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- Record bid for Tai Po sites
- Developers join forces in bidding at land auction
1. Record bid for Tai Po sites
Raymond WangandDanny Chung, The Standard 14 March 2007
 
Demonstrating its power to forge alliances with developers, Sino Land (0083) teamed with another property player at the government land auction Tuesday to fork out a record HK$5.61 billion for two Tai Po residential sites.
The final price exceeded the 1997 record bid for a nearby site.
"With transacted land prices surpassing the 1997 record set by a nearby project, risk appetite appears to be peaking as evidenced by the decision to seek a partnerp to dilute the land cost," said Kenny Tse, executive director of Morgan Stanley.
At the same auction, the other plot on Plover Cove Road in Tai Po went to private developer Chinachem Group for a higher-than-expected HK$570 million. A total HK$6.18 billion poured into the public coffers from the sale.
The auction bids were within analysts' forecasts of HK$5 billion to HK$7 billion.
Site A at Pak Shek Kok reclamation phase 1 in Tai Po opened for bidding at HK$1 billion, which then drew intense attention from Nan Fung Development, Wheelock Properties (0049) Henderson Land Development (0012), Chinachem, Sino, K Wah International (0173), New World Development (0017) and Hang Lung Properties (0101).
As soon as the price climbed to HK$2.08 billion, Sino chairman Robert Ng Chee-siong leaned over to discuss a deal with Nan Fung director Donald Choi Wun-hing.
An agreement was struck within a few minutes and a HK$2.11 billion winning bid was made. It represented HK$6,109 per square foot. This was more than double the reserve pric e and exceeded market expectations of HK$1.5 billion to HK$2 billion.
The consortium also secured the adjacent Site C at Pak Shek Kok reclamation phase 1, separated only by a road from Site A, for HK$3.5 billion. The bidding tactic proved to be effective because the number of competitors had been reduced to three at that stage.
The transaction price for Site C was in line with market expectations.
The two adjacent lots would be developed into a high-end residential project, with a combined gross floor area of more than one million square feet, according to the consortium.
Ng said Sino and Nan Fung will each have a 50 percent share in Site A.
As for Site C, K Wah and Sino will each have a 25 percent share, while Nan Fung has a 50 percent stake.
Ng said upscale low-density flats will be built on the two plots.
The construction cost is estimated at HK$2 billion with completion set for 2010.
Ng dismissed suggestions that Sino overpaid. Investors, however, did not share the evident confidence of the developers on the direction of property prices, as shares of Sino and K Wah fell on concern that rising land prices may crimp builders' margins.
Sino shares slipped 2 percent to close at HK$16.74 after Tuesday's auction, while K Wah shares fell 0.7 percent to HK$2.96.
However, Prudential Brokerage associate director Kingston Lin King-ham said shares of other leading property counters such as Henderson remained steady, as the developer's residential projects in Tai Po may benefit from the auction results.
Henderson shares climbed 1.4 percent Tuesday to HK$43.65, as analysts expect prices at its Beverly Hills housing project in Tai Po to be revised.
Henderson sales department general manager Tony Tse Wai-chuen said the developer will monitor market reaction and that there are no immediate plans to raise prices.
Chinachem, meanwhile, said it will spend between HK$800 million and HK$900 million to develop two residential blocks of medium-sized flats of about 800 square feet, plus a three-floor commercial podium, on the Plover Cove site.
Total investment is a combination of land costs and construction costs. Completion is expected in four years and Chinachem sales manager Ng Sung-mo expects selling prices to be more than HK$5,000 psf.
2. Developers join forces in bidding at land auction
YVONNE LIU, SANDY LI and PEGGY SITO , SCMP 14 March 2007
Developers set aside their rivalries and joined forces at a land auction yesterday to snap up two residential sites in Tai Po for HK$5.61 billion. Analysts said the government could have obtained a higher price for the sites.
Sino Land bid a winning HK$2.11 billion for a waterfront site at Pak Shek Kok, Tai Po, after chairman Robert Ng Chee Siong was seen in discussions during the bidding with Nan Fung Development's Donald Choi Wun-hing. Nan Fung dropped out of the bidding at HK$2.1 billion.
The two companies joined hands with K Wah International to acquire a 214,225 sq ft site adjacent to the first site sold, paying HK$3.5 billion. Other developers showed little interest in joining the fray.
"The bidding result was good but it could have been better," said Alva To, director of research at property agent DTZ Debenham Tie Leung. "Interest for the second site slowed after they reckoned Sino and Nan Fung had joined forces to win the first site."
Property consultants said that if the companies had not linked up during bidding on the first site, the second site could have been sold for a much higher price.
Chinachem Group later paid HK$570 million for the third site sold yesterday, a 29,601 sq ft plot in the centre of Tai Po.
The auctioneer, Lands Department assistant director Graham Ross, said the result reflected market demand and strong market sentiment.
The government had no right to stop people talking during the auction unless they interrupted the proceedings, he said.
The Pak Shek Kok plots are adjacent to Tolo Harbour and next to the Hong Kong Science Park .
The price Sino Land paid per square foot of developable gross floor area - the accommodation value - on its site was HK$6,109 per sq ft, a record for such a site in the New Territories and only slightly lower than the prices at which new houses in the area are selling. Property agents said that, for example, buyers were paying between HK$5,500 and HK$6,500 per sq ft for homes in Henderson Land 's Beverly Hills luxury project in Tai Po.
Eight developers entered the bidding for the site, among them Chinachem, Hang Lung Properties, New World Development and Wheelock Properties. Amid intense bidding, Sino Land and K Wah International initially appeared to team up against Chinachem and Nan Fung.
K Wah pulled out when the bidding reached HK$2 billion, leaving Sino Land to battle it out with Nan Fung. Sino Land secured the site with the 63rd bid after discussions on and off between Mr Ng and Nan Fung's Mr Choi.
The two companies will develop the site through a 50-50 joint venture, with completion scheduled for 2010.
The second site attracted only four bidders. The winning bid of HK$3.5 billion translated into a price per square foot of developable gross floor area of HK$4,668, some 24 per cent less than the first site and 15 per cent below surveyors' expectations.
Mr Ng said Nan Fung owned 50 per cent of the site and Sino Land and K Wah 25 per cent each. The two sites would be developed into a luxury project with a total construction cost of HK$2 billion, he said.
Knight Frank executive director Alnwick Chan Chi-hing estimated joint development of the sites would cut developers' costs by 10 per cent. He expects the best-situated houses to sell for HK$10,000 per sq ft.
Mr To, of DTZ Debenham Tie Leung, said the slow bidding for the second site was partly a reflection of its quality.
"The first and second sites will create a marriage value if they are developed together. But once the sea view site was sold, developers were not interested in the second one," Mr To said.
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