Sun Hung Kai beats expectations with offer for Hong Kong site

epa01359129 People stand in front of the Sun Hung Kai Centre where a board meeting of Hong Kong's largest property firm was being held on in Hong Kong, China 27 May 2008. Sun Hung Kai Properties has announced on Tuesday that it's chairman and chief executive of Sun Hung Kai Properties, Walter Kwok, has been voted out of office. But he will remain a non-executive director. The 79-year-old mother of the Kwok brothers will become the firm's new Chaiworman - until an annual general meeting is held in December. Walter Kwok's younger brothers, Thomas and Raymond, will together take over his duties as chief executive. The board said the decision was made in the best interests of the company and shareholders. EPA/YM YIK

 

Bloomberg

Hong Kong’s biggest developer, Sun Hung Kai Properties Ltd., outbid 10 other companies with a HK$2.4 billion ($305 million) offer for a site, as builders selectively add to their land banks. The price for the land offered by the government in the New Territories district works out to about HK$5,450 per square foot of saleable area, according to calculations by Bloomberg News based on figures released by the Hong Kong Lands Department on Monday. That is about 25 percent higher than valuations some industry experts had placed on the site located in the Sha Tin area.
Hong Kong’s large property companies have pulled back on land purchases amid a broader slump in home prices, with smaller players and mainland companies outbidding them in the past year, according to government figures. The purchase would mark Sun Hung Kai’s first of residential land since June 2015, when it paid HK$1.3 billion for a site in the New Territories.
“Big developers have lots in their land banks so they have not been as aggressive,” said Thomas Lam, head of valuation and consultancy in Hong Kong at Knight Frank LLP, who had estimated that the Sha Tin site would sell for between HK$1.6 billion and HK$1.7 billion. “They are only selectively looking.”

PROPERTY STOCKS
Hong Kong’s home prices have slumped from a peak last September amid slower growth and economic uncertainty.
The total number of unsold units for projects under construction or already completed jumped to 71,000 at the end of June, the highest in 12 years, according to Bloomberg Intelligence. The city’s gross domestic product unexpectedly contracted in the first quarter, while retail sales in the city tumbled 8.9 percent in June, declining for a 16th straight month.
Signs that home prices have stabilized and a more favorable outlook for interest rates have helped the real estate industry benchmark equity gauge surge 37 percent from this year’s low in January, climbing to the highest level versus Hong Kong’s Hang Seng Index in 19 years on July 29.
Shares of Sun Hung Kai Properties have advanced 19 percent since the beginning of the year, compared with a 12 percent increase for the Hang Seng Property Index.
Even so, Bocom International Holdings and Baring Asset Management
say weak economic growth and surging apartment supplies will derail the
advance.
Lam said that Sun Hung Kai was willing to pay above market expectations because it can recoup the extra cost by selling high-end residences. A Sun Hung Kai spokesman said the site will be used for a luxury development requiring a total investment of about HK$5 billion.
Another government site in Tuen Mun, also in the New Territories, was awarded on Monday to local developer Hong Kong Ferry (Holdings) Ltd., a subsidiary of Henderson Land Development Co., for HK$2.7 billion, beating eight other developers.

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