Far East Consortium (FEC) Wins Sai Ying Pun Tender

The entrance to Sung Hing Lane

Hong Kong-listed Far East Consortium last week beat eight competing bids to buy a residential site in the city’s Sai Ying Pun district for HK$1.24 billion ($157.9 billion). million) under an Urban Renewal Authority tender.

“The acquisition will provide the group with the opportunity to establish a foothold in Sai Ying Pun district which is an area undergoing regeneration and is evolving into a vibrant community with a mix of residential and commercial environments,” FEC said. in a filing with the Hong Kong Stock Exchange.

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“(It) will also allow the group to continue to diversify its property development portfolio and add to the residential and commercial development pipeline,” the developer said in the same announcement.

The winning bid was below analysts’ expectations of HK$1.38 billion to HK$1.45 billion, despite the site being only two MTR stops west from the city’s main business district at Central.

Residential with retail

After beating tenders from Hong Kong heavyweights like Sun Hung Kai Properties, Far East Consortium is set to develop a 94,766 square foot (8,804 square meter) project with 4,305 square feet earmarked for the retail, according to a URA announcement.

FEC's David Chiu

FEC’s David Chiu

Analysts have estimated the value of the project, which covers addresses 1-7 Sung Hing Lane, 12-16 Kwai Heung Street and 216-218 Des Voeux Road West, to reach up to HK$2.4 billion. once completed.

The FEC’s winning bid values ​​the site at HK$13,084 per square foot of maximum floor space allowed, which translates to a unit price that is still around 10% below the low of analysts’ expectations. The discounted offering was likely due to continued interest rate hikes, which made developers more cautious, said Alex Leung, senior director of CHFT Advisory and Appraisal.

Other reasons for the lukewarm response to tenders include lower sales of new and second-hand homes in Hong Kong in recent weeks, as well as the evaporation of competition from mainland developers. At the same time, local developers have also become less aggressive in their bids, Leung said.

Housing cooling

“In the current economic environment, developers seem to be more conservative than before,” said Leung, who noted that this land tender is not the first to indicate a change in attitude among developers towards vis-à-vis the acquisition of residential land in Hong Kong.

In April, a tender for a residential site known as Tuen Mun Town Lot No. 561 on Castle Peak Road was canceled as none of the bids reached the reserve price set by the government.

A month before this tender was withdrawn, CK Asset won a site covering four residential plots in To Kwa Wan through a URA tender for HK$5.99 billion, which is also below analysts’ expectations of HK$6-6.9 billion for the site.

An exception to these low bids was the June tender for a site at the Queen’s Road East site in Wan Chai, which Swire Properties acquired for HK$1.96 billion. The developer’s bid in this government tender came in at the upper end of market expectations, which ranged from HK$1.39 billion to HK$2.2 billion.

Expansion of the land reserve

The FEC is undertaking its latest housing project on Hong Kong Island as residential transaction volumes are expected to fall by up to 25% in 2022 from a year earlier, according to a recent report by Cushman & Wakefield.

The acquisition of Sai Ying Pun comes after the developer last November teamed up with New World Development to acquire a residential project on the old Kai Tak airstrip from pressured Kaisa Group Holdings as part of a a deal valuing the property at HK$7.9 billion.

Two weeks after that deal, the FEC agreed to sell the commercial part of a project on the disused runway to utility operator China Light and Power for HK$3.38 billion.

Also in the past year, the FEC replenished its land bank with the acquisition of two residential sites in the Tuen Mun and Sai Kung areas of the New Territories, with the two sites holding a combined gross development value of 4, HK$67 billion, according to the group. latest annual report.

FEC holds full ownership of the housing site in Tuen Mun, while owning approximately 33.3% of the Sai Kung site, its joint venture partner remaining unnamed.

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