooms will be strong,” he said. “It also shows our confidence in Hong Kong which, at this time, is facing huge challenges in its economy. But it offers a good opportunity as land price is declining.
“We will continue to expand our hotels business, Chiu said, whose company owns and operates some 10,500 hotel rooms in Hong Kong, mainland and London.
Denis Ma, head of research at JLL, said that because it was a hotel site, there was an impact on pricing.
“If it were for office buildings, I think it would have been a different story,” said Ma. “The demand for hotels in Kai Tak hasn’t proved itself yet. It’s going to take some time.”
The Kai Tak Sports Park will have a 50,000-seat main stadium with a retractable roof, an indoor sports centre with 10,000 seats and a public sports ground with 5,000 seats. The groundbreaking was held in April, and the HK$30 billion park is to be finished by June 2023.
Far East’s bid trumped some of Hong Kong’s biggest property giants, such as Sun Hung Kai Properties and CK Asset Holdings, indicating that they remain cautious on the market’s outlook.
Far East’s market capitalisation of HK$8.16 billion is around 2.6 per cent of SHKP, the city’s biggest developer, which has a market value of HK$319.63 billion.
Thomas Lam, executive director at Knight Frank, said because of the social turmoil and the US-China trade war, developers were turning conservative in their bids.
Victor Lai, managing director of Centaline Surveyors, said that the government has “accepted the reality” of lower property and land prices now and would not liked to have seen another parcel withdrawn from sale.
Hong Kong has been reeling from 10 weeks of sporadic protest rallies, which are deteriorating into mayhem and chaos, as a civic movement that grew out of a popular opposition to a controversial extradition law descended into mob violence. Hong Kong’s international airport was forced to cancel all outgoing flights on Monday after thousands of protesters laid siege to the airfield’s terminals.
Additional reporting by Daryl Choo
