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1. Land auction nets $3b

1. Land auction nets $3b
Raymond Wang and Eli Lau, The Standard 26 May 2004

In a signal that developers are regaining confidence in Hong Kong's economy, the first government land auction in 20 months attracted fierce bidding for two suburban plots that fetched HK$2.96 billion, almost double the minimum price.

Property shares and the benchmark Hang Seng Index reversed course to end higher yesterday after aggressive bidding by 13 developers boosted market sentiment.

The auction was expected to help boost government revenue after five budget deficits in the past seven years.

Cheung Kong (Holdings), controlled by tycoon Li Ka-shing, warded off 12 competitive bids from Sun Hung Kai Properties, Nan Fung Development, Hang Lung Properties, Chinese Estates Holdings and a consortium comprising K Wah International and Sino Land, to win the Ma On Shan site, the larger of two residential lots, for HK$2.09 billion or HK$2,773 per square foot.

That was 74 per cent above the plot's reserve price of HK$1.206 billion or HK$1,600 psf.

The land price was close to current prices of more than HK$3,000 psf for newly completed flats in Ma On Shan.

Cheung Kong managing director Victor Li, however, said that the transaction price ``is a fair price, I don't think it's too high''.

``The site is very rare with a high portion of seaview units [after completion].''

But Li said the price is unlikely to become a new market benchmark because of the site's unique location.

He added he expects property prices to remain stable for the rest of the year.

UBS investment research managing director Franklin Lam said prices are expected to fetch about HK$5,000 psf when the Ma On Shan project comes on stream in two to three years, or 52 per cent higher than prevailing Ma On Shan prices of HK$3,300 psf. After the long hiatus between auctions, developers seeking to replenish land reserves put on a variety of subterfuges yesterday to hide the identity of their bidders and confuse their rivals.

Major developers such as Cheung Kong and Sun Hung Kai Properties each sent at least two representatives to bid for the two suburban lots.

One casually dressed individual sporting a baseball cap presented the winning bid of HK$2.09 billion for the Ma On Shan site, only to be identified later as a Cheung Kong agent.

Other developers lost out because they did not follow the unexpectedly aggressive bid offered by the mystery man, who sat behind his boss, Victor Li, in the Hong Kong Cultural Centre in Tsim Sha Tsui.

The fierce bidding from more than 10 companies for each of the two suburban plots occasionally confused auctioneer and Assistant Director of Lands AK Paton, who, despite everything, managed to complete the auction within 45 minutes.

KWah International fended off 11 bids from Sun Hung Kai Properties, Cheung Kong, New World Development, Nan Fung Development and Chinese Estates to win the second suburban residential lot in Sha Tin for HK$865 million, or HK$3,317 psf.

This was up 85 per cent from its opening bid of HK$469 million or HK$1,800 psf.

KWah Real Estate managing director Alex Lui estimated total investment in the Sha Tin project would be more than HK$1 billion.

``I previously estimated the accommodation value would not exceed HK$3,000 psf,'' Lui said.

``The price is slightly higher than we expected, but it is still our acceptable price.''

Lui said the company plans to develop the plot into a luxury residential project comprising detached houses and apartments.

Franklin Lam of UBS predicted the selling price of the Sha Tin project would be about HK$6,000 psf.