MTRC withdraws residential property from tendering

After no single developer came to bid.

Acording to Maybank Kim Eng, MTRC (66) has withdrawn its residential site atop Tin Wing LRT Station (Tin Shui Wai) from tendering, as no developer submitted a bid for the site by the deadline yesterday. 

Here's more:

The site, of which 1,600 residential units will be built, has a GFA of 982,298 sq ft and estimated AV of HKD3,152 psf of GFA. The total land cost of HKD3.1b included a HKD410m site formation cost, and the winning developer will also need to share profit with MTRC.

In January, the site was opened for tender and MTRC has received 16 Expressions of Interests from developers such as Cheung Kong (1), SHK Properties (16), Sino Land (83), Wheelock Properties (20), Lai Sun Development (488), Asia Standard (129), Kowloon Development (34) and COLI (688). 

Implication: The high development costs and location are the major reasons of no tender, in our view. Assume a post-bonus construction cost of HKD2,500 psf, 10% and 3% bonus GFA ratio and annual finance costs, respectively, the project will have an ASP of HKD6,881 psf of GFA in order to achieve a 15%  development margin.

The figure is 48% and 35% higher than that of the 2 adjacent secondary estates, Kingswood Villas and Central Park Tower. Yet, we believe the event will have minimal impact to share price of MTRC and other local developers as with the relative unattractiveness of the site.

Market focus on the sector in the short-run will be the responses from projects pre-sale, developers’ results announcement (Sino Land and SHKP will announce their 1H6/13 interim results next week while Cheung Kong and Henderson Land will announce FY12 results in March), and tendering results of two luxury sites in Ho Man Tin and Kau To (Shatin) next month. 

Action: Accumulate large-scale developers, such as SHKP, on any share price weakness.