Hong Kong property

Nan Fung Development smashes property records, pays US$3.16 billion for world’s costliest land site in Kai Tak

Textile company turned property developer beat out eight rival bidders for Kai Tak site, smashing previous Hong Kong record set just two weeks earlier

PUBLISHED : Wednesday, 31 May, 2017, 5:58pm
UPDATED : Wednesday, 31 May, 2017, 11:36pm

Cash rich Nan Fung Development, the textile producer that morphed into the developer of Hong Kong’s most exclusive real estate, has won a commercial site in Kai Tak area for a record HK$24.6 billion (US$3.16 billion), smashing the previous world record set by the Murray Road site in Central.

The Lands Department awarded the office-retail-hotel site, named Area 1F Site 2, to Rich Union Development, a wholly-owned subsidiary of Nan Fung Development on Wednesday.

The price represents HK$12,863 per square foot, which is 7 per cent higher than the top end of market expectations, whieh ranged from HK$14.3 billion to HK$23 billion, or HK$7,500 per square foot to HK$12,000 per sq ft.

The site, designated for office, retail or hotel development, will yield a total gross floor area of 1.91 million sq ft. Site provisions that include a 200 metre tall tower, will make it the tallest building in Kai Tak.

The auction result exceeded the HK$23.28 billion that Henderson Land Development – controlled by one of Hong Kong’s wealthiest family under patriarch Lee Shau-kee – paid for the Murray Road car park site in Central on May 16.

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“This is one of the strongest commercial sites in Kai Tak, thanks to its large footprint, proximity to the future MTR station and mixed use zoning, which allows developers to provide amenities for office occupiers within the same complex,” said Marcos Chan, head of research at CBRE Hong Kong, Southern China and Taiwan.

“It explains why this site is even more sought after than the record-breaking Murray Road site,” he said.

The Kai Tak site drew 12 bids, while the Murray Road site attracted nine. Bidding for the both sites were dominated by Hong Kong developers.

Knight Frank estimated the total investment cost for the project at HK$32 billion, including the HK$24.6 billion land cost.

Denis Ma, head of research at JLL said Chinese developers interest in the commercial sector has primarily been focused on opportunities in the central business district, so there is no real surprise with the low level of bidding for this latest Kai Tak site.

“Within Kowloon East, Kai Tak is likely to benefit the most from the completion of the future Shatin-Central Link, which will reduce travelling time to Central to within 15 minutes. The line is expected to open by 2021.”

Victor Lai, chief executive of property consultancy Centaline Professional said Nan Fung group, chaired by Antony Leung Kam-chung who is also chief executive, has become more aggressive in property investment.

“Nan Fung paid an unexpectedly high price for the site, indicating its eagerness to own a landmark building in Kai Tak which will be transformed into the city’s second central business district,” he said.

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Nan Fung said the group would develop an integrated project on the site.

“Half of the project will be comprised of grade-A offices while the rest are retail and hotels. Our project will definitely become an important part of the city’s future CBD,” according to a statement by Nan Fung issued on Wednesday.

Daniel Wong, chief executive at Midland IC&I, said there were 21 commercial sites sold by government tender since 2012.

“All of them were bought by either Hong Kong developers or foreign real estate funds. It showed mainland investors are more interested in buying whole blocks of existing office buildings instead of commercial sites,” he said.