1 $3.98b wins auction
Raymond Wang, Victor Cheung and Stephanie Tong, The Standard 1August 2007

A parcel of residential land in Wong Tai Sin was secured by mid-tier developer Kerry Properties (0683) at yesterday's auction for HK$3.98 billion in a final bid that fell below market estimates.

Developers and surveyors, however, said the outcome was not correlated to certain adverse consequences of high- density development on the site, as highlighted by an environmental concern group.

Charles Chan Chiu-kwok, managing director of valuation and professional services at property consultant Savills, said the market had been over- optimistic with estimates before the auction.

Industry analysts expected the 102,280-square-foot site on Chun Yan Street, which previously housed police quarters, to fetch between HK$4 billion and HK$5 billion.

The environmental concern group Greensense made an application to the Town Planning Board demanding a reduction in the plot ratio, which determines how many flats can be built.

Greensense also sought height restrictions and air-ventilation assessments.

The move, however, did not deter developers. The site attracted six bidders - New World Development (0017), Sino Land (0083), Chinachem Group, Wheelock Properties (0049), an unidentified company and Kerry Properties. The final bid was nearly one-third above the opening price of HK$3 billion.

Kerry Properties, controlled by the family of Malaysian billionaire Robert Kuok Hock Nien, said it plans to develop premier residential and commercial properties on the site, which will require total investment of HK$5.5 billion. The outlay is a combination of land costs and construction expenditure, which will be funded by internal resources.

The project will comprise four to five blocks of residential buildings and a shopping arcade, according to Chu Ip- pui, executive director of Kerry Real Estate Agency, a subsidiary of the developer.

Residential towers will provide 1,000 apartments measuring 800 to 1,000 sqft each. The site has a plot ratio of nine, with a buildable gross floor area of about 920,519 sq ft when completed in three to four years.

The developer expects to sell the apartments for about HK$8,000 psf.

"Due to limited supply of premier residential properties in Hong Kong, the local real estate market has a keen demand on properties at prime locations within the city area," Kerry Properties said in an announcement after the auction.

New World Development executive director Stewart Leung Chi-kin described the transaction price of HK$4,327 psf for the Wong Tai Sin site as reasonable based on prevailing housing price levels in the district.

Secondary market prices for flats at Galaxia, a residential development above the Diamond Hill MTR station, range from HK$4,000 to HK$5,000 psf, a local real estate agent said.

The agent reckons Kerry Properties will have to sell flats for more than HK$7,000 psf to make a 17 percent profit margin.

Vigers Appraisal and Consulting executive director David Cheung said the result of yesterday's auction was at the lower end of market expectations. This, he said, would help to optimize the profit margin.

The auction, the fourth in the fiscal year, took about 20 minutes to conclude. Auctioneer and assistant director of the Lands Department, James Merritt, said developers had adequate time to consider bids and make their decisions during that short timeframe.

The government has so far raised HK$15.28 billion from four land sales this financial year.