Tenders for Phase 1 of MTR's 20-year-old Little Oyster Bay depot project in the new town of North Lantau were closed yesterday.

MTR announced that three developers or consortia had been selected to bid for the project, including Cheung Kong (1113) and Wheelock Properties, which were the sole bidders.

SHKP said through a spokesman that it had participated in the tender. The industry is of the view that the response is lower than the market expectation. Given that the first phase of the development is the "opening" phase, it is expected that the developers will be more cautious in their bids and the percentage of dividends, and there is still a risk of losing the bid.

According to the information, Phase 1, which is the first phase of the project, is located in the southwest of the whole project, with a total floor area of about 1.31 million square feet, of which about 1.25 million square feet of residential floor area, with a maximum of 1,900 units, and about 67,000 square feet of shopping mall floor area.

The terms of the project are reportedly different from previous railway projects in that there is no land premium clause, but the developer will be required to pay a one-off entrance fee of $1.2 billion and propose its own profit-sharing ratio.

Market participants estimate that, including the land premium, Phase 1 will be valued at approximately $3,938 million to $6,564 million, with a floor area price of approximately $3,000 to $5,000 per square foot.

The entire Siu Oyster Bay Depot development will be completed in four phases. Phases 1 to 3 will comprise 56 blocks of 21 to 45-storey residential towers, with building heights ranging from 180 to 191 metres above Principal Datum, providing approximately 15,000 units, including 10,720 private and 4,280 public housing units, with a total residential floor area of approximately 11,194,600 square feet.

Phase 4, which will commence after the completion of Phase 3, is expected to provide about 6,200 subsidised housing units and will not include any private homes.

Mr Ho Wai Kam, Senior Manager of Property Development of Wheelock Properties, who represented the group in the tender yesterday, said that Siu Oyster Bay was a new development area and the group had experience in the development of Sunrise Hong Kong in Tseung Kwan O. It was optimistic about the development potential of Siu Oyster Bay and therefore bid for the project on its own.

As for the recent low bids from developers and the successive abortive bids for some sites, Ho said the market conditions had been reflected and the bids had taken into account various factors.

Mr Cheung Chiao-chor, Managing Director of Consultancy and Valuation, said that the number of bids received was not in line with expectations, with six to eight bids originally expected, so there was a risk of abortive bids.

However, the risk of losing bids is still lower than for other non-rail projects as the response to rail projects is generally good.

The land premium per square foot for the project remains unchanged at $3,600, with medium-sized units with an average size of 500 to 700 square feet expected to be developed.

Mr Lam Tze-Bun, Director of Midland Surveyors, said the scale of the Phase 1 development is quite large and the number of bids received and the response is in line with market expectations.

Based on a floor area price of about $4,000 per square foot, the site is valued at about $5.251 billion.

He explained that the successful developer of the railway project would be responsible for a series of formation works, involving some of the station works and more complicated construction, which would increase the development cost and investment risk of the project, as well as the total investment amount, so the bids were mainly from large developers and consortia.

Moreover, since Phase 1 is the first project in the development area, it is expected that developers will be more cautious in their bidding and dividend sharing ratio.

On the other hand, Cheung Kong Holdings won the Queen's Road West/Hyun Kuk Lane project in Sai Ying Pun for $1.161 billion in mid-December last year, at a land premium of about $9,554 per square foot, which is about 7.2% lower than the lower valuation limit of about $10,300.

The URA announced yesterday that the remaining six unsuccessful bids ranged from $708 million to $950 million, meaning that the winning bid from Cheung Kong was already about 22% higher than the second bid ($950 million).

Based on the project's total floor area of about 121,500 square feet, the land price per square foot is about $5,826 to $7,817.