Wheelock wins TKO tender for HKD2.449b

Development cost is pegged at HKD4.5-5b.

According to Maybank Kim Eng, Wheelock won a Tseung Kwan O residential and commercial site (area 65C1) at HKD2.449b, which is within the market’s expectation of HKD2.16-2.85b.

Here's more:

The site, of which 494k sq ft of residential units will be built, translates into a prebonus accommodation value of HKD4,301 psf of GFA. Another 75k sq ft will be developed into commercial usage.

With a bonus GFA ratio of 10%, 3% p.a. interest costs and estimated development margin of 20%, we expect that the residential units will have an asking price of HKD8,740 psf of GFA in 2016, compared to the HKD7,500-10,000 price tag within the region.

Separately, the developer also announced that it has disposed of en-bloc West Tower of One Bay East in Kwun Tong, for a consideration of HKD4.5b, to Manulife.

The developer has been aggressive in purchasing landbank over the last year, with total acquisition costs of HKD7.6b, supported by its strong sales proceeds of HKD11.3b (inclusive of the en-bloc sale of One Bay East yesterday).

We expect the total development costs for the latest TKO project to be HKD4.5-5.0b, which is almost the same amount with the proceeds of latest disposal. Wheelock’s latest acquisition has added the 2nd land parcel in the TKO district, as the developer has won another tender for area 68A1 in December 2012 for HKD1.968b (430k sq ft of residential GFA with pre-bonus AV of HKD4,580 psf).

Note that Lai Sun Development (488) has won a tender in November last year for TKO Area 68A2 with pre-bonus AV of HKD4,929 psf, or a correction of 13% over the last 6 months. The price correction is within our expectation with increasing supply in land market.