Li Ka-shing Picks Up Suzhou for Cheung Kong Holdings' Real Estate Investment
Cheung Kong Holdings (stock code: 0001 HK), under Mr. Le Ka-shing, in search for second-line cities following the entry into Chengdu and Chongqing, is currently negotiating the acquisition of the two land parcels by Jinji Lake, Suzhou, for residential and commercial property development. Once the transaction is effected, it will be the first real estate project of Cheung Kong Holdings in Suzhou.
Mr. Cao Li, Deputy GM Suzhou Metians Real Estate Development Co., Ltd., confirmed on Feb. 27 that the company is approaching Cheung Kong Holdings and would set up a joint venture with the latter in the near future, but refused to reveal the actual proportion of stocks owned by the latter. The negotiation is now focused on the final details.
The development project through the cooperation between Metians and Cheung Kong Holdings is located on the end of Jinjihu Road on the east of Jinji Lake, which is part of the commercial belt around the lake. The land parcel was jointly obtained through bidding by Metians and Suzhou Jinri Property Ltd. in December 2006, and the two sides are now ready to sell part of the stocks to Cheung Kong Holding.
The land parcel is 47,000 square meters in area, and the final transaction was done with 355 million RMB, about 25% higher than similar land parcels.
Negotiation with Cheung Kong Holdings started even before the bidding, a fact that Cheung Kong Holdings has been seriously prepared for the cooperation project.
Local authorities have made clear of the restrictions on the land use at the time of bidding. It is required, for instance, that one or two chain hotels of international fame (with at least 25 hotels in the chain) should be built on the premises, and commitment and agreement should be ready at bidding. It is predicted that the return of investment can be expected only through a long-term point of view.
Suzhou Industrial Park has been a major supplier of residential and commercial properties in Suzhou in the past few years, especially in the area around Jinji Lake, but because the entry rate in residential areas remains low, the market for commercial properties is yet to be fostered. With recent improvement of the situation, Cheung Kong Holdings is moving in at the "right time".
Similar cities like Suzhou, such as what are knows as second-line and third-line cities of Qingdao and Zhuhai, are becoming new targets for Cheung Kong Holdings and other HK-financed developers. Henderson China, for example, obtained two land parcels totaling 630,000m2 in area in Xiangcheng District, Suzhou, for 865 million RMB, to develop commercial and residential properties.
Feb. 28, 2007