Changhe Department'S Land Business: From "Land Hoarding" To Cash Out

Over the past 20 years, Changhe department, who has enjoyed the dividend of China's urbanization process, has repeatedly fallen into the storm of "land hoarding".

On September 23, a document named "letter on Prohibition of financing, loans and major restructuring of Hutchison Whampoa real estate (Chengdu) Co., Ltd." was circulated among the public. According to the document, due to the bad behavior of covering the land and the plate of Hutchison Huangpu Chengdu company, which seriously affected the stable development of the regional real estate market, financial institutions in the high-tech zone were prohibited from providing new financing and loans to the company It is forbidden to provide assistance to the company in restructuring its assets.

On the evening of that day, the finance and Finance Bureau of Chengdu high tech Zone confirmed on its official website that it was cooperating with relevant departments to investigate and deal with a number of projects involving the hoarding of shares, including the "Nancheng Duhui" project, which was once subordinate to Hehuang banner.

"Nancheng Duhui" project was acquired by Hutchison Whampoa real estate in 2004, but it has not been developed yet. In July this year, Hutchison transferred the project to Yupu group.

Although Changjiang industry tried to clear the relationship in response, considering the fact that the project has not been developed for 16 years, Hutchison Huangpu is still under the suspicion of "hoarding land and covering the plate". Many local industry insiders in Chengdu also approved the "ticket".

Hutchison Huangpu Real estate belongs to the "Changhe Department" commercial empire under Li Jiacheng. As early as the 1990s, Changhe Department expanded its real estate business to the mainland with the main body of Changjiang industry and Hutchison Whampoa.

Over the past 20 years, although Changhe Department has enjoyed all kinds of dividends of China's urbanization process, it has failed to achieve the expected development achievements. On the contrary, the company's projects have repeatedly suffered exposure and punishment due to "hoarding land and covering plates".

In recent years, Changhe Department has successively sold several real estate projects, which seems to have the intention of withdrawing from the mainland market. In addition to the large environmental impact, it is not difficult to find that the company's strategy and mode seem to be incompatible with the current market trend.

Friends of time

It is not for nothing that the outside world refers to Zhang He as "covering the plate and hoarding the land". In the early years, the development of the company in the mainland was known as "long cycle".

In 1994, Hutchison Whampoa won the Huangsha plot in Guangzhou, the later "yicuiwan" project, with an area of 241800 square meters. In 2002, Hutchison Whampoa said publicly for the first time that "the Huangsha project has entered the final stage of preparation for construction. The residential part is expected to be officially sold in the second half of 2003, the CCCC building will be built in 2004, and the shopping mall will be open for rent at the end of 2003."

But it was not until November 2005 that the project started construction, which had been 11 years since land acquisition. It was not until 2009 that the project was finally completed.

In September 2005, Hutchison Whampoa acquired four residential plots in Zengcheng, Guangdong Province, covering a total area of 2.03 million square meters. However, due to various factors, the foundation laying ceremony of the project was not launched until 2011. In 2014, the project opened for the first time. So far, the project has not been completed.

The expansion of Changhe department in Beijing also has a similar "routine". In 1997, Changjiang Industrial Group officially obtained the development right of xuedazhuang village in Shunyi District of Beijing, and entered Beijing for the first time. Later, the project was built into a "world-famous". However, it was not until the second half of 2008 that the first phase of yutianxia project began to enter the market, which has been 11 years since land acquisition. In 2018, the yutianxia project has been fully developed. Today, some of the projects are still on sale.

This wavelength period operation makes Changshi get a lot of "price dividend". Over the past 20 years, the housing price of yutianxia project area has increased from 2000 yuan / m2 to more than 60000 yuan / m2.

Hutchison Whampoa entered the Beijing market in 2001. In that year, Hutchison Whampoa won the yaojiayuan plot in Beijing for 700 million yuan, which was the later "yicuiyuan" project. The agreed completion time was October 31, 2006. However, the time when the project really started was in June 2005.

In November 2005, phase I of yicuiyuan project was granted a pre-sale license with an average pre-sale price of about 9000 yuan / m2. At this time, the average price of 28000 square meters of the project has been sold for 6 yuan in 2011. In 2013, the project was finally completed.

According to public information, as of May 2019, Changhe Department has 56 real estate projects including office buildings, residential buildings, shopping malls and hotels in 21 cities in the mainland. In addition to Beijing and Guangzhou, Changhe department's projects in Shanghai, Chengdu, Chongqing, Dalian, Dongguan, Zhuhai, Zhongshan, Huizhou and other places have been exposed as "land hoarding", with the duration ranging from 5 years to more than 10 years. Although some projects were acquired earlier, they have not yet been completed.

Despite the fact that some projects are too large in volume, the development cycle of more than ten years makes Changhe Department hard to escape the suspicion of "land hoarding". From the company's public statement, the development cycle of some projects is too long, and there are uncontrollable factors such as planning adjustment, government audit, land disputes and so on. But overall, their own reasons still account for the majority.

A senior real estate practitioner in Beijing told the 21st century economic reporter that Changhe department was one of the first Hong Kong real estate developers to enter the mainland. With rich development experience and the "halo" of Li Ka Shing, the "richest man", he was favored by the local government in his early years. Usually, land can be acquired again and again in 2010 for a longer period of time.

He said that this was a "privilege" enjoyed by Hong Kong funded real estate enterprises in the early years, which was once envied by mainland real estate developers. At that time, the rapid development of China's real estate market happened. Only through the appreciation of land, Changhe system could obtain several times or even dozens of times of income.

