Winning Bid For New Central Harbourfront Site 3

Huge Gap In Henderson Land’s Winning Bid For New Central Harbourfront Site 3

HONG KONG – Last month, Henderson Land Development won a trophy commercial land plot in Central for HK$50.8 billion (US$6.5 billion). Now the government revealed that the second highest bidder offered HK$37.1 billion, reported Mingtiandi on Thursday evening (9 December, SGT).

This means Henderson Land’s bid exceeded the runner up’s bid by a whopping HK$13.7 billion or by around 37 percent.

According to Hong Kong’s Development Bureau, the government received a total of 6 tenders for the New Central Harbourfront Site 3 spanning 516,312 sq ft. All of their concept proposals qualified.

However, only 2 of the submitted tender met the reserve price set by the authorities. As customary, the reserve price, the identity of the runner-up bidder, and the details of the other failed bids were not revealed.

Apart from Henderson Land, the bidders include Wharf, CK Asset Holdings, and Sun Hung Kai Properties. A joint venture of MTR Corporation and Chinachem Group also participated, likewise for a consortium comprising Sino Land, Great Eagle Holdings, and China Merchants Group.

At least one market watcher wasn’t surprised by the HK$13.7 billion gap between the two highest bids.

Local brokerage Vincorn’s managing director Vincent Cheung credited the huge bid gap to the two-envelope tender system, which screened the design proposal first followed by the price, as well as the complicated terms and conditions usually seen in a major development.

“When we look back to the Kowloon Station commercial land plot successfully bidded by Sun Hung Kai Properties, there was also a huge price difference between SHKP and the first runner-up,” noted Cheung.

The New Central Harbourfront Site 3 is also subject to height restrictions. Consequently, Henderson can only build up to 16 metres in height at the eastern side and 50 metres at the western part, compelling the developer to construct a more horizontal complex.

Apart from bridging roads running through the site, Henderson Land also needs to develop the site in 2 stages because of the relocation of the General Post Office. This will lead to longer development and investment payback periods versus other commercial sites, noted Alkan Au, Senior Director of valuation advisory services at Jones Lang LaSalle (JLL) in Hong Kong.

“These factors combined with the large investment cost and building height restriction on the site have also affected potential offers,” explained Au.
Henderson Land said Phase 1 is expected to be completed by 2027. It will comprise 270,000 sq ft of office space and 340,000 sq ft of retail premises. Phase II will consist of additional 390,000 sq ft of office space, 600,000 sq ft of retail premises. The latter is targeted to be ready by 2032.

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