Foreign investors have given a warm reception to Shenzhen's development of the Qianhai special economic zone as a testing ground for the free convertibility of the yuan. But it will be an entirely different matter when they are asked to put in real money to transform the 15-kilometre strip into the "Manhattan of the Pearl River Delta".
On Friday, the third commercial site in the zone is to be auctioned off, providing an immediate gauge of the level of confidence Hong Kong developers have in the project. These developers boast of their more extensive experience compared to their mainland peers and their ability to build Shenzhen's financial centre into a pilot zone for new collaboration with Hong Kong.
Interested bidders for the plot, however, face tougher requirements from the Qianhai Authority, unlike the first two commercial sites that were offered for sale to developers with annual turnover of 10 billion yuan (HK$12.6 billion).
Two weeks ago, the first two sites were sold to Shenzhen-based Excellence Group, the mainland's 48th-largest developer by sales.
The authority did not mince words in stating its developer of choice for the third plot. It prefers a property giant with strong experience in developing top-notch office buildings and an extensive network with international companies.
To ensure the rapid success and international recognition of the Qianhai special economic zone, the sale of the site, which is being offered at a minimum bid of 6.72 billion yuan, will be restricted to Hong Kong-listed companies with a market capitalisation of HK$40 billion or more, according to the land sale document. The site is designated for the development of office, retail and hotel space and serviced apartments over six towers, each ranging from 150 to 260 metres high.
A bidder's revenue for the past financial year should be no less than HK$20 billion. More importantly, the eligible bidder is required to secure a tenancy commitment of at least three offshore firms or subsidiaries of Fortune 500 financial institutions. The winning bidder must set up a national or regional headquarters at the Qianhai Shenzhen-Hong Kong Modern Service Industry Co-operation Zone within one year after securing the site. It also has to achieve annual turnover of 10 billion yuan or more by 2015.
With these stringent terms and conditions and the projected high cost of the development, consultants estimated the third site was likely to go under the hammer at the minimum price set by the authority or even lower.
Only a handful of Hong Kong-listed companies can meet the conditions, including Sun Hung Kai Properties, Cheung Kong, Hongkong Land and Swire Properties. They have one thing in common: they all have a leasing portfolio of multinational corporations. Lining up three Fortune 500 financial institutions, such as Citigroup, JP Morgan Chase and Morgan Stanley, to set up offices on the site will hardly be a problem for them.
The third site is certainly reserved for major players listed in Hong Kong because of their established credentials in developing skyscrapers, such as the International Finance Centre, Exchange Square, Cheung Kong Center and Chater House in Central. The project could yield a gross floor area of 503,000 square metres and development cost alone could reach 7.54 billion yuan as the winning developer must invest at least 15,000 yuan per square metre for construction.