Hong Kong sells car park to developer for record USD3b

Henderson Land Development Co. outbid eight other developers and will pay a record HKD23.3 billion (USD3 billion) for the first commercial land to be sold by Hong Kong’s government in the Central district since 1996.

The Hong Kong company’s shares fell the most in the Hang Seng Properties Index yesterday, sliding as much as 2.9 percent.

Henderson Land beat local rivals including units of Cheung Kong Property Holdings Ltd. and Wharf Holdings Ltd., the Lands Department said on Tuesday. The firm will build an office tower on the site.

The record price for the property, currently used as a car park, underscores strong demand for office space in Central. Since MTR Corp. sold a waterfront site for the landmark International Finance Centre in 1996, no new supply has come on stream. The area’s vacancy rate was only about 1.5 percent in the first quarter of this year, according to CBRE Group Inc.

“The price surprises on the high side,” said Alfred Lau, an analyst at Bocom International Holdings Co. “However, the market may not share such a bullish outlook,” Lau said, adding that Henderson Land should consider introducing a partner to share the risk.

Office space in Central is the world’s most expensive, according to a CBRE survey released in March, which ranked the rents ahead of those in Beijing districts, Hong Kong’s West Kowloon, London’s West End, midtown Manhattan and Tokyo.

The price per square foot for the deal is about HKD50,000, according to Bloomberg calculations based on a maximum gross floor area of 465,000 square feet. That compares with HKD36,200 per square foot when China Evergrande Group paid a record for a commercial building in 2015 HKD39,700 per square foot in March for units in 9 Queen’s Road Central that are the city’s most expensive office space, according to the Apple Daily newspaper.

Only one of the nine bidders was a mainland company, indicating a cooling of interest from Chinese buyers after three recent residential land auctions where at least a third of the bids were from mainland businesses. Previously, Chinese bidders such as HNA Group Co. have snapped up Hong Kong sites.

The car park building is in the heart of Central, near the iconic Bank of China skyscraper and billionaire Li Ka-shing’s Cheung Kong Center. Last year, Colliers International estimated that the property was worth HKD15.8 billion to HKD17 billion.

Henderson Land will finance the acquisition through its internal resources and bank funding, and plans to complete an office building, with some retail facilities, by 2022, the company said in a statement.

Aggressive bidding for the commercial site echoes brisk developer demand for residential plots amid record home prices in the world’s least affordable housing market. Moxy Ying, Bloomberg