Estimates cut for HK waterfront site

Estimates cut for waterfront site

Raymond Wang and Danny Chung

Friday, May 18, 2007

Surveyors are revising their valuation for a waterfront residential site in West Kowloon downward by as much as 11 percent after the May 8 auction for a site in the area.
The auction saw a consortium comprising Sino Land (0083), Chinese Estates Holdings (0127), K Wah International (0173) and Nan Fung Development secure a residential plot at the West Kowloon reclamation area for HK$4 billion, which was at the low end of market estimates.

Surveyors expected the site, bounded by Hoi Wang Road, Yan Cheung Road and Yau Cheung Road near Yau Ma Tei, to fetch between HK$4 billion and HK$5 billion.

The low-end price prompted Vigers Appraisal and Consulting executive director Tony Chan Tung-ngok to lower his valuation for another waterfront residential site in West Kowloon scheduled for auction next month.

Chan said the site on Hoi Fai Road could go for HK$6.2 billion, or HK$6,767 per square foot - 11.4 percent lower than his previous estimate of HK$7 billion, or HK$7,638 psf.

"If companies partner up, fewer bidders will take part, which may affect bidding atmosphere and final price," he said.

Charles Chan Chiu-kwok, managing director of valuation and professional services at property consultant Savills, is considering revising his valuation for the site downward by about 5 percent to HK$6,650 psf from more than HK$7,000 psf.

Centaline Surveyors director James Cheung King-tat expects the site to go for nearly HK$6,800 psf.

Previously, market watchers said developers, who took a cautious stance at last week's auction, could be holding on to their financial resources to bid in next month's auction for the prime West Kowloon site.

"It cannot be ruled out that some developers want to reserve their resources in order to bid for the West Kowloon site," Chan of Vigers said. "The sea views from the Hoi Fai Road site in next month's auction are a little better than the one sold last week."

Midland Surveyors director Alvin Lam Tsz- pun agreed that developers may have wanted to keep the price down so as not to set too high a benchmark for the Hoi Fai site.

The Hoi Fai Road auction was triggered by Wheelock Properties (0049) with a bid of HK$4.2 billion, the biggest by a developer since 2004.

The 122,204-square-foot site adjacent to One SilverSea - which was developed by Sino Land - is likely to draw potential bids from rival developers.

Those include Cheung Kong (Holdings) (0001), Sun Hung Kai Properties (0016), Sino and K Wah, who have all indicated they will study the site.

The bid of HK$4.2 billion, or HK$4,583 psf, will also be the opening bid in the auction June 12.

Wheelock raised the price after failing to trigger the site in March.

Wheelock director Ricky Wong Kwong-yiu said the Hoi Fai Road site was suitable for the construction of between 800 and 900 apartments of more than 1,000 sqft each.

The project will generate a gross floor area of 916,522 sqft.

He estimated the total investment including land price, construction cost and other fees would be HK$7 billion to HK$8 billion.

Given the large scale of the project, Wheelock would also consider teaming up with other developers to bid for the site, he added.

Sino purchased the One SilverSea development site for HK$1.6 billion, or HK$1,944 psf, at a government land auction in 2002 when the market was in a downturn.

Midland's Lam estimated the value of the Hoi Fai Road site at HK$6 billion, as it is close to Olympic station and some apartments would have sea views.

"It is one of the few waterfront sites in the area," Lam said.

Cheung Kong executive director Justin Chiu Kwok-hung said: "At the Hoi Fai site, the [existing] flats there are newer and so they [owners] wouldn't upgrade so soon. Still, the view [from the plot up for auction] is better."

Chiu said Cheung Kong was interested in the site.

In September 2004, a residential site on Tin Kwong Road in Ho Man Tin was triggered for auction with a bid of HK$5.02 billion.

The site was sold to Cheung Kong for HK$9.42 billion a month later.

In September 2005, two adjoining sites opposite Hoi Fu Court and Park Avenue in West Kowloon fetched between HK$5,300 psf and HK$5,400 psf. It was also a consortium involving Sino Land, Nan Fung and Chinese Estates that won those sites.

Midland Realty chief analyst Buggle Lau Ka- fai said last week's land sale may not stimulate secondary prices in West Kowloon very much as the market was overoptimistic with its estimates before the auction.

"With [the final price] at the lower end of the market, some owners may not be so aggressive in hiking their prices," Lau said.

Ricacorp Properties executive director Willy Liu Wai-keung agreed the lower-than-expected price would be healthier for the market.

He said if the site had sold for a higher price, then the Hoi Fai plot set for auction could be bid even higher.

"The market may not accept such price levels," Liu said, referring to secondary market owners possibly being too aggressive in pricing.

Hong Kong Property Services (Agency) reported that some owners raised asking prices by 2 percent to 6 percent after the auction last week.