Land tender: Hong Kong government must introduce guarantors, higher deposits to prevent another Kai Tak fiasco

Guarantors similar to those required by MTR Corp and Urban Renewal Authority will ensure completion of land sale via tenders, says industry expert

Although Lands Department says Kai Tak default was an isolated incident, it will consider raising the deposit cap from the current HK$25 million

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The sale of a prime commercial plot at the former Kai Tak airport fell through as the buyer walked away from a HK$11.1 billion winning bid. Photo: Winson Wong

Published: 8:00am, 19 Jun 2019Updated: 8:37am, 19 Jun 2019

The aborted sale of a HK$11.1 billion (US$1.4 billion) plot of prime land has exposed a serious flaw in the tender process that may cause the Hong Kong government to suffer a huge loss if it is unable to sell the site for the same price in a depressed market, according to market observers.

Property experts suggest the government should increase the deposit amount steeply from the current HK$25 million to prevent a repeat of such an incident in the future and introduce a guarantor to complete the sale in case the tenderer backs out of the deal.

On June 11, Goldin Financial Holdings walked away from its bid for a waterfront plot in Kai Tak, citing “social contradiction and economic instability”. It said in a stock exchange filing that the waterfront site was won by its wholly owned subsidiary, High Smart Investment, which has a total paid up share capital of HK$1, and that “no guarantee was given by the company nor any of its other group’s companies in relation to the tender”.

The HK$25 million forfeited to the government amounts to a mere 0.23 per cent of the HK$11.1 billion bid.

Stewart Leung Chi-kin, executive committee chairman of the Real Estate Developers Association of Hong Kong, said that the government was unlikely to recover the price difference from the defaulting company if the plot fetches less in the second sale.