West Kowloon’s commercial site draws a bid from Sun Hung Kai Properties, no news on others as deadline passes
- SHKP has submitted a tender for the plot, located in an area that has been touted as the city’s premier arts hub
- The latest tender included an extension of the build-operate-transfer (BOT) term to 47 years or until 2070
A commercial site being sold by West Kowloon Cultural District, which had been expected to fetch as much as HK$10.5 billion (US$1.3 billion), has received one known bid from one of Hong Kong’s biggest developers amid a tough property environment.
Sun Hung Kai Properties (SHKP) has submitted a tender for the plot, located in an area that has been touted as the city’s premier arts hub. The site comprises three buildings with office, retail, dining and entertainment features in the 40-hectare district.
“Yes we have submitted a tender,” a spokeswoman for SHKP confirmed to the Post via email.
The latest tender included an extension of the build-operate-transfer (BOT) term to 47 years or until 2070. While the terms of sale were enhanced, they still were not in line with the standard 50-year grant given to winning bidders in other land tenders in Hong Kong.
The sale is taking place at a difficult time for Hong Kong’s property market, which is battling a triple whammy of rising interest rates, knock-on effects from the pandemic, and a slump in the city’s stock market.
The authority declined to give any information about the latest tender, with its spokeswoman saying it would “make an announcement in due course”.
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SHKP had been tipped by analysts as a potential bidder for the site given that it won the commercial parcel above the West Kowloon terminus. Other developers such as Henderson Land, Link Reit, K Wah International Holdings and Chinachem Group confirmed they had not submitted a tender for the project when the deadline passed at 5pm today. No other bidders had been named as of late Monday.
“There were initially several developers and investors keen to review the project. However, recent interest rate hikes have stopped them from bidding for the project,” said Hannah Jeong, head of valuation and advisory services at Colliers in Hong Kong.
“Despite the authority increasing the land lease term from 34 to 47 years, the developer needs to return the building and land at the end of the tenure, which means there will be no capital investment appreciation. It is a pure yield play project and unfortunately the current high-interest environment does not make the project attractive,” added Jeong.
Earlier this month, Hong Kong’s five biggest lenders, including the three note-issuing banks HSBC, Standard Chartered and Bank of China (Hong Kong), raised their key rates to the highest levels in 14 years, following US rate hikes to curb inflation in the world’s largest economy.
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The higher interest rates means increased borrowing costs, hurting the ability of investors and developers to fund acquisitions.
Nevertheless, in the long term Jeong said the project has “a lot of potential with good amenities”. The project is described as a “landmark commercial development” by the authority.
The property lies close to facilities including the M+ contemporary art museum, the recently opened Hong Kong Palace Museum, the Lyric Theatre Complex currently under construction and an 11-hectare Art Park fronting Victoria Harbour.
The plot was previously valued at as much as HK$10.5 billion by Michael C.K. Lee, associate director of valuation and advisory at Prudential Surveyors.
There had been speculation that Sino Land may bid for the site, but there was no confirmation from them on Monday. Sino is part of a consortium that built the Grand Victoria residential project in Southwest Kowloon and the owner of the China Hong Kong City commercial complex in neighbouring Tsim Sha Tsui.
