Mainland China’s most valuable developer has won an auction to buy a rare package of prime development sites in Guangzhou for RMB 55.1 billion ($8.13 billion), in what is said to be the country’s biggest-ever land sale. Under the deal, China Vanke will buy assets including 16 land parcels in the city’s Liwan and Yuexiu districts from a bankrupt state-owned enterprise, the developer announced in a stock exchange filing.
Vanke will build a series of residential, commercial, hotel and office projects with a total gross floor area of around 2.1 million square metres (22 million square feet) on the land, according to the statement. The deal signals that the Shenzhen-based homebuilder is back in action and more ambitious than ever, after a protracted struggle for control of the company that ended last week with the election of a new board and celebrity entrepreneur Wang Shi stepping down as chairman.
A Rare Land Opportunity in a First-Tier City
“The Board believes it is a valuable opportunity for the Company to enhance its land bank in Guangzhou and it is beneficial to the Company and the shareholders as a whole,” Vanke said in the statement on the land sale, without providing further details of the proposed development.
The total price tag far exceeds that of a consolidation deal last March in which China Overseas Land & Investment Ltd took over a 25-city residential land portfolio from CITIC Group for RMB 21 billion ($4.8 billion), believed to be the biggest such transaction at the time. The deal represents a massive win for Vanke, given the scarcity of available land in China’s first-tier cities and fierce competition from seven other developers including Country Garden, Evergrande and COLI.
The price of the parcels comes to roughly RMB 26,000 per square metre, although analysts could not determine the exact figure due to the complexity of the deal. Among the parcels, a one million square metre site in the Huadiwan area of Liwan district is said to be the most coveted prize. A site nearby sold last year for RMB 42,000 per square metre, according to an expert cited by the South China Morning Post. Liwan and Yuexiu are both central districts within the sprawling Guangzhou municipality, with Yuexiu serving as the seat of the city government.
Vanke to Take Over Liquidated Assets from SOE
Under the terms of the agreement, Vanke is taking over the equity interest and creditors’ rights of entities holding the land from Guangdong International Trust Investment Corporation (GITIC), a governmental investment firm that was declared bankrupt in 1999. GITIC reportedly bought the Huadiwan site in in 1988 for RMB 280 million (RMB 218 per square metre) with plans, later put on ice, to develop a project combining residential and other uses.
According to the account in the South China Morning Post, the package Vanke picked up also includes an estimated RMB 8 billion ($1.8 billion) in debts and various unfinished projects in Guangzhou and the neighbouring city of Foshan.
At around the same time the deal was announced, Vanke last Friday elected a new board of directors, marking the end of a complex takeover battle that had dragged on for nearly 18 months. Wang Shi stepped down as chairman of the company he founded in 1984, handing the reins to president Yu Liang, who was elected chairman. Three executives of Shenzhen Metro, the subway operator that pushed aside Baoneng Group to become the largest shareholder in Vanke with a 29.38 percent stake, were elected to the board. Baoneng did not attend the shareholders’ meeting and has no seats on Vanke’s new board.