Kerry Properties joins list of HK developers buying land across border
Company snaps up Shanghai plots as mainland rivals struggle with debt
Hong Kong’s developers continued to buy prime land sites in top-tier cities on the mainland, as they took advantage of the general malaise among competitors struggling to survive an unprecedented debt load in the industry.
Kerry Properties, controlled by the Malaysian billionaire Robert Kuok, paid 13.3 billion yuan (HK$16.3 billion) for four adjacent plots of mixed-use land in Shanghai during the municipal government’s first auction of the year on January 4.
The firm plans to turn the 38,100 square metre site near The Bund into what it calls a new landmark, comprising a hotel, offices, shopping centres, blocks of flats and town houses.
“We anticipate the project will contribute good property sales income and add significant rental income, with capital value creation in line with the growth of mainland China,” said Serene Nah, executive director and chief financial officer of Kerry Properties.
This year is likely to be another high-water mark for China’s debt defaults, with US$38.3 billion of offshore bond payments due in the first half. With many of the country’s biggest land buyers – China Evergrande Group, Kaisa Holdings – hamstrung by debt, Hong Kong’s developers are picking up choice parcels.
Kerry’s last such big acquisition on its own in China was nearly three years ago when it bought a residential and commercial site in Hangzhou, the capital of Zhejiang province, for 6.8 billion yuan in May 2019.
In December, Shui On Land teamed up with state-owned Wuhan Real Estate to acquire a plot in Wuhan, the capital of central Hubei province, for 17 billion yuan.
Hongkong Land, the biggest landlord in Hong Kong’s Central business district, won two plots in Chengdu, in southwestern Sichuan province, for 2.33 billion yuan during the city’s third land auction on December 7.
Hong Kong Resorts International, the developer of Discovery Bay, paid 830.4 million yuan for a residential plot in Shanghai’s southwestern suburb of Songjiang on November 30.
“Hong Kong developers now stand a better chance of getting high-quality land at a cheaper price, as many mainland developers are watching from the sidelines of these auctions due to their liquidity crisis,” said Yan Yuejin, director of
Offshore bond repayments due in the first half, in US dollars. Many mainland developers are hamstrung by heavy debt
Shanghai-based E-house China Research and Development Institute.
“We may see more Hong Kong and international developers and property funds joining the competition this year, considering most local players will still be busy cutting debt,” Yan added.
Evergrande, Kaisa, Fantasia Holdings and Modern Land (China) made headlines over their failure to repay onshore and foreign creditors last year.
More defaults are likely this year as they face an onslaught of bond maturities.
Some US$19.8 billion worth of offshore bonds are due in the first quarter, almost double that of the final three months of last year. Another US$18.5 billion will mature in the second quarter. Onshore, they face 84 billion yuan of first-quarter repayments and 91 billion yuan in the second.
As a result, many private developers that used to go on land-buying binges have disappeared from these auctions since late last year.
In the last round of auctions in 22 major mainland cities, 80 per cent of the plots were snapped by state-owned developers such as China Resources Land and Poly Development, according to data from China Index Academy, an independent property research organisation.