Action hots up on Bund realty front

08:34, November 19, 2009      

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Hutchison Whampoa and Sun Hung Kai Properties are likely to enter the bidding race for the city's most expensive piece of real estate, according to industry sources.

The two heavyweight Hong Kong realtors are already active players in the Shanghai commercial realty market. They are expected to join 20 other companies to bid for the plot sometime in mid January.

The entry of the Hong Kong developers does not come as a surprise to industry experts as Shanghai is slowly being modeled as a leading financial and shipping center. That in turn would see the entry of big-ticket international companies.

By acquiring land in advance the Hong Kong developers would not only acquire valuable realty in the city, but also get a good return on their investments in the future, said the experts.

Analysts estimate that the plot, located in the future Bund international financial service center, could fetch an auction price of nearly 11 billion yuan, making it the most expensive piece of realty in the mainland.

Officials with the Huangpu district government, owner of the plot, refused to reveal the base price for bidding, but said they expect the price to between 9 billion and 11 billion yuan indicating that the per sq m cost of the plot would be around 40,000 yuan by gross floor area.

"This plot is a complex one, and in order to acquire more knowledge about it, we attended the briefing (held on Monday by the local government). But that doesn't mean we will buy it," said Wang Zheng, assistant general manager with Sun Hung Kai Properties. Hutchison Whampoa officials were not available for comments.

Prominent among the other companies that participated in the meeting are CITIC Pacific, Swire Properties, GIC Real Estate, the Government of Singapore Investment Corp, and the Shanghai-based 'land king' Greenland Group.

Xue Jianxiong, an analyst with E-House (China) Holdings Ltd, said he doesn't expect the plot to fetch prices that are far above the market price. "The prices have already soared. Developers have to spend several billion yuan to develop the project thereby affecting cash flows," said Xue.

According to Lu Qilin, deputy director with Shanghai-based Uwin Real Estate Research Center, heavyweight property developers from Hong Kong and overseas have distinct advantages over domestic rivals.

"Unlike residential projects, the commercial complex entails sophisticated management and operational experience. Therefore, private property developers may be excluded from the bidding," Xue said.

This year, the domestic property market has been booming with land prices hitting new highs in ambitious biddings. The Shanghai government has started to put more land plots into the market to augment supply.

Earlier this week Poly Real Estate purchased a 210,000-sq-m plot for 390 million yuan in Changchun of Jilin province.

Source:China Daily
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