In fact, it was very common at that time. In 2009, Pan Shiyi, chairman of SOHO China, said in an interview with CCTV, "there are a group of real estate developers in China who never build houses, that is, they dump land." He believes that this part of the developers account for 1 / 3 of the industry.

The long sum system of repeatedly "treading on the line"

As the helmsman of Changhe department, Li Jiacheng has repeatedly denied that the company has "hoarded land". In July 2014, forced by external pressure, Li Jiacheng responded that "the land projects of Changshi and Hehuang in the mainland do not have the situation of land hoarding, nor do they have the intention of hoarding land. They even hope to complete the development and sale projects as soon as possible, so as to recover the funds for further development."

However, according to the relevant provisions, there are clear standards for the definition of idle land in China.

According to the "measures for the disposal of idle land" issued by the Ministry of natural resources (then known as the "Ministry of land and resources") in 1999, the land contract that has not started construction one year after the land contract comes into effect, and whose construction area is less than 1 / 3 (or the total investment is less than 25%) but has no reason to stop work for more than one year, are regarded as idle land.

The document also stipulates that "for the land idle for one year, the land idle fee equivalent to less than 20% of the land use right transfer fee can be levied; if the land has not started development for two years, the land-use right can be recovered free of charge."

In January 2008, the State Council issued the "Notice of the State Council on promoting the economical and intensive use of land", reiterating that if the land has been idle for more than two years and should be recovered free of charge according to law, it must be recovered without compensation.

However, due to the long-term lack of strict implementation, the problem of idle land has become more serious in 2009 and 2010. For this reason, from March to July 2010, the Ministry of land and resources has concentrated on carrying out the special rectification work of real estate land throughout the country, focusing on clearing up and dealing with outstanding problems such as delayed development and construction, land hoarding and speculation, and idle land violating laws and regulations. The Ministry of land and resources also requires all localities to basically complete the investigation and punishment task by the end of October.

In 2012, the revised Measures for the disposal of idle land came into effect, which means that the institutionalization of the disposal of idle land has come to an end.

During this period, part of Changhe department's projects were repeatedly exposed because of "stepping on the line".

In 2007, Dongguan Bureau of land and resources issued a fine of 79.15 million yuan of land idle fees to Dongguan Guanya huangang Lake commercial and Residential District Construction Co., Ltd., a subsidiary of Changjiang Industrial Co., Ltd., on the ground that "Haiyi Haoting project has the most idle land for 95 months". This was also the largest land idle ticket at that time.

It is reported that the Haiyi Haoting project, located in Houjie Town, Dongguan, covers an area of 36 million square meters. However, from the development in the 1990s to 2007, the completed area is less than 1%.

At the beginning of 2010, some organizations disclosed 330 "abandoned" plots in Shanghai, including the Maqiao residential project of Changjiang industrial group.

In August 2010, some media exposed a "blacklist" of 1457 idle land. It is said that the list was handed over by the Ministry of land and resources to the then CBRC for risk investigation. There are two pieces of land "listed" in Changhe department, namely, plot 2h1 and 2h2 of Beijing yicuiyuan under Hutchison Whampoa and a residential plot located in Zhuhai, Guangdong Province.

Cash out and "exit"

After the investigation of idle land, Changhe department's development strategy in the mainland has been adjusted. Since 2013, Changhe Department has rarely acquired land in the open market. Instead, the company began to sell its real estate projects.

In 2013 alone, Changhe Department recovered about HK $12 billion through the sale of Guangzhou Xicheng Dushui Plaza and Shanghai Dongfang Huijing center. In 2014, Changhe Department transferred Nanjing International Financial Center building, Changyuan group equity, Beijing Yingke center, Chongqing metropolis, Shanghai Shengbang International Building and other projects.

"This adjustment is related to the changes in the mainland market." Yan Yuejin, director of the think tank center of Shanghai E-House Research Institute, told the 21st century economic reporter that the basic strategy of Changhe department is to "advance low and sell high". However, after 2013, the competition in the land market in the mainland was fierce, and the land price continued to rise. However, under the strict control of housing prices, the price of housing was not able to rise.

Prior to this, Changhe Department has been interested in the mainland real estate market. At the beginning of 2010, Li Ka Shing publicly said that the land reserve of Cheung Kong Industrial Co., Ltd. would be enough for the next five to six years. Due to the low average cost, low liabilities and abundant reserve funds, the company can invest no less than HK $50 billion.

How low is the land acquisition cost of "Changhe Department"? According to the 2012 annual report of Hutchison Whampoa, the company's land reserve at that time was about 10.22 million square meters, most of which were jointly held with Yangtze River industry. The average land cost in the mainland was 1980 yuan / square meter. Among them, Hutchison Whampoa acquired a piece of land in Caidian District of Wuhan City in December 2012, with a floor price of only 1502 yuan / m2.

For comparison, Vanke, the industry's "boss", had an average land acquisition cost of about 2790 yuan / m2 in 2012.

The constant increase in the regulation of the mainland's real estate also puts pressure on Changhe department. Hutchison Whampoa said in its 2012 annual report that "the measures taken by the government to suppress the rise in residential property prices continued to have a negative impact on market sentiment in 2012.". In 2014, Hutchison Whampoa continued to say that the company "continues to face fierce price reduction wars" in several mainland cities due to increasing liquidity tensions. Affected by this, the real estate business income of Hehuang