Xinyuan Kunshan Land Purchase

Xinyuan Real Estate disclosed through a wechat post that it was the winning bidder in a court auction of a partially completed commercial project in Kunshan.  Key terms:

  • Price: 754,331,700 RMB
  • Buildable Floor area: 163,300 sqm
  • Land Use Rights: Commercial

My understanding is that Xinyuan plans to submit a new site plan to the local government that would involve demolition of the concrete shell currently on the site and conversion of a portion of the zoning to Residential.  Therefore at this early stage the company cannot provide guidance about the project design.

Pictures of the site in its current condition (from the taobao auction listing):

 

 

 

 

Comments:

  • Location appears to be excellent.  It’s easy walking distance to a stop on the #11 line of the Shanghai subway, adjacent to major roads, and close to existing Xinyuan projects.  Long term planning for the Suzhou subway includes the extension of its S2 line to this area with a connection point to Shanghai #11.

XInyuan Kunshan Huaqiao Land Purchase

  • Market is attractive.  This area of Kunshan provides commuting access to Shanghai with better affordability and less restrictive housing policies.  The larger Yangtze River Delta region has been one of China’s strongest long-term real estate markets due to favorable economic growth which has attracted population inflows (see 11/07/16 article).
  • Brand presence in Jiangsu province is maintained.  Xinyuan has developed 3 projects in Kunshan and 5 in Suzhou (immediately to the West of Kunshan) and achieved strong results until the poorly timed launch of Suzhou Lake Royal Palace (see 04/11/16 article).  A steady flow of projects enables efficient use of company resources and gives confidence to buyers that the company will deliver a good quality completed home within an attractive community.
  • Price may be excellent at an indicated 4619 RMB/sqm.  For comparison, the land for Kunshan Xindo Park was acquired last year for 5043 RMB/sqm, development costs are estimated at about 6700 RMB/sqm, and the average selling price is estimated at about 20000 RMB/sqm.  The projected margin on the new project will be uncertain until a new site plan is agreed with the local government, but it appears that participation in the court auction may have enabled Xinyuan to find a bargain.

 

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