Henderson Land wins rare Hong Kong site for record US$3 billion

HONG KONG (BLOOMBERG) - Henderson Land Development outbid eight other developers to win a rare site in Hong Kong's Central district for a record HK$23.3 billion (S$4.2 billion). It was the first commercial plot sold by the government in more than two decades.

Hong Kong-based Henderson Land outbid local rivals including units of Cheung Kong Property Holdings and Wharf Holdings , according to a statement released on the Land Department's website on Tuesday. The site measures about 2,880 square meters and is designated for non-industrial use with a minimum gross floor area of 25,920 square meters.

The record price for the site, currently used as a car park, underscores strong demand for office spaces in Hong Kong's Central area, where supply is scarce. Since MTR Corp sold a waterfront site to build the city's 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.

"The price surprises on the high side," said Alfred Lau, an analyst at Bocom International Holdings. "However, the market may not share such a bullish outlook and may see near-term pressure to share prices," Mr Lau said, adding that it might be better if the firm can introduce a partner to share the risk.

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Only one of the nine bidders was a mainland company, indicating a cooling of interest from Chinese buyers in three recent auctions where at least a third of the bids were from mainland businesses.

Henderson Land will finance the acquisition through its internal resources and through bank funding, the firm said in a statement Tuesday. It will develop an office building on the site with some retail facilities, an endeavor it expects to complete by 2022, according to the 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.