The garden city of Suzhou is now only twenty-five minutes from Shanghai by high speed rail, and one of Hong Kong’s biggest developers, along with its mainland partner, may be hoping that the Chinese commercial centre’s sky high real estate prices will make the trip west as fast as a new generation bullet train.
Henderson Land Development, which has a market cap of over $22 billion, is teaming up with Shanghai-based housing and hotel developer CIFI Holdings to build two residential projects in Suzhou for RMB 4.5 billion ($661.7 million), CIFI announced this week. The two projects will be located in the Luzhi and Xukou areas of the eastern Chinese city’s Wuzhong district.
Betting on a Second-Tier Mainland Economy Bigger Than a SE Asian Nation
The Luzhi property will have a total gross floor area of 42,864 square metres. CIFI is taking a 51 percent stake in the overall project – including land, construction and other costs – amounting to a commitment of RMB 465 million ($68.4 million). Henderson China Properties Limited, the mainland arm of the Hong Kong builder, is taking the remaining 49 percent equity.
The Xukou project will be built on a much larger scale, with a total gross floor area of 121,280 square metres. CIFI will hold a 49 percent stake in the development, equating to RMB 1.1 billion ($166.1 million), while Henderson China takes the remainder.
Suzhou, has an urban population of 5.7 million and the city’s 2015 GDP of $211 billion exceeded the entire nation of Vietnam. The second-tier city saw double-digit housing price growth in 2016, and was one of eight provincial cites that followed Beijing’s example by introducing home purchase restrictions last October.
Henderson Deepens Its Partnership with a Shanghai Builder
The deal continues a partnership which has seen the two companies work together on other ventures in eastern China’s Yangtze River Delta area over the years. Last September, CIFI announced it would collaborate with Henderson on five projects covering a total of over 931,000 square metres, including three properties in Suzhou, one in nearby Yixing and one in the central Chinese city of Changsha.
CIFI said it would invest around RMB 1 billion in the earlier projects, which include phases two and three of Suzhou Riverside Park, a residential development of nearly 600,000 square metres in the city’s Xiangcheng district, and another unspecified project in the same district.
The duo first linked up 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. Also that year, CIFI and Henderson agreed to partner on a mixed-use, 216,700 square metre development project in Hangzhou costing RMB 763 million.
Henderson, the Hong Kong development giant that smashed records when it picked up a commercial site in the city’s Murray Road for HK$23.3 billion ($3 billion) in May, has a major presence in mainland China with a portfolio of office, retail and residential properties that spans 15 cities.