The surge of land and project acquisitions in China during the past week raises the question of which of the country’s fearless real estate developers is actually the most aggressive. While this may be a bit like trying to figure out which of the people waiting beside you for the subway is most likely to knock you down to grab the last seat, it appears that Sunac and Sun Hung Kai are wrestling for the aggro-bidder title against reigning king of the hill SOHO.
SOHO’s Distressed Asset Feast
For a period during 2011 and 2012 if there was a major acquisition property acquisition made in Shanghai or Beijing then SOHO China was likely to be part of the story headline.
In April 2011 the Beijing-based developer bought a site in Shanghai’s Hongkou District for RMB 2.47 billion, and a site in the city’s Jing An district for RMB 1.6 billion. In May of that year SOHO bought a site on Shanghai’s Zhongshan Road for RMB 3.2 billion and in August bought a site in Pudong for RMB 1.89 billion. During 2012 the company was less active, but still picked up a project from then-distressed rival Greentown in Shanghai’s Hongqiao district for RMB 2.14 billion.
However, now that developers are out of 2011 and 2012’s dire straits and the prices of land and developed real estate assets in China have spiraled upwards, SOHO is only one of several aggressive acquirers, and it even losing out to some foreign players.
In August SOHO was outbid by privately owned US property developer Hines for a 156,000 sqm site in Shanghai’s Jing An district that Hines ultimately purchased for RMB 3.706 billion.
And last week, during one of the busiest spasms of asset acquisition in recent years, SOHO was only one of several players acquiring sites.
New High Bidders Emerge
In what could be called a new stage of China’s real estate market or just a return to the good times, development in 2013 seems to depend more on winning a land auction rather than prying a project from a distressed competitor.
Sunac bought a Beijing residential site for RMB2.1 billion and has been among the most aggressive acquirers of property in China this year having made a number of large buys through its joint venture with Greentown.
In July the Sunac-Greentown joint venture paid 49 percent over the starting price to buy a 10,239 square metre site in Shanghai’s Hongkou district at auction for RMB 1.044 billion. And in June the joint venture announced that it was purchasing a 113,842 square metre site in Shanghai’s Huangpu district for RMB 5.68 billion from another developer.
And Sun Hung Kai is not sitting on the sidelines.
No doubt buoyed by the success of its IFC and ICC mall/office combo projects in Shanghai, the Hong Kong-based developer set a new record for Shanghai land prices last week by purchasing a plot in Shanghai’s Xujiahui area for RMB27.77 billion.
Has SOHO Shifted Its Acquisition Focus?
During this year SOHO’s CEO Zhang Xin has mostly garnered attention for purchasing a share in the GM building in New York – an acquisition that she made with her family and not through SOHO. Zhang’s husband and SOHO chairman Pan Shiyi meanwhile has also been touring the US, although no news of major purchases have emerged from his side.
Industry rumours have it that there is internal conflict within SOHO as the company shifts from its former strata-sales model of selling office space in its buildings to a buy and hold strategy propelled by leasing revenues.
It may also be that, like many observers, SOHO sees investment yields in China’s real estate market compressing as international private equity giants bid up asset values. Whatever the reason, it appears that there is a new battle on to be the fastest gun in China’s wild west real estate world.