5 Min Read
HONG KONG (Reuters) - Henderson Land Development (0012.HK) won a hotly contested auction on Tuesday, agreeing to pay a record HK$23.3 billion ($3 billion) for a commercial property site in the heart of Hong Kong's central business district currently being used as a public car park.
It outbid eight other developers including local giants Cheung Kong Property Holdings (1113.HK) and Sun Hung Kai Properties (0016.HK) to take ownership of the site in the Central area, where office vacancy rates are less than 2 percent.
The price beat market estimates for between HK$14 billion and HK$22.3 billion. The lump sum translates into just over HK$50,000 ($6,400) per square foot - a record price paid for land per square foot in crowded Hong Kong, one of the most expensive real estate markets in the world.
Henderson Land, one of the city's four major property developers, was founded by Hong Kong's second richest man Lee Shau-kee.
The company, which also has investments in at least 14 mainland Chinese cities, does not have its own flagship skyscraper in Hong Kong and analysts expect it to move its headquarters to this new location upon completion.
The site, at Murray Road, is now a public car park squeezed between Cheung Kong Center and Hutchison House, two major flagship buildings owned by the city's richest man Li Ka-shing.
It is the only plot of large-scale commercial land put up for sale in the district in two decades and was seen as a prime site for a company headquarters thanks to its location and gross floor area of more than 460,000 square feet.
"The company is optimistic of the long-term prospect of this investment. The site will be developed into a landmark office building with retail facilities and is expected to be completed in around 2022," Henderson Land said in a statement.
The sale comes as the availability of office space remains tight in the prestigious Central district and mainland Chinese financial companies are eager to set up offices there, pushing prices ever higher.
"This transaction sends a very positive sign to office prices in Central," said Antonio Wu, deputy managing director of property consultancy Colliers International Hong Kong.
European and U.S. financial firms, trying to cut costs, reduced their presence in the greater Central area by 146,000 square foot and 28,000 square foot respectively in the three-year period to March 2016, according to a November report by property consultancy CBRE.
During the same three-year period, their Chinese counterparts took up 73 percent of the total banking and financial sector space expansion in the area, CBRE added.
The latest land sale halts a winning streak of prime land plots being acquired by mainland Chinese developers marking their territory in the former British colony, where government intervention is minimum and financing costs are low.
Mainland Chinese firms have piled in to snatch up high-profile office towers in Hong Kong, with property giant China Evergrande Group (3333.HK) splurging a record-breaking HK$12.5 billion for a building in Wan Chai and state-owned China Life Insurance Co Ltd (2628.HK) buying an office tower in Kowloon's Hung Hom district for HK$5.85 billion two years ago.
China's strengthening of capital controls late last year, in an attempt to restrict funds flowing out of the country as the yuan plummeted, could be a factor behind the dampened enthusiasm for the rare Central site, analysts said.
"The site cannot be partitioned for sale, and in recent months there have been controls over mainland Chinese capital outflow. These might affect the prices offered by mainland Chinese firms," senior director of property consultancy Knight Frank Hong Kong, Thomas Lam, said in a text message.
"But I believe mainland Chinese firms remain very interested in the Hong Kong property market."
In 2015-2016, mainland Chinese companies gobbled up 29 percent of land sold for development in Hong Kong, according to industry figures.
Two mainland Chinese developers also shattered the city's record for the most expensive piece of residential land ever sold when they jointly bought an oceanfront site on southern Hong Kong island at HK$16.9 billion ($2.18 billion) in February.
Reporting by Venus Wu; Editing by Anne Marie Roantree, Nick Macfie and Keith Weir