In the midst of one China’s most acute economic setbacks in the last two decades, the biggest landlord in Hong Kong’s Central district has agreed to pay a record RMB 31.05 billion ($4.48 billion) for a development site in Shanghai’s Xuhui district.
Hongkong Land today announced to the Singapore stock exchange that it had purchased the plot along what is now called Shanghai’s West Bund, noting that, “The acquisition provides the Group with an attractive opportunity to develop and operate a commercial complex of scale in a prime location in Shanghai, the predominant commercial hub of the Chinese mainland.”
When the division of Jardine Matheson group completes the mixed-use project, which is expected in 2027, the site would yield some 1.09 million square metres (11.73 million square feet) of accountable gross floor area.
Aiming for a Xuhui Finance Hub
Hongkong Land’s new prize is a 231,300 square metre site located between the Huangpu river’s west bank and Longhua Middle Road south of Shanghai’s traditional downtown area.
The site, which was listed for sale by the Shanghai government in December, is bounded by Ruining Road to the east, Ruining Road and Longteng Avenue to the south, Dongan Road to the west, and Longhua Middle Road to the north. The project is located near the Middle Longhua Road metro station, offering access to the city’s Middle Huaihui Road, Jing’an Temple and Expo areas via lines 7 and 12.
The project is approved for construction of 650,000 square metres of office space, complemented by another 210,000 square metres of retail. The residential element is designed to provide up to 200,100 square metres of housing, including no less than 153,000 square metres which must be built to provide a minimum 1,187 units of long-term rental housing, including construction of an affordable housing component.
In the arrangements for the site tender, the Shanghai government had specified that the project should be developed with the goal of creating a world class finance hub that would attract leading banks and global investment institutions – a status that Hongkong Land has achieved in its home city where its buildings in Central, such as Exchange Square and Jardine House, accommodate the headquarters of some of the largest international finance firms.
The developer, which is headed by Ben Keswick, scion of the family which controls Jardine Group, is paying the equivalent of RMB 24,486 per square metre of finished floor space to acquire the site. Hongkong Land says that it will complete the project in phases, with the company indicating that, upon completion, it expects the development to provide it with “a stable stream of recurring earnings.”
Hongkong Land’s purchase of the site is the biggest price paid for a single plot since China Minsheng Investment Group made its ill-fated decision to buy a project along Shanghai’s South Bund for RMB 25 billion in 2014. One year ago, the financially-trouble firm sold its remaining 50 percent stake in that parcel at Dongjiadu Road to Greenland Group for RMB 12 billion.
Learning to Love the Mainland
Hongkong Land’s purchase of the Xuhui site comes after the group in 2018 missed out on a tender for a commercial parcel near Xintiandi which was eventually awarded to Shui On Land.
During that same year the developer won a government auction of a residential site in Nanjing’s Jiangbei district, placing the winning RMB 4.49 billion offer for the project after 71 rounds of bidding.
After famously moving its corporate domicile away from Hong Kong before 1997, Jardine Matheson Group, and with it Hongkong Land, seems to have grown more comfortable with the mainland business environment in recent years, including having opened a Mandarin Oriental Hotel at its WF Central project in Beijing during 2019.
With the $1.2 billion WF Central complex measuring over 150,000 square metres by gross floor area, Hongkong Land’s upcoming project in Shanghai will be more than seven times larger than the company’s Beijing flagship.