Henderson Land Development, chaired by property tycoon Lee Shau-kee, has paid the reserve price of HK$1.689 billion (US$216.56 million) for a 53-year-old residential block in Tai Kok Tsui, an area west of Mong Kok in Kowloon, which it aims to redevelop. With government land sales remaining scarce, the Hoi Hing Building was bought under Hong Kong’s “Land Compulsory Sales for Redevelopment Ordinance”, under which developers are able to force a compulsory auction to buy the remaining stake in a building, in which it already it owns 80 per cent. The auction was completed by JLL. Augustin Wong, Henderson Land’s executive director, said the building – which has 238 units – will be demolished to make way for a new residential project comprising 460 units of 330 square feet each, and cover a total 180,000 square feet gross floor area. The total investment, including land costs, will be HK$2.6 billion, a price tag which represents HK$14,444 per square foot. Thomas Lam, senior director at Knight Frank, said developers have been building up sizeable land banks in urban areas through acquiring older properties, as “even if you have the money, there are fewer sites being put up for sale by government tender in urban areas”. According to Henderson Land’s 2016 annual report, there are currently 39 potential urban redevelopment projects involving old tenement blocks in Hong Kong, which fall under the 80 per cent ownership “compulsory sales” rules, worth some HK$26.1 billion, or HK$6,900 per square foot. It said the projects could contribute total gross floor area of about 3.8 million square feet, and are expected to become available for sale or lease from next year. Vincent Cheung Kiu-cho, deputy managing director of Asia valuation and advisory service at Colliers International, explained that buying older buildings – which sometimes have scattered ownerships – outwith the compulsory sales ordinance can take as long as a decade. “There are few developers who can afford to wait that long to build a project,” he said. Developers buying units under a corporate name in older properties now need to pay a 15 per cent buyer’s stamp duty on top of 15 per cent double stamp duty. But they can get refunded those costs if they start construction within six months of obtaining the required permit, he said.