Kong Jian Min, the chairman of KWG Property Holdings, is ranked 181st on the Forbes China Rich List, with a personal fortune estimated at $950 million. According to a report on mainland news site Caixin today, however, the Guangzhou real estate tycoon may owe much of his wealth to purchasing land at below market rates through ousted Guangzhou Vice-Mayor Cao Jianliao.
A report on Caixin’s website details how the Hong Kong-listed developer had a relationship with the long-time Guangdong power broker that went back to at least 2004, and had allowed the real estate firm to buy land and assets at a fraction of their market value through its special relationship with Cao.
KWG is one of the largest privately owned developers in Guangzhou and rose rapidly after its 1995 incorporation to where it controlled as much as 600,000 square metres of land in the city’s properous Zhujiang New Town – nearly 10 percent of the district’s total area — by 2006.
The former Vice-mayor of Guangdong’s capital city and Communist Party chief of the Guangzhou district of Zengcheng was taken under investigation last year and later dismissed from his post after China’s anti-corruption agency uncovered a web of illicit dealings. The probe of Cao was part of an anti-corruption sweep in Guangdong, which eventually took down the party secretary of Guangzhou.
KWG as the Sole Qualified Bidder in Land Sales
In the most recent incident where KWG is alleged to benefit from its relationship with Cao, the developer successfully purchased a 131 mu (87,333 square metre) site along Gualv Lake in Zengcheng district for RMB 72 million. Cao is said to have arranged the prerequisites for bidding on the site so that only KWG qualified. The developer was the sole bidder in the land auction.
Following its purchase of the lakeside site, KWG is was allowed to build more than 100 illegal villas on the site, which it priced for sale at more than RMB 50,000 per square metre. Following Cao’s ouster, the developer has been unable to receive a pre-sale permit for the project.
Cao Linked to KWG Land Deals Back to 2004
Cao’s real estate dealings went back as far as 1996, when he helped a former official named Tan Lai Kwan to purchase a city block in what was then the outskirts of Guangzhou from a state-owned collective that Cao controlled for only RMB 300,000.
By 2004, with property prices in Zhujiang New Town rapidly rising, Cao personally introduced KWG and Kong to Tan Lai Kwan’s River Trillion Union Ltd, which received payment of RMB 26 million from the private developer in return for access to a 6238 square metre plot in Zhujiang New Town, for development into a five-star hotel and residential tower.
The Caixin report refers to sources which indicate that the RMB 26 million paid by KWG actually went directly to local officials who helped facilitate the transaction. When the units went on sale in the residential tower in 2009, they brought the highest rates on the Guangzhou market at the time, at RMB 40,000 per square metre.
Local media reports indicate that officials appointed by Cao who were involved in land deals in Zhujiang New Town are now under investigation by authorities for taking bribes of RMB 30 million related to property transactions.
Guangzhou Party Secretary Wan Qingliang is one of the highest level Chinese officials to lose his job amidst the country’s current anti-corruption campaign when he was dismissed from his job and the party in June amidst charges of corruption. Chinese media sources have alleged that a history of dirty real estate deals may have led to Wan’s downfall as well.