Zhang Yuliang, Chairman of Greenland Group
Greenland Group, which through its domestic and international acquisitions is rapidly establishing itself as one of China’s most aggressive real estate firms, this week announced that it was acquiring a residential site in downtown Shanghai for RMB 5.95 billion (US$979 million).
The purchase of the 64,980 square metre plot in Huangpu district by Greenland Hong Kong, the listed arm of Shanghai-based Greenland Group, comes amid growing competition among China’s real estate developers which has driven land prices to record levels.
Greenland’s buy was the second largest lump sum paid for land in Shanghai this year, trailing only the RMB 21.77 billion that Hong Kong’s Sun Hung Kai paid in September for a 99,000 square metre site in the Xujiahui area. Greenland’s new Huangpu site is zoned for mixed residential and commercial use, and with a planned floor area of up to 245,550 square metres, the developer paid an accommodation value of RMB 24,236 yuan per square metre.
In terms of price per unit of planned area, Greenland’s price was still well below some other recent acquisitions, with Singapore developer Wing Tai group paying the equivalent of RMB 42,821 for another plot in Huangpu district earlier this month. For Sun Hung Kai’s project the developer paid RMB 37,264 per square metre.
Greenland’s site was acquired on Wednesday for the reserve price of RMB 5.95 billion, according to a statement from the company. Greenland Hong Kong also took over a shareholder loan to the company.
China Developers Step Up Competition for Land
While 2013 has been a year of rapid growth for many Chinese real estate companies, a shortage of new projects in the pipeline and increasing scarcity of new development sites are forcing developers like Greenland to make these big land buys if they wish to keep making progress in 2014.
A recent report by BNP Paribas Securities cited the competition for land as the major limiting factor for China’s listed developers going forward. This scramble for sites, along with compression of margins between land price and housing prices caused the investment bank to downgrade the entire sector for 2014.
Greenland Group Buying Locally and Globally
While Greenland’s Shanghai purchase is remarkable, the group has grabbed its biggest headlines this year through its overseas acquisitions.
During 2013 the developer has invested in projects in Los Angeles, Korea, New York, Sydney and Melbourne. The company is also undertaking residential projects in Southeast Asia.
After decades of rapid growth, China’s real estate markets are becoming increasingly regulated, and as domestic opportunities get compressed, many of the developers are looking globally for chances to maintain the healthy margins that they have historically enjoyed.
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