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Saturday, September 3, 2011

GuocoLand in joint development of Beijing land

Zhang exchanging documents wth Lee at the agreement signing

The Xinzhongjie land parcel opposite the Dongzhimen transportation hub in Beijing, which is touted as Asia’s biggest, might be one of the last pieces of land left in the prime area.

But the concentration of old and dilapidated houses and buildings with over 2,400 households and the high-end commercial designation by city planners for the future development of the area has been a stumbling block for developers eyeing the land.

Defying the odds, GuocoLand China, owned by Singapore-listed GuocoLand Ltd, the investment arm of Malaysian conglomerate Hong Leong Group, has taken a calculated risk to team up with Beijing Oriental Real Estate Investment Co Ltd for the primary development of the area.

GuocoLand China should make use of the good guanxi (connection) it has successfully built over the years with the local government, says its group managing director Violet Lee in an interview after the signing of a strategic cooperation agreement with Beijing Oriental Real Estate Investment in Beijing recently.

Both companies will be responsible for the planning and administration of the land to meet the standard preconditions for a land grant. Their job also includes the payment of compensation for the takeover of the land, resettlement of existing residents, land levelling and construction of public infrastructure.

The initial plan proposed by GuocoLand China is to connect both the Dongzhimen and Dongsishitiao subway stations at both ends of the 160,000 sq m with an underground shopping mall selling high-end fashion products and services.

GuocoLand China has already developed its iconic Guoson Centre project smack on top of the Dongzhimen transportation hub. The 600,000 sq m development includes Guoson Mall, a five-star British-styled Guoman Hotel, grade A office towers, high-end residences and a 40,000 sq m rooftop garden.

Miao Qian, a partner from Dongfang Hengxin law firm, says the Xinzhongjie area is not considered valuable land at all and the cost of resettling the thousands of households in the area would be very high.

“If it is a much sought-after piece of land, then it would have been developed early. It is very hard to develop, not to mention the property prices in the surrounding area are very high,” he says. The Xinzhongjie area is part of the overall East Second Ring Road High-End Industry Development Plan initiated by the district government under its 12th Five-Year Plan (2011-2015).

Beijing Oriental Real Estate chairman Zhang Yue says the actual number of households to be relocated and compensation cost for the affected residents are still unknown. Furthermore, there are possibilities of dragging the development for a long time and not having the desired return on investment.

“We cannot say for sure whether GuocoLand China will continue to be involved in the secondary land development. But, I believe GuocoLand China will have an edge over others when bidding for the granted land because they would already have a better understanding of the desired development from their involvement in the primary land development,” he says.

This is the first time GuocoLand China is involved in primary land development in the country. To date, GuocoLand China has invested US$3.5bil in China with a sizeable portfolio of completed and ongoing property development spanning 2.5 million sq m.

By The Star

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