Excellence boosts investor allure with Qianhai move

Developer hopes to achieve 'first-mover' edge over its peers with aggressive buying tactics

PUBLISHED : Tuesday, 30 July, 2013, 12:00am
UPDATED : Tuesday, 30 July, 2013, 3:42am

What did Excellence Group see that its bigger rivals failed to identify when the former won last Friday's auction of two commercial sites in the Qianhai special economic zone in Shenzhen?

At the auction, the Shenzhen-based developer displayed aggressiveness unmatched by its much larger peers. It agreed to pay 12.36 billion yuan (HK$15.5 billion) for the plots with a total developable area of 770,600 square metres. That is equivalent to nearly two IFC complexes in Central in Hong Kong.

The developer's bids were up to 45 per cent higher than those of the mainland's largest listed developer, China Vanke, which took a cautious stance despite raking in sales of 140 billion yuan last year, compared with 10.2 billion yuan for Excellence.

Bids submitted by a joint venture between Vanke and New World Development for the bigger site were 4.93 billion yuan, about 46 per cent lower than Excellence's winning bid of 7.18 billion yuan. The site could yield a gross floor area of 450,200 square metres and is earmarked for office-retail-serviced-apartment use.

The other office-retail-hotel site, above the proposed Qianhai underground railway station, sold for 5.18 billion yuan, about 14 per cent higher than Vanke's 4.55 billion yuan bid.

The two sites had received 11 bids from eight companies from the mainland and Hong Kong.

Greenland Group, which generated 243 billion yuan in revenue last year, submitted the second-highest bid for the two sites. Its bet for the office-retail-hotel site was 7.13 billion yuan and that for the other was 4.96 billion yuan. The bids were 0.7 and 4.4 per cent, respectively, less than Excellence's.

In May, Shanghai-based Greenland gained a Hong Kong listing through the back door by acquiring a 60 per cent stake in SPG Land. It was renamed Greenland Hong Kong.

Other bidders were Shenzhen-listed Financial Street and Hong Kong-listed firms China Resources Land, Kaisa and Shimao Property.

With the proposed development of Qianhai still on the drawing board, Excellence's aggressive buying binge has inevitably raised questions about its intentions.

The company is not listed and is under no obligation to declare its immediate or ultimate development plans for the two sites.

But one theory that is gaining some traction is that Excellence's move in Qianhai is in line with its strong desire to preserve its long-established reputation as the largest builder of commercial properties in Shenzhen's core business district, Futian.

The two sites will not allow the firm to build the tallest commercial complex in Shenzhen. The tower blocks to be built on the sites have a maximum height of 280 metres, lower than the current 441-metre, 100-storey Kingkey 100, the tallest building in the city.

But Excellence's aggressive and expensive move can potentially yield massive benefits.

For instance, acquiring the first two commercial sites in Qianhai will provide the company, which was founded in 1996, with the so-called "first-mover" advantage over its peers.

After all, owning two parcels of prime land in the future "Manhattan of the Pearl River Delta" will definitely be attractive to institutional investors.

While the 24 billion yuan total investment in the projects to be built on the two sites look formidable on paper, it could be a golden opportunity. The challenge will be to lure a prospective joint-venture partner on its own terms.

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