Henderson Land Development has purchased a residential plot in Beijing for RMB 3.02 billion ($440 million), according to an announcement by the Beijing Municipal Bureau of Land and Resources.
The developer shouldered aside nine other competitors, including mainland developers Country Garden and Poly Real Estate Group, paying more than 23 percent over the auction reserve price for the plot in Chaoyang district’s Sunhe township.
The blue-chip developer is paying the equivalent of RMB 69,542 per square metre of buildable area for the low-rise project — a record high for the luxury residential neighbourhood, with market researchers predicting that finished homes would sell for more than 40 percent over that level.
“Considering the acquisition price it would make sense that the eventual units should sell for RMB 100,000 per square metre or above,” an analyst at Savills told Mingtiandi.
While regulations have capped home prices in central Beijing in recent years, pre-sales rates for high-end residential units in Chaoyang averaged from RMB 63,000 to RMB 72,000 per square metre during the first quarter of 2019, according to a recent report by Savills.
Getting into the Villa Zone
Henderson Land won the 39,479 square metre plot in the northeastern corner of the capital’s posh Chaoyang district, after 24 rounds of bidding. The project, which has a 70 year land use term, carries a plot ratio of 1.1 and lies in an area of villa developments beyond the capital’s fifth ring road near a Jack Nicklaus-designed golf course.
Henderson’s new plot, which had an auction reserve price of RMB 2.49 billion and has approval for construction up to 43,427 square metres of homes, was auctioned on the same day as three other parcels in the capital, with the sales bringing the city government a combined RMB 9.72 billion.
The Hong Kong-listed company, which held a mainland land bank of 2.97 million square metres at the end of 2018, acquired the plot the day after 90 year-old founder Lee Shau Kee officially passed the baton to his sons following 43 years in charge.
Looking to Carve Out a Profit in Beijing Residential
“This is now the sixth plot of residential land sold in Beijing in 2019 that does not have any price cap on the completed units – potentially an indication that the authorities have adjusted their land supply policy,” according to Savills’ team in Beijing.
The removal of price caps, which the local government has used to maintain the appearance of housing affordability, has been seen by analysts as creating an opportunity for the plot’s new owner to sell homes at a higher price in a market where price restrictions have squeezed residential margins in recent years.
The apparent change in policy comes after the volume of land sold in Beijing dropped 30 percent to 4.5 million square metres in 2018, sliding from 6.4 million square metres the previous year.
Henderson Looking to Re-establish itself in the Capital
Henderson Land’s 165 metre tall Beijing World Financial Centre, now ten years old, has been the developer’s only major involvement in the city besides a residential project purchased in the northeastern suburb of Shunyi developed in 2017.
By 2020 the developer will complete construction of up to 120,000 square metres of housing on the 65,000 square metre Shunyi site. Henderson began sales of the first batch of some 979 homes late last year, with the project also including commercial and community facilities.
The Hong Kong-listed company was also among the bidders for residential land in the capital’s Shijingshan district in November 2017, losing out to Hanghzou-based Greentown Group, which purchased the 216,400 square metre site for RMB 8.6 billion ($1.3 billion).
Henderson’s Reach Extends to 12 Cities in the Mainland
According to last year’s annual report, Henderson Land is currently engaged in 22 developments across 12 mainland cities, with several projects coming as the result of a partnership with Shanghai’s CIFI Holdings.
Carrying a a market cap of over $27 billion, the Hong Kong heavyweight teamed up with the Shanghai residential and hotel developer in September 2017 for a joint commercial property project in CIFI’s hometown in a deal worth $98 million.
The pair linked up for the first time in 2013 to develop Henderson CIFI Center, an 85,000 square metre, mixed-use project in Shanghai’s Hongqiao business hub with an estimated price tag of RMB 2.1 billion.