Hong Kong to get HK$28 billion in record land sales haul

The Hong Kong government may get up to HK$28 billion from selling two sites next week, a record haul for the city’s coffers on a single day.

The two plots in Central and the Kai Tak area to be sold by government tender are worth up to HK$28 billion and likely to land a single day land sale revenue record, say industry experts.

They believe that the commercial site on Murray Road will fetch as much as HK$22 billion, while some HK$6.3 billion will be earned for the residential site, Area 1K Site 1, in Kai Tak – Hong Kong’s second core business centre.

The tender for the two lots will close on Friday noon, and the Lands Department will likely announce the outcome as early as next week.

“The market attention will definitely focus on the Murray Road site. But what concerns us most is who is the winner, instead of the selling price. Everyone expect it to be sold at sky-high prices,” said Victor Lai Kin-fai, the chief executive of property consultancy Centaline Professionals.

The site, expected to yield a total gross floor area of 450,996 square feet, could generate bids of between HK$35,000 and HK$48,000 per square foot, the equivalent of HK$15.7 billion to HK$22 billion.

“Grade-A office spaces in Central have already been at high prices, as investors bet that the Murray Road site could sell for an ultra-high price,” he said.

In March, two office units, with a total gross floor area of 3,664 sq ft, at the 9 Queen’s Road Central development was sold for HK$145.8 million. The price tag represented HK$39,800 per square foot, the highest price per square foot for office space in Hong Kong, said agents.

Lai said the projection for the Murray Road site would be difficult as big enterprises, largely from the mainland, intend to buy the plot to be used as their headquarters.

“These enterprises have no choice but to submit a very aggressive bid if they want to outbid rivals. Whether the purchase will generate profit will not be their top priority. More importantly, higher floors of the future building will have a sea view which is most sought after by corporates ,” said Lai.

Vincent Cheung Kiu-cho, deputy managing director for Asia valuation and advisory services at Colliers International expects the commercial site to also attract interested foreign bidders.

He projects that the tender would attract 15 to 20 competing bidders for the site.
“Hong Kong’s major developers who already owned trophy buildings in Central may not be as aggressive as the mainland players. Local companies may like to have one more building in the CBD, but will not be as keen as the others who do not have presence,” said Cheung.

Agents said the site could be developed into a 30-storey grade-A office building, with each floor of about 16,000 sq ft.

Alvin Lam, a director at Midland Surveyors expects existing land owners in Kai Tak to express interest in the site.

“Those who already owned land in the nearby area will bid aggressively as they want to expand their presence in Kai Tak,” he said.

Lai of Centaline said he would not rule out the possibility that the HNA Group could bid for the site, which if successful, will become its fifth residential site in the area.

HNA’s four plots, when combined into one, will yield a total gross floor area of 2.02 million sq ft with an average land cost of HK$13,416 per square foot.

“All four sites will be combined under one development project for the purpose of constructing a world-class integrated residential complex,” HNA said in a statement in March.