CR Land buys two sites in Fuzhou for 1.8b yuan

PUBLISHED : Friday, 30 May, 2008, 12:00am
UPDATED : Friday, 30 May, 2008, 12:00am

China Resources Land has bought two sites in Fuzhou, the capital of Fujian province, for 1.8 billion yuan (HK$2.02 billion) in an auction without any rival bids, as developers face a credit crunch as a result of Beijing's austerity measures.

The two residential-commercial sites in Jinshan district, the new expanded city centre, were withdrawn in the previous land auction on May 19 due to a lack of interest.

China Resources Land paid 960 million yuan for a 188,000 square metre site and bought the adjoining site of 172,000 sq metres for 850 million yuan. It won the sites with the opening bid.

Analysts said the austerity measures had given companies with solid financial health more opportunities to buy sites.

China Resources Land, with a net debt to equity ratio of about 45 per cent, was one of them, they said.

'Mainland firms are facing obstacles in borrowing from banks, so cash flow will be a concern as not too many developers have projects for sale,' said Castor Pang Wai-sun, a strategist at Sun Hung Kai Financial.

According to the auction document, the winning company is required to pay 40 per cent of the transaction price within five days of signing the purchase agreement. The remainder must be settled in 90 days.

That in part dampened interest in Fuzhou, where seven of the nine sites on offer in government auctions since the beginning of the year were withdrawn, according to mainland website

China Resources Land would need to sell homes to be built on the Fuzhou sites for at least 10,000 yuan per square metre to get a reasonable profit, as the land price, or accommodation value, was about 3,000 yuan per square metre, analysts said.

'China Resources Land may be betting on faster economic growth in Fuzhou after relations between the mainland and Taiwan improve,' one analyst said.

Fuzhou is on the southeast coast facing Taiwan, and its fast-growing economy is likely to be further boosted by closer cross-strait business activities under Taiwan President Ma Ying-jeou.

Fuzhou's economy rose 15.1 per cent last year to 197.46 billion yuan. The per capita disposable income of urban residents was up 12.2 per cent to 16,642 yuan.

Another Hong Kong-listed developer, Shimao Property Holdings, has a high-end project in Fuzhou called Fuzhou Shimao Bund Garden.