The Bid of Kai Tak Commercial Land Is Failed Again Due to the Low offers.

28Hse Editor  2019-09-26  3.1K
The market turmoil continues, and it is worried that the project on top of West Kowloon high-speed railway station would follow in the step. (By Ngan LunLok) Kai Tak commercial land had been failure of bid twice in a year! No.4 land site in Kai Tak District 4C which had came across forfeiture of deposit by Goldin in June was relaunched for tender in August, having received 5 tenders until the close of application on last Friday, while Lands Department announced yesterday that the bid was failed because all 5 developers’ offers were lower than government’s reserve price. Surveyor believes that the shrinking of retail and hotel industry due to the recent violent demonstrations has caused a serious gap between the government's reserve price and the developer's bid, and the news will have a considerable impact on the market outlook, so it is worried that the project on top of West Kowloon High-speed Railway Station would follow in the step. No.4 commercial/Hotel land site in Kai Tak District 4C can be built with floor area of about 863,000 sq ft, capable for 480-800 housing units. The application was closed on last Friday, with five tenders were received at the time, including Cheung Kong, SHKP, Chinese Estates Holdings Limited, Sino and Great Eagle. However, the Lands Department announced yesterday that all the above five consortiums’ bids were lower than the government’s reserve price and the government would not sell the land. According to industry insiders, many large developers offering low prices reflects developers' views on the prospects for a certain extent. Twists and turns, the lower limit of valuation decreases by 38%. Going through the data, the tendering process for Site No. 4 in Kai Tak District 4C can be described as twists and turns. In May this year, Goldin International won this commercial site for over HKD11.124 billion with the sq ft price at HKD12,888, which was the highest sq ft price among the Kowloon East commercial lands. However, in June, the group suddenly made a decision to give up based on the reason that market would be affected by "recent social conflicts and economic instability". Since June, the property market has been rapidly reversed. In fact, many surveyors have already predicted that there would be risk of failure of bid, and reduced the valuation of the land to HKD6.9-10.36 billion with the floor area sq ft price was only HKD8,000-12,000, also the lower limit valuation is 38% lower compared with the former bid price. The Market Planning and Sales Director of Goldin Group which did not re-enter the bid last Friday, Chen SauYin expresses, the Group wait and see on hotel land site because the Sino-US trade negotiations had not improved and Hong Kong hotel occupancy rate has been low recently, but the Group remains optimistic about residential and Hong Kong property markets. Price of Kai Tak commercial site may fall further. What is even more worrying is that, this is the second time of failure of bid in the year. At the beginning of the year, the No.5 commercial/hotel site in Kai Tak District 4C also was failure of bid, and two cases of failure of bid for commercial lands in one year is highly unusual. During four times that Government putting on sale commercial lands in this year, only one commercial/hotel land site near Kai Tak Sports Park in Shing Kai Road, Kai Tak was sold, and it was sold to The Far East for about HKD2.446 billion in August with each floor area land price at about HKD7,100, which was 11.25% lower than the lower limit expected by the market at the time. The Managing Director of WangLeung Consulting and Evaluation Company, Cheong KiuChor expresses, although there were frequently failure of bid or cases of forfeiture of deposit for Kai Tak commercial sites, but it does not mean they are valueless, he believes the failure of bid this time mainly because the sharply shrinking of retail and hotel businesses affected by recent social turmoils and no signs of visitor number recovering soon made developers offered lower bids from the government. He considers the impact of the current news on the property market will be quite large, or it may also affect the tender results of the project on top of West Kowloon High Speed ​​Rail Station, and there would be a negative impact on the future land price of Kai Tak commercial land sites if this giant land site would also be a failure of bid. The Executive Director and Corporate Development Director of PuJin, Cheong ShingDium expresses, the market conditions have changed rapidly, and government used different pricing method from developers, with Lands Department estimated according to registered transactions while developers calculated base on transactions data closing to market level. It is believed land prices gap between Government and developers will remain during the sales of the commercial land in future, and there would still be risk of failure of bid. He also mentions that, the term of half of the floor used as hotel in this commercial land sale also indirectly caused the developers to lower their bids, so he believes Government should change the land lease requirements and not limit the ratio of the land used as hotel, because Kai Tak runway area has inconvenient traffic. Traffic supporting and business atmosphere are still insufficient. The executive director and director of the valuation and consulting department of the Knight Frank, Lam HoMan frankly admitted that, the failure of bid is not surprising because the investment is huge and the payback period is long for runway area commercial land site, while developers would consider more the factors of future cash flow and occupancy rate of the project etc. Furthermore, although the site is located in the runway area and enjoys the garden scene, the current lack of transportation facilities and the lack of commercial atmosphere in the district have led to the need for the winning consortium to have sufficient cash to manage and operate. He will maintain the valuation of the project on top of West Kowloon High Speed Rail Station, the application of which was closed after, and the Government may need to review the existing mechanism if this tender would also fail. It is known, the commercial land site for the project on top of the West Kowloon High Speed Rail Station is inviting tenders. This site can be built with up to 3,164,600 sq ft, which is the largest single tendering real estate project ever. The latest valuation is HKD31.6-88.6 billion, with the sq ft floor area land price at HKD10,000-28,000.
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