[ET Net News Agency, 28 November 2019] Sun Hung Kai Properties (SHKP)(00016) yesterday
won the tender for the site which will become the mixed-use product site located atop the
West Kowloon High-Speed Railway (HSR) station for a land premium of HK$42,232mn, implying
land cost of HK$13,350/sf GFA.
Goldman Sachs views this as an important non-residential site tender in Hong Kong for
its massive scale (3 million sf GFA in a single tender) and strategic location (atop the
high-speed railway station and access to three other subway lines).
The research house believes this site acquisition will potentially enable the company to
achieve a bigger scale and create synergies with its International Commerce Centre in West
Kowloon development (including offices, hotel, and retail), further uplifting the entire
area as a business hub.
With reference to spot rentals of key office projects in the West Kowloon and Tsim Sha
Tsui area, assuming a spot rent of HK$60/sf (GFA) for this high-speed railway site's
office component (i.e. somewhere between ICC's level and that of Gateway), and HK$50/sf
(GFA) for its retail mall, assuming the total investment of HK$18,000/sf (GFA), the
initial yield would be almost 4%.
Goldman said SHKP's tender this time is more attractive than Nan Fung's purchase of Kai
Tak Area 1F Site 2 at an average land cost of HK$13k/sf (GFA), and Henderson Land's
(00012) purchase of Murray Road office site at HK$50k/sf (GFA), both were done in 2017.
On a pro-forma basis, assuming 100% full payment of the land premium, SHKP's net gearing
would increase to 18%, versus 12% as of June 2019, or approaching its internal gearing
ceiling of 20%.
Goldman maintained its target price of HK$145 and reiterated its "buy" rating on SHKP.
(KL)