Hong Kong-listed Kerry Properties has won the rights to a 98,053 square metre (1 million square foot) site in the eastern China city of Hangzhou after placing the winning bid of RMB 6.814 billion ($985 million) at a government auction, according to a statement to the stock exchange.
The property developer controlled by Shangri-La Hotels founder Robert Kuok is entitled to use the site in the home town of Jack Ma’s Alibaba to build a 229,613 square metre mixed-use property incorporating office space, retail, and a hotel.
Kerry Properties, which already operates the 204,000 square metre Hangzhou Kerry Centre near the city’s West Lake, made its new site purchase in Xiacheng district on a day when developers spent RMB 16.3 billion acquiring eight sites in the capital of Zhejiang province.
Kerry Sees Opportunity for More Investments in Hangzhou
One of the earliest foreign property developers to enter the mainland market, Kerry is paying the equivalent of RMB 29,677 per square metre for its latest project, which it won at a 29.94 percent premium to the auction reserve price after 126 rounds of bidding.
“The Directors believe that the Transaction provides the Group with a good investment opportunity in the prime location at Hangzhou and it also provides an opportunity for the Group to increase the land bank for development,” Kerry explained in its statement to the Hong Kong stock exchange, adding that, “The Directors believe that the acquisition and development of the Land are expected to enhance the value of the Shareholders by providing additional revenue for the Group.”
The project, which is part of the Hangzhou City Star International Tourism Complex master plan near the city’s Peace International Convention and Exhibition Center in Xiacheng’s Wenhui subdistrict, is approved for development of 49.5 percent of the gross floor area as residential, with at least 8 percent of the development’s total space required to be held for the long-term.
The site is bordered by Shengnan Road to the east and Dongxin Road to the west, and is bounded to the north by Hangyang Street, with Guihua No 9 Road to the south. Homes at a neighbouring project developed by Hong Kong’s Wharf are currently available at asking prices of RMB 60,000 per square metre, according to local media accounts.
Adding to the Mainland Portfolio
With Kuok’s Shangri-La Group having proven to be one of the Chinese government’s most dependable allies when it opened the China World Trade Centre and the 716-room Shangri-La China World Hotel in Beijing in August 1990 – just over one year after the Tian An Men Square incident in 1990, Kerry has gone on to build a mainland portfolio of 13 commercial projects covering nearly 785,000 square metres, in addition to 10 hotels, as of 31 December 2018.
At the end of last year, Kerry Properties had another 1.94 million square metres of projects under development, including residential, hotel and commercial undertakings.
The Hangzhou Kerry Centre project opened in 2016 and includes grade A office space, a shopping centre, a hotel and a residential component.
Bumper Land Harvest as Investment Rebounds
Kerry’s latest Hangzhou acquisition was the largest of eight land buys in the Zhejiang capital on 18 May as the city brought in over RMB 9.48 billion in further revenue from selling another three mixed-used sites, and four rental housing plots. In all, the city sold 328,890 square metres of sites in a single day, which are expected to yield more than 705,426 square metres of finished space.
On the same day that Hangzhou was selling its eight plots, Jinan, the capital of northern China’s Shandong province sold 21 sites for a total of RMB 12.6 billion, and Zhengzhou, the capital of Henan province, sold a residential site for nearly 174 percent over the auction reserve price.
The display of developer hunger came just four days after the People’s Bank of China injected RMB 200 billion into the country’s monetary system through a medium-term lending facility, and three days after the central bank announced its sixth cut of reserve ratio requirements since early 2018.
The increasing liquidity has helped fuel a rise in new property deals, with China’s National Bureau of Statistics reporting this past week new figures which show that overall real estate investment in the country was up 12 percent in April compared to the same month last year.