Sun Hung Kai’s $1.5 Billion Bid Below All Estimates Wins Hong Kong Tender

Sun Hung Kai Properties Ltd. (16), the world’s biggest developer by market value, won a tender for a residential project atop a Hong Kong subway station with a less- than-estimated HK$11.8 billion ($1.5 billion) bid.

The lowest prediction in a Bloomberg News poll of five surveyors for the Nam Cheong site in Sham Shui Po district was HK$13.2 billion, with a median of HK$14 billion. The site was sold by MTR Corp. (66), the railway operator that gets income from land sales surrounding its stations.

Hong Kong home prices and transactions have been falling as equities drop, mortgage rates rise and the government boosts land supply to quell a surge in apartment values. The government has sold three sites since August for less than analysts estimated. Prices may decline 10 percent over 12 months on higher mortgage rates, Colliers International Executive Director Simon Lo said this month.

“The below-consensus price will be negative on the sentiment of the physical property market,” Standard Chartered Plc’s Hong Kong-based analyst Paul Yau wrote in a report today. “The developer has factored in some buffer for a possible price drop.’

The Hang Seng Property Index, which tracks the seven- biggest builders in Hong Kong including Sun Hung Kai, lost 2.6 at the close, extending its loss this year to 25 percent, compared with the 22 percent decline in the Hang Seng Index. Sun Hung Kai slid 2.1 percent to HK$97.20.

‘Worsening Sentiment’

The project has total residential gross floor area of 214,700 square meters (2.31 million square feet) and commercial gross floor of 27,660 square meters, MTR said. The winner must build at least 3,313 apartments, with 75 percent of the homes having usable areas of less than 50 square meters each, the company said.

Nam Cheong station, in the western part of the Kowloon Peninsula, is a stop-away from the Kowloon station’s luxury apartment cluster.

“Developers have taken the worsening sentiment into account,” James Cheung, a surveyor at Centaline Property Agency Ltd., the city’s biggest closely held realtor, said before the tender results. “They’re also mindful of restrictions imposed on the development site” on unit size.

Other Bidders

Sun Hung Kai beat three other bidders, including Cheung Kong (Holdings) Ltd. and Henderson Land Development Co., and an unidentified third bidder, according to earlier reports from the Standard and South China Morning Post newspapers.

Cheung Kong, controlled by Li Ka-shing, Hong Kong’s richest man, dropped 2 percent to HK$88.65. Henderson lost 2.6 percent to HK$38.05.

This is the second time MTR invited bids to develop the project. The company, one of Hong Kong’s biggest owners of unoccupied residential sites, withdrew a tender for the site in May 2010 after receiving only three bids. MTR sells land to developers in exchange for a cut of profits.

The Hong Kong government has in the past year raised minimum down-payment requirements for some home purchases, while senior government officials including Chief Executive Donald Tsang repeatedly warned of the possibility of an asset bubble.

Citigroup Inc. and Bank of Communications Co. have stopped approving new mortgage loans to most Hong Kong customers, Apple Daily reported today, citing people it didn’t identify.

To contact the reporters on this story: Kelvin Wong in Hong Kong at kwong40@bloomberg.net; Jasmine Wang in Hong Kong at jwang513@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net

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