GBA, Property

Training its sights

Sun Hung Kai in massive bid for West Kowloon site – but was it a bargain?


A skyscraper to be built here

Belgian actor Jean-Claude Van Damme has long been a fan of Hong Kong. In 2004 the martial arts star spent HK$80 million ($10 million) on two top-floor units at a luxury development in West Kowloon. They’re now up for sale, at a combined asking price of HK$320 million. Interested parties will have to deposit a HK$5 million cheque before taking a tour, according to Apple Daily.

While the 59 year-old star known as the ‘Muscles from Brussels’ is looking to exit the city, Hong Kong’s largest developer by market value Sun Hung Kai is doubling down in the very same neighbourhood.

Last week it won the bid for a prized parcel of commercial space, atop the West Kowloon high-speed railway terminus. It paid HK$42.2 billion.

The winning bid was at the low end of the valuation for the plot, which topped out at HK$63 billion at the higher end. Nevertheless, it still set the record for the largest premium paid in the city’s history for a single parcel of land.

The site is next door to Sun Hung Kai’s International Commerce Centre (ICC), a 118-storey skyscraper, and analysts believe that the developer will turn its new site into another huge compex of retail, office and hotel use.

The speculation is that the building will be 12% larger than the ICC, reported the South China Morning Post.

Kwok Ping-luen, chairman and managing director of Sun Hung Kai, points out the site has another major advantage when it comes to the location: fast trains from West Kowloon station connect directly with stations in Shenzhen and Guangzhou.

As a result, the new tower will be even more convenient for people travelling between the three biggest cities in the Greater Bay Area, another of the major policy initiatives expected to shape the region over the next decade.

The land auction, which came a couple of weeks after the largest plot at Hong Kong’s former Kai Tak airport was sold at a price well below expectations, only attracted two other bidders: Li Ka-shing’s CK Asset Holdings and a consortium that included Wharf Holdings, Sino Land, Henderson Land Development, Chinese Estate Holdings and Lifestyle International Holdings.

When the site was first included on the land sales list in February, some of the property brokerages were predicting that it could sell for HK$100 billion or more. But events since then have battered the local economy, depressing market sentiment in the property sector as GDP registered a 2.9% drop in the third quarter. “It is definitely at the low end. It is mainly because the market is not good,” Alex Leung, senior director at CHFT Advisory and Appraisal, told the SCMP of the final price. “When the market is not good and there is an uncertainty, then investors will certainly be very conservative.”

Others, took a more bullish stance, including Thomas Lam, executive director of Knight Frank. He told the Hong Kong Economic Times that it was a solid sale, demonstrating the developer’s confidence in Hong Kong’s real estate market over the long-term, as well as its ongoing appetite for high- quality projects.

“Large-scale development in a strategic location is an important battlefield among developers, which are also attracted to the long-term investment and rental income. The winning developer [i.e. Sun Hong Kai] is very experienced in the development of commercial projects and has extensive operating and management experience. Even though the value of the land is still very high, it is definitely a very good investment,” Lam told HK01.

Investor appetite for other commercial projects in the city seems to be cooling, however. Average rents for top grade office rents in October showed their biggest dip in 10 years. Grade A office rates slid to an average of HK$74.30 per square foot, down 1.6% from HK$75.60 per square foot in September.

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