China Overseas Land & Investment (COLI) has teamed up with the real estate arm of state-owned steel company Shougang to win a 61,100 square metre (657,674 square foot) residential site in Beijing for RMB 5.1 billion ($730 million), according to a notice by Beijing Municipal Commission of Planning and Natural Resources.
With the purchase last week, the pair of state run giants have won the right to develop and market 148,600 square metres of space at the site near Gucheng station on Beijing’s metro line one without price restrictions, provided that they also build community facilities associated with the project under the terms of the land tender.
The acquisition comes one year after COLI and Shougang had joined hands to acquire a 61,000 square metre neighbouring site, for RMB 4.83 billion.
Project to Include Community Centre
COLI and its partner are paying the equivalent of RMB 41,943 per square metre of built area for the project between the fifth and sixth ring roads in western Beijing, after buying the five parcel site at the auction reserve price.
The project in Shijingshan district is close to the Yongding River Forest Park, Beijing Garden Expo Park and Shijingshan Sports Centre in an area that has seen multiple site sales this year.
As a condition of the bid, however, the development duo will be required to build a 12-classroom kindergarten, a 300-bed senior living facility, a community health care centre, and a community retail strip which they will turn over to the local government free of charge upon completion.
The community development element of the project wins COLI and its partner an exemption from housing sales price caps that have squeezed many developers between rising land costs and government-imposed limits on home prices.
The conditions of the land auction have required the winning developer to build a 12-class kindergarten, a 300-bed old-age care center, a community health care service center and a business service center, all to be handed over to the local authority free of charge upon completion.
Learning to Develop Under Evolving Policies
COLI and Shougang’s new site enters the pipeline after the duo began sales of the neighbouring project which they purchased in October 2018, which also includes significant restrictions on home sales in alignment with government policies to boost the supply of affordable housing in China’s major cities.
The 2018 project includes two phases, the first of which began sales in May of this year, with all units already sold out. In accordance with the terms of the land tender, the average price of homes sold from this first tranche was cppaed at RMB 58,802 per square metre, with the price of the most expensive units not to exceed RMB61,742 per square metre.
The second tranche of homes, which are expected to be completed by June 2020, are being sold under the shared ownership model where the home buyer purchases from 50 to 95 percent of the equity in the unit, with the remainder to be retained by the local government.
COLI Bets on Western Beijing Hub
With the COLI-Shougang joint venture purchasing this latest residential site this month, the local government of Shijingshan district has now completed successful tenders of four projects so far this year, including one that came close to setting a new price record for residential projects in China’s capital.
In June, the district land office had sold a 64,400 square metre site to a joint venture between China Resources Land and Power China for RMB 7.34 billion. The land sale, which took place at a premium of 11.63 percent to the auction reserve, was the second biggest residential land sale in Beijing ever.
Both COLI and Shougang participated in that June tender, with COLI making a solo bid and Shougang forming a consortium with Hong Kong-listed China SCE Group and China Merchants Group for its offer.