Henry Cheng could be explaining how New World would have picked up five projects, but decided four was more prudent
Hong Kong’s New World Development has become the latest builder to bet big on the Shenzhen market following a record-breaking real estate run in China’s southernmost megacity.
The Hong Kong developer’s New World China Land subsidiary on Thursday successfully bid a total of more than RMB 4.8 billion ($618 million) for four projects in Shenzhen through a 51/49 joint venture with Guangdong builder China Merchants Shekou Industrial Zone Holdings.
New World plans to invest a total of RMB 9.1 billion ($1.2 billion) as its contribution to building a range of commercial and residential space on the four sites at Prince Bay in the Qianhai district of Shenzhen, just across the border from Hong Kong, according to a statement to the Hong Kong stock exchange.
New World Focuses on Shenzhen Opportunities
Chow Tai Fook opened a mall in Qianhai last year
The two companies formed a combination of onshore and offshore joint ventures to develop a pair of 30,000-plus square metre commercial projects, along with a second pair of projects that will be developed into “a mixture of commercial, office and serviced apartment properties” for sale.
The investment by New World indicates a new level of focus on projects in Shenzhen.
“Following the completion of disposal of five property projects to China Evergrande Group (formerly known as Evergrande Real Estate Group Limited), the Group is actively identifying suitable land acquisition opportunities for future development, with particular focus on projects in the first-tier cities in the PRC such as Guangzhou and Shenzhen.,” New World chairman Henry Cheng said in a statement.
While New World’s statement points to first tier cities as a target, the seven projects that the Hong Kong developer agreed to sell to Evergrande just under a year ago included two sites in Shanghai’s Qingpu district and another in Beijing, as well as land parcels in Qingdao, Chengdu and Guiyang. Evergrande agreed to pay RMB 20.4 billion to New World for that set of acquisitions.
In August of this year New World, together with sister company Chow Tai Fook Enterprises, paid a total of RMB 4.2 billion for a 170,000 square metre commercial site in Qianhai intended for a financial centre. In December last year Chow Tai Fook, which is also controlled by the Cheng family, opened its first project in Qianhai, the 19,000 square metre Qianhai Chow Tai Fook Global Goods Shopping Center.
Qianhai Projects Latest Mega-Investment by China Merchants Shekou
China Merchants Shekou Industrial Zone Holdings broke records with its RMB 31 bil deal for projects at the planned Shenzhen International Exhibition Centre
For China Merchants Shekou Industrial Zone Holdings, the joint venture with New World is its latest super-sized project in just over three months.
In late August the state-owned firm acquired a mixed-use site at Shenzhen’s planned new convention and exhibition center in the southern Chinese city’s Bao’an district via a record RMB 31 billion ($4.6 billion) joint bid with developer Overseas Chinese Town.
The blockbuster joint ventures come after the price of housing in Shenzhen jumped more than 40 percent in the last year, attracting new levels of investor interest to the city as a high tech hub and to Qianhai in particular as an outsourcing hub for Hong Kong-based businesses.
Not all of the attention has been positive, however, with the Chinese Academy of Social Sciences last month declaring Shenzhen to be the mainland’s highest risk real estate market, in a study of potential property bubbles.
Despite any potential risks, developers have been stepping up investments in the southern Chinese city, with recently recovered local player Kaisa last month announcing plans for a RMB30 billion ($4.4 billion) international theme park project in eastern Shenzhen that will include a substantial residential real estate component.
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