Hong Kong company reporting season

Henderson Land looks to farmland conversion, ageing buildings to stoke development pipeline

PUBLISHED : Saturday, 02 June, 2018, 10:01am
UPDATED : Saturday, 02 June, 2018, 10:03am

Henderson Land Development will look to a combination of sites sold at government tender and private land acquisitions to help replenish its land bank at a time of soaring property values in Hong Kong.

Henderson Land would consider buying land in good locations from tender regardless of the economy, and “not only from tender”, said Martin Lee, vice-chairman of the real estate giant at a media briefing of Henderson Investment on Friday.

“Apart from tenders, we would also work on farmland conversion and redevelopment of ageing districts,” said Lee.

Lee said Henderson Land, the city’s largest farmland holder, has also been working to complete a premium payment, a necessary step in farmland conversion, for land in Ma Shi Po and Wu Nga Lok Yeung, near the north-eastern district of Fanling.

Lee described the current housing prices in the city as “a bit high”, noting that with the imminent interest rate rise, the ability of homebuyers to repay mortgages would be affected.

“But the price level is likely to remain unchanged given strong demand,” he said.

Hong Kong’s home price index rose for a 25th straight month in April, according to the Rating and Valuation Department.

Analysts said high land premiums at government auction will translate to thinner margins for developers after one to two years.

“We believe farmland conversion is a good option for developers to acquire land at a more reasonable cost. However, not all developers have these assets on hand and the negotiation process with government to convert the land could be very lengthy,” said Esther Liu, associate director at Standard & Poor’s.

Henderson Land’s underlying profit rises 38 per cent, beats estimates

Henderson is the largest farmland owner among its peers, controlling more than 40.5 million sq ft of acreage, mainly in Hung Shui Kiu and Yuen Long North, that could provide 64,300 flats in 61.8 million ft of gross floor area.

Henderson has spent HK$3.7 billion (US$471.61 million) on farmland conversion in addition to the two residential sites in Kai Tak it bought from HNA in February.

Meanwhile, Henderson Land revealed it has secured majority stakes in 51 projects of old tenement buildings in areas such as Sheung Wan, Mid-Levels and Jordan.

It said the 51 residential buildings, acquired at a cost of HK$34.6 billion, or HK$8,200 per sq ft, could be redeveloped to yield a total gross floor area of 4.2 million sq ft.

“The group has made use of multiple channels to expand its development land bank in Hong Kong,” Henderson Land chairman Lee Shau-kee in a company statement in March.

Henderson released the price list for 103 flats at its new project Cetus Square Mile in Tai Kok Tsui on Friday. Of the flats set for sale, 38 are “nano” studio flats of 193 to 194 sq ft.

Prices start from HK$4.42 million after discounts for a flat of 194 sq ft, or HK$22,771 per sq ft. The most expensive, at 417 sq ft, costs HK$9.84 million, or HK$23,585 per sq ft.