CapitaLand forms venture in Sichuan
CapitaLand and Chengdu Zhixin Industrial, Sichuan's largest developer, formed a joint venture that will expand the Singapore-based real estate firm's mainland investments to include the fastest-growing city in China's western region.
The 50-50 joint venture, Sichuan Zhixin CapitaLand, has an initial capitalisation of 700 million yuan and has its eye on five to seven development projects in Chengdu. Both partners are putting up 350 million yuan, with the Singapore-listed developer adding a loan of approximately 1.09 billion yuan.
Under current plans, the joint venture expects to build some 25,000 residential units over the next eight years, with a potential total gross floor area of 48.43 million sq ft.
Under the deal, the joint venture will have the right of first refusal on any Chengdu Zhixin deals.
CapitaLand Group president Liew Mun Leong said his firm will begin the first project next year. 'We expect to see a positive contribution from 2007,' he said.
The Sichuan developer has about 3.76 million sq ft of properties under development.
Foreign and Hong Kong developers once focused exclusively on Shanghai, Beijing and Guangzhou. However, high land prices and limited supply have driven the switch to second-tier cities.
Earlier this month, New World China Land bought a 60 per cent stake in Chengdu Xinyi Real Estate Development for 500 million yuan.
Chengdu is especially attractive to developers because it has become a base for foreign investors. According to a Jones Lang LaSalle survey, Chengdu ranked as the fourth most popular city among multinationals looking to expand.
Flat prices in Chengdu climbed 9.75 per cent to 379 yuan per sq ft last year, a DTZ report showed.
The city's track record has also caught investors' eyes. 'The Chengdu property market has a longer history than other cities in Western China,' said Land Power International chairman Michael Choi.
'The market is active and mature, compared with other Western cites such as Chongqing and Xian.'