Swire, HKR team up for project in Shanghai
Alliance formed for Jingan complex after resettlement costs soar in mainland city
Swire Properties, a leading Hong Kong developer expanding in the mainland, is to join HKR International in building a HK$10 billion complex in the heart of Shanghai as resettlement costs in the city soar.
Swire said it has agreed to pay HK$1.26 billion for a 50 per cent stake in a 63,000 square metre site on Nanjing Road in Jingan district owned by HKR.
The project, which includes a hotel, office and retail space and serviced apartments, will be held for long-term investment, a Swire spokeswoman said.
HKR, whose projects include Discovery Bay near Hong Kong's Disneyland, last year said it may face a doubling of resettlement costs for the Jingan complex to 2.6 billion yuan after the central government introduced stricter rules to control the property market.
The cost of the demolition and resettlement works could increase from the 1.3 billion yuan that the company originally budgeted for, managing director Victor Cha Mou-zing had said earlier.
The government measures also delayed the demolition and moving process.
The HK$10 billion investment represents costs of HK$34,364 per square metre and is about 50 per cent higher than Deutsche Bank's estimate of 6.5 billion yuan or 23,000 yuan per square metre.
'Most Hong Kong developers have shifted their acquisition spree to second-tier cities due to the high land value and time-consuming resettlement [in Shanghai],' said Alex Ng, an executive director of estate agent Knight Frank.
The first phase of the Jingan resettlement work started in August and will be largely completed by the end of next year, HKR said.
The development, with a gross floor area of 3.12 million square feet, is Swire's second major mainland project, the company spokeswoman said.
The developer has a 97 per cent interest in Taikoo Hui, a four billion yuan office-retail-hotel project in Guangzhou that is slated for completion in 2009. It also has a 10 per cent stake in Citic Square in Shanghai, she said.
'We are also looking at investment opportunities in projects both in Hong Kong and the mainland,' she said, without identifying specific locations.
Swire is in talks with United States property fund Gateway Capital to take part in a retail-hotel-office development worth almost four billion yuan in Beijing's Sanlitun district, sources said.
The Jingan project will comprise residential and serviced apartments, offices, a hotel, boutique hotels, retail space and a private club. No further details are available at the moment, a statement issued by HKR said. The development will take five to 10 years to complete, an HKR spokeswoman said.
HKR shares fell 2.25 per cent to close at HK$3.91 yesterday while Swire Pacific shares slid 0.43 per cent to HK$81.05.
