Kerry Properties to Pay $940 Million for Hong Kong Land Site

  • Price is most paid for government land since March 2013
  • Kerry outbid Cheung Kong Property and Sun Hung Kai Properties

Kerry Properties Ltd. outbid Hong Kong giants Cheung Kong Property Holdings Ltd. and Sun Hung Kai Properties Ltd. with a HK$7.3 billion ($940 million) offer for government land in the territory’s Kowloon district, the highest price in three-and-a-half years.

The price works out to about HK$21,206 per square foot of saleable area, according to calculations by Bloomberg News based on figures released by the Hong Kong Lands Department on Wednesday. It’s the most that a piece of land has fetched in a government sale since March 2013, when Kerry Properties paid HK$11.7 billion for a parcel in the Ho Man Tin district of Kowloon.

The site in the exclusive neighborhood of Beacon Hill attracted Hong Kong’s biggest property developers, while smaller local players didn’t participate, property records show. Units of Cheung Kong and Sun Hung Kai bid for the property, as did affiliates of Henderson Land Development Ltd. and Wheelock Properties Ltd.

“All the big guys were there,” said Victor Lai, chief executive officer for valuation at Centaline Property Agency, who had expected the site to fetch about HK$22,000 per square foot. “It’s a big investment and not suitable for small and medium-sized developers.”

Property Rebound

Lai said the bidding reflected developers’ confidence in the luxury sector, where record prices have been set in recent weeks in Kowloon neighborhoods. Hong Kong residential property prices have rebounded from a six-month slump when they fell 13.3 percent from a record high in September 2015. They are now down 6.3 percent since last year’s peak. Transaction volumes have also rebounded, with 7,826 properties changing hands in September, the highest level in at least 15 months.

Alan Jin, real estate analyst at Mizuho Securities Asia Ltd. in Hong Kong, calls the deal a "timely addition" to Kerry’s land bank, especially against the backdrop of improved sales both in Hong Kong and China, where Kerry has large developments.

“Sales are so good so they need to use the money,” Jin said in a telephone interview.

Jin, who has a buy rating on the stock and a price target of HK$27.20, said that Kerry is his top pick among Hong Kong developers, noting that it is trading at a 62 percent discount to net asset value.

Kerry, which rose 1 percent on Thursday to HK$25.30, has advanced 19 percent this year, compared with the 13 percent increase for the Hang Seng Properties Index.

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