Chenghong (Shanghai) Investment, a subsidiary of City Development Limited (CDL), along with its Chinese partner Lianfa Group, has successfully won the tender for a mixed-use development site in Shanghai’s Xintiandi area in the Huangpu district. The acquisition cost for the 27,994 square metre (sqm) site is RMB8.94 billion ($1.66 billion).
The government land tender for the site closed on October 28, with the award being announced on November 1. This amounts to a cost of RMB117,542 ($21,827) per sqm plot ratio (psm ppr), equivalent to $2,027 per square foot per plot ratio (psf ppr). The reason for the acquisition is that there have been no other residential site transactions in the prime Xintiandi area this year.
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In comparison, a residential site in Jing’an District was sold for RMB114,000 psm ppr in September this year, while another residential site in Xuhui District was transacted at RMB 131,000 psm ppr in August, through normal public tender.
In Singapore, the Cuscaden Reserve site was sold for $2,377 psf ppr and the Watten Estate Condominium collective sale was transacted for $1,723 psf ppr.
The mixed-use development site in Xintiandi comprises of two plots of land, separated by a public road in the middle, with a total gross floor area (GFA) of 76,027 sqm. CDL states that the future development can allocate up to 77% of the GFA for residential use, with at least 19% dedicated to commercial purposes and 4% reserved for public amenities. The lease for the residential portion is 70 years, while for the commercial portion, it is 40 years.
Chenghong Shanghai holds a 51% controlling stake, equivalent to RMB4.56 billion, in the joint venture (JV) acquisition. The remaining 49% equity interest in this JV is held by a wholly-owned subsidiary of Lianfa Group.
CDL group CEO, Sherman Kwek, says that this rare acquisition in Shanghai’s prominent Xintiandi area showcases the Group’s trust in China’s long-term growth prospects. “We are expanding our presence in this dynamic and heavily-populated nation by targeting key tier 1 and tier 2 cities for iconic placemaking opportunities,” he says.
“Following our acquisition in Suzhou last year, the acquisition of this prime land plot in Shanghai will further increase our residential land bank in China. We are honoured to collaborate with Lianfa Group, and together, we look forward to creating a landmark that will redefine the landscape,” adds Kwek.
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As of June 30, CDL recorded a net gearing of 116% based on historical cost and an interest cover ratio of two times. However, as the group also includes the fair value of investment properties, its net gearing stood at 69.2% as at June 30. This new investment is expected to raise its pro forma net gearing by 3.3% to 72.5%.
As of 1HFY2024, the group’s total assets, including fair value of investment properties and hotels, amounted to $33 billion, with China accounting for 10%. With the new acquisition, the pro forma segmentation will increase to 14%.
On November 1, shares in CDL closed 2 cents higher, or 0.39% up, at $5.22. This is compared to its net asset value of $10.12.
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