Overseas Chinese Town Buys Pair of Shenzhen Sites for RMB 4.2B

Hong Kong and Shenzhen-listed real estate developer Overseas Chinese Town Holding has purchased a pair of mixed-use sites in the centre of Shenzhen’s Bao’an district for RMB 4.2 billion ($605 million) at a government land auction on October 10th, according to official announcements.

The two pieces of land in the Guangdong province mega-city, total 19,465 square metres (209,521 square feet), and are approved for  development of hotels, serviced apartments, retail and offices. With a total permitted construction area of 178,197 square metres, the listed developer paid an average of RMB 23,569 per square metre for the pair of plots.

Backed by the Shenzhen local government, Overseas Chinese Town Holdings was the sole bidder for both sites, picking up the pair of projects for the auction reserve price for each tender.

This latest pair of project purchases came after land sales revenue in the southern China city dropped by 83.2 percent during the first three quarters of 2018, compared to the same period last year.

Picking Up a Pair of Adjoining Sites

The developer known for its hospitality projects including hotels, resorts, and theme parks has picked up the pair of primarily commercial parcels in near Shenzhen’s up-and-coming financial centre in Qianhai, just cross the bay from Hong Kong.

According to the transaction documents, the two plots, namely A001-0206 and A002-0065, are separated from each other by Xingye Road, and are located just south of the Bao’an district government centre and adjacent to a station on Shenzhen’s metro line 11.

The developer agreed to pay RMB 1.43 billion for plot A001-0206, a 11,789 square metre site which cost the developer an average of RMB 20,258 per square metre of built area for the project.

The site is located along Xin’an Street, south of where it intersects Xingye Road. With the plot ratio set at 6, the land can be developed into a total of 70,736 square metres of space, with 40,000 square metres used for hotel, 5,736 square metres used for retail, and 25,000 square metres for serviced apartment.

The listed developer paid RMB 2.77 billion its second site, also located along Xin’an Street, to the northwest of its intersection with Baoxing Road and Xingye Road. The purchase works out to RMB 25,749 per square metre of built area.

The 7,676 square metre property is approved for construction of a total of 107,461 square metres of space, including 40,000 square metres of hotel, 5,000 square metres of retail, and 62,461 square metres of office space.

According to the government requirement, the developer also needs to build two public squares within the two plots, while the hotels are required to be five star grade. As the two plots are close to Shenzhen Bao’an airport, the height of the buildings is limited by aviation restrictions. The commercial space is required to be for rental purposes, rather than for strata-title sale.

Shenzhen Land Market Slows Down in 2018

Once China’s fastest growing market for commercial property, Shenzhen saw a rapid decline in developer interest in the city’s land parcels during the first nine months of 2018.

According to research by Hong Kong-based real estate agency Midland Holdings, Shenzhen recorded just 36 land sales in the first three quarters this year, with the transfer area reported 1.1 billion square metres, down by 7.1 percent from the same period last year. The total value of those land sales, RMB 13.371 billion, represented an 83.2 percent drop year-on-year.

The slide in land sales, according to mainland media nbd.com, is partly due to government restrictions on the sale of some commercial plots. In the case of the two most recent sites, tender conditions require developers to own at least two five star hotels to be eligible to bid.

Backed by the Shenzhen local government, Overseas Chinese Town Holdings, bought 10 pieces of land, amounting to 1,384,000 square metres in the first half of 2018, the company’s interim report showed.