China property

China Vanke inks more cooperation agreements amid ongoing control fight

Home-builder to expand ‘railway+property’ development model to other mainland cities

PUBLISHED : Sunday, 12 June, 2016, 10:50pm
UPDATED : Friday, 15 July, 2016, 10:32am

China Vanke, the nation’s largest home builder, has inked four more preliminary cooperation agreements that could see the expansion of its “railway+property” development model from its home market Shenzhen to other mainland cities, amid an ongoing control battle between its top management and conglomerate Baoneng Group.

The Shenzhen-based and listed firm has signed four memoranda of understanding (MOU), including one with state-owned subway operator Shenzhen Metro Group, on “intensified strategic cooperation” on the development of the fourth phase of the city’s subway system, Vanke said in a statement on Sunday.

The two firms also entered into three separate cooperation agreements with Dongguan Industrial Investment Holding Group, Chongqing City Transportation Development and Investment Group and China Metro Group.

“The MOUs seek to explore the application of the new public-private partnership model in urban railway development and to promote the ‘railway+property development’ model to more cities,” Vanke said.

“[They] signified a major step forward for Shenzhen Metro and Vanke to duplicate their cooperation ... outside Shenzhen ... Vanke will be able to obtain an abundant supply of development resources along metro routes.

Vanke’s latest announcement was made during a forum on rail transit and urban development organised by Shenzhen Metro and Vanke.

It came three months after the signing of a non-legally-binding agreement by Vanke with Shenzhen Metro for the latter to become one of its major shareholders by injecting up to 60 billion yuan (HK$71.7 billion) of property projects along its subway lines. A formal agreement has not been inked.

The string of preliminary tie-ups come as the trading in Vanke’s Shenzhen-traded shares remains suspended pending a “relatively complicated” asset restructuring involving “huge” sums, to safeguard investors’ interests amid the uncertainty, and to avoid the trading on insider information, according to a Vanke announcement early this month.

The suspension was intended to last no later than June 18. Trading of Vanke’s Hong Kong-traded shares has not been halted.

They closed last Friday at HK$18.32, 20 per cent lower than the closing of December 18 when it first revealed the planned asset restructuring. The Hang Seng Index fell 3.3 per cent in the same period.

Analysts speculated at the time management might hope to dilute Baoneng’s shareholding in Vanke by issuing new shares to a friendly third party.

Vanke’s potential tie-up with Shenzhen Metro comes amid a sharp price surge in Shenzhen’s property prices due to tight supply, which attracted calls for more efficient land use and development of fringe areas like east Shenzhen that requires better transport linkage.

Set up late 2012, Dongguan Industrial is wholly-owned by the city’s government, and had 26.45 billion yuan of assets at the end of August last year.

It undertakes construction of the city’s major infrastructure projects, including subways, tramways, a ferry terminal and waste treatment facilities.

Chongqing City is a municipal government-owned developer and operator of public buses, subways and railways, with 68.6 billion yuan of net assets at the end of June last year.

Established just over two years ago, China Metro is the nation’s first pure railway development projects investor that is funded by both public and private capital. It planned to invest no less than 200 billion yuan on rail projects last year and this year combined.