Another site aborted! MTR Corporation announced yesterday that it has decided not to accept any tender documents for Phase 1 of the Siu Oyster Bay project on Lantau Island and will re-tender the project in due course.

The project is the second MTR project to be aborted in less than 18 months, following the aborted tender for the Tung Chung Traction Substation project in November 2021, and the third site to be aborted in the past month or so.

According to industry analysis, developers' desire to bid for land is still weak under the current market conditions, and the project's large scale and long-term development, coupled with the fact that the successful bidder will be responsible for building part of the platform, station facilities and depot, etc., facing a great increase in technical and cost factors and uncertainties, have made the project more difficult.

Only three bids were received from Cheung Kong (1113), Sun Hung Kai (0016) and Wheelock Properties for the first phase of the Little Oyster Bay project, all of which were wholly-owned.

However, a total of 33 expressions of interest were received when the project closed at the end of last year.

According to the information, the entire Siu Oyster Bay project is located above the MTR Siu Oyster Bay Depot, adjacent to the proposed Siu Oyster Bay Station of the Tung Chung Line.

The station is expected to open in 2030 and the project is expected to be ready for occupation in the same year.

Phase I, located to the southwest of the project, will provide approximately 1,245,400 square feet of residential space and a further 67,300 square feet of commercial space, for a total of approximately 1,312,700 square feet and a maximum of approximately 1,900 residential units.

In fact, in order to increase the flexibility and attractiveness of the development, MTR has relaxed the maximum number of units from 1,600 units to 1,900 units as early as last month, which in effect reduces the average size of the units to approximately 655 square feet.

As the entire Siu Oyster Bay project has been completed by MTR in one go, there is no land premium clause in this tender, but the developer has to pay a lump sum of $1.2 billion entrance fee, and the successful bidder will be responsible for building part of the platform, station facilities and depot, etc. The shopping mall part will have to be returned to MTR in the future.

Market participants estimate that, including the land premium, the first phase will be valued at approximately $3,938 million to $6,564 million, with an estimated land value of approximately $3,000 to $5,000 per square foot.

According to Mr Cheung Chiao-chor, Managing Director of HL Consulting and Valuation, the main reason for the aborted tender is the large scale of the project, with over one million square feet of floor space, but the terms of the tender are simple and there are few variables.

He believes that with the recent slowdown in the removal of new properties and the release of many government sites to the market, developers will be relatively conservative in bidding for a large scale project in the new development area.

However, Mr Cheung believes that if the market slowly picks up, it will be helpful for some large sites.

When market conditions return to normal, developers will resume their desire to bid for land once their inventory has been fully absorbed.

He also believes that MTR should consider whether to build its own superstructure before tendering, so as to reduce the technical and cost considerations of developers, as not every developer in Hong Kong has experience in building station facilities.

The University's Visiting Associate Professor in the Department of Real Estate and Construction said that the Siu Oyster Bay project is a new district and there is no other project in the same area to compare with, and there is a clear difference in price between MTR and the bidders.

He believes that MTR may leave the project for another launch after the property market has turned up, and may reconsider the profit-sharing ratio or reduce the admission fee to reduce the risk that developers have to bear.

He believes that the Hong Kong land market is good depending on the performance of the property market, although currently affected by the uncertainty of the property market, but in the future, the macroeconomic and property market recovery, I believe the land market will also recover.

According to MTR's previous announcement, the entire Siu Oyster Bay project covers an area of about 30 hectares, with a total residential floor area of about 826,000 square metres and another 34,500 square metres of commercial floor area, to be developed in four phases, with a total of over 20,000 public and private units.

MTR earlier estimated that the successful consortium for Phase 1 could launch the sale of the flats in 2027-28 at the earliest, with the first residents moving in in 2030 at the earliest, when the Siu Oyster Bay station and the 300,000-square-foot shopping mall would be completed at the same time.