LCQ18: Rules for bidding land
Following is a question by the Hon Emily Lau and a written reply by the Secretary for Planning and Lands, Mr John C Tsang, in the Legislative Council today (April 17):
It is learnt that when the land auction for a commercial site located at Hung Hom Bay was held in August 2001, both Cheung Kong (Holdings) Ltd. ("Cheung Kong") and Sino China Enterprises Ltd. ("Sino China"), which had only been established for several months, participated in the bidding. Sino China eventually won the bid at a price lower than that expected by the market. In October the same year, Cheung Kong also succeeded in bidding for an adjacent commercial site at a price lower than that expected by the market. It was only after these two land auctions that the market came to realize that Sino China was wholly owned by Cheung Kong. In this connection, will the Executive Authorities inform this Council whether:
(a) they have assessed if Cheung Kong's failure to make public its relationship with Sino China at an early stage has caused unfairness to the outcome of the bidding at the two land auctions; and
(b) they will consider revising the rules for bidding land by stipulating that bidding companies have to disclose their background in order to enhance transparency as well as ensure fairness and justice; if so, of the details; if not, the reasons for that?
Government's land auctions are conducted in a fair and transparent manner based entirely on the principle of open competition. Any registered company in Hong Kong may participate in the open bidding process. Companies may form consortia or set up subsidiary companies to participate in land auctions in the same way as they do in other business activities in Hong Kong. Disclosure of company information, including information about parent or subsidiary companies, is not required.
The price level at which a piece of land is sold at a government land auction is the highest bid received in an open and competitive bidding process. It represents the price at which developers are willing to pay for the site under prevailing market conditions. Sale prices forecast by different individuals prior to the land auction reflect individual expectations and assessments, and cannot be seen as authoritative and objective predictions of the market price for the site.
At the government land auction held on 13 August 2001, the opening price for a Hung Hom commercial site (KIL 11110) was $900 million. The site attracted a total of 20 bids from three bidders and was sold to the highest bidder, Sino China Enterprises Ltd., for $1,090 million (about 21 per cent higher than the opening price). Another Hung Hom commercial site (KIL 11103) was auctioned on 16 October 2001. The opening price was $600 million. The site attracted a total of 12 bids from three bidders and was sold to the highest bidder, Bermington Investment Ltd., for $655 million (about 9% higher than the opening price).
The successful bidders in these two cases participated in the auctions in their own right as legitimate business entities. There was no evidence to indicate that non-disclosure of the successful bidders' company information had in any way caused unfairness in the bidding at these two land auctions or had resulted in unreasonable sale prices.
Government's land auction procedures are well-publicized and well-supported by the property sector. We see no need to change the present arrangement and require bidders to disclose their company information. We will, however, continue to keep our land auction procedures under regular review.
End/Wednesday, April 17, 2002