Concrete Analysis | Sun Hung Kai’s record US$5.43 billion purchase of West Kowloon site shows long-term confidence in protest-hit city
- The development above West Kowloon high-speed railway station will add some 3 million sq ft of high-quality office space and bring the area closer to becoming a thriving business district
- The highly demanding project will require an estimated investment of more than HK$60 billion
What made it interesting was that the tender was conducted at a time when political and economic uncertainties surrounding Hong Kong were intensely high. Despite a successful sale, the result was considered “disappointing” as much of the focus was on the small number of bids and per square foot value of HK$13,345, which stood near the low-end of “market expectations”.
However, if we look beyond what is clouding Hong Kong today, confidence of investors with a long-term view of the city appears to have remained relatively unaffected.
To begin with, the project is a highly demanding undertaking, with more than 3 million sq ft in floor area and a projected total investment of more than HK$60 billion. Therefore, it was not a surprise that only three bids were submitted for the site. Two of them were from single bidders and the third was from a five-party consortium. After all, there are only a handful of developers who have the expertise and financial capacity to take on a project of such scale. The mere fact that a developer commits such a hefty amount in Hong Kong is itself a strong vote of confidence in the long-term prospects of the city.
SHKP has begun to introduce strategic investors to participate in the development – the first being an investment company owned by the Kwok family, SHKP’s largest shareholder. As SHKP continues to seek other strategic investors, and if overseas investors are brought into the project, it will be further testament that confidence in Hong Kong’s long term prospect is not limited to home-grown players.
As for the suggestion that the accommodation value (per square foot price) is low since it is near the low-end of market expectations, we believe there is an objective way to gauge.