Cosco International Holdings yesterday announced its first foray into the mainland residential development market, saying it would spend 831.55 million yuan (about HK$772.8 million) on a Shanghai urban redevelopment project. The venture continues the red chip's expansion trail since the mainland's largest shipping company bought control last July. The company paid $2.2 billion two months ago for a stake in a mainland power plant and part of a Hong Kong office tower. Vice-chairman Zhang Dachun yesterday said the latest attempt would help the company build up its income drivers, including property development, infrastructure and construction operations, while capitalising on housing-reform policies. Under the project, a site of 35,000 square metres in Shanghai's central Hongkou district will be re-developed into a residential complex comprising 10 blocks of 29-storey buildings, giving about 200,000 sq metres of floor area in two phases by 2001. The project - Shanghai Hailun Garden - will be developed jointly by Cash Rich Enterprises, held 85.85 per cent by Cosco International and 14.15 per cent by Shanghai Siping Development and Leasing (Group). Cash Rich Enterprises will have a registered share capital of 277.18 million yuan. Pre-sale could start as early as this year, Mr Zhang said. The project could fetch a return on investment of more than 15 per cent, he said. Investment in the first phase would be $66 million and the second phase would cost $80 million, Mr Zhang said. Total investment in the project would reach 831.55 million yuan, including 368.06 million yuan in removal and demolition costs. Cosco is to finance the project from internal resources and bank borrowings. Mr Zhang would not estimate the price of the flats, but Shanghai Siping Development president Chen Shunzhao said incomplete flats nearby sold at 6,100 yuan per square metre and completed flats fetched 6,500 yuan per sq metre. Removal and demolition have started and will be completed in the middle of next year. The first phase of the urban redevelopment project will be completed in the middle of 2000, while the second is scheduled for early 2001. Mr Zhang said he had picked Shanghai because people there seemed more able to afford housing. He said the company was focusing on urban redevelopment and mass residential construction to capitalise on housing reforms. Without giving details, he said the company was still eyeing similar housing projects in other cities after identifying Shanghai and Guangzhou this week.