Hong Kong property

Ho Man Tin Station development draws just six bids, despite low land premium

Muted response may indicate a lack of experience cooperating with MTR Corp among developers

PUBLISHED : Wednesday, 21 December, 2016, 3:15pm
UPDATED : Wednesday, 21 December, 2016, 10:51pm

MTR Corp has received just six bids from developers, largely local players, for the tender of a luxury residential project above Ho Man Tin MTR Station despite the government offering a lower than expected land premium to drum up interest.

The outcome stood in marked contrast to the overwhelming response to most government sites sold through tender.

“The number of bids is lower than my expectation,” said Alfred Lau, a property analyst at Bocom International. “The only explanation is that most developers have a lack of experience cooperating with MTR Corp.”

He said the outcome would not have been greatly affected by a 25 basis point increase in US interest rates last week or the new stamp duty on property purchases recently introduced in Hong Kong. Last week’s government tender of a residential site at Kai Tak attracted 21 bids, with HNA winning the plot for HK$5.41 billion on Monday.

Among the six bidders for the Ho Man Tin development, four have experience of working on property projects with the rail operator.

Sun Hung Kai Properties, Cheung Kong Property, New World Development ,Goldin Financial Holdings and Wheelock Properties made separate bids before the tender closed at 2pm on Wednesday. The sixth bid came from a consortium formed by Sino Land, K Wah International, Shimao Property Holdings, Logan Property Holdings and Empire Group Holdings, chaired by Sun Hung Kai Properties’ former chairman Walter Kwok Ping-sheung.

Knight Frank senior director Thomas Lam said the response was reasonable, given the residential development would require a total investment of more than HK$10 billion, inclusive of the estimated HK$6.28 billion land premium.

“Most of the bidders have a strong financial position and a good track record with MTR Corp,”he said.

The premium for the “package one” development in Kowloon is likely to be HK$6.28 billion, or HK$8,459 per square foot, according to a source who has read the tender document but did not wish to be named.

The premium, a levy charged for a change in land use, is 29 to 43 per cent lower than market expectations of HK$8.9 billion to HK$11 billion, according to surveyors.

Despite the lower levy, the rail operator still expects to raise its profit-sharing ratio on the site to 35 per cent from the average of 10 to 15 per cent on other development sites along MTR lines.

The project’s gross floor area will be 742,716 square feet, and this can accommodate between 800 and 1,000 flats. It has a target completion date of between 2022 and 2033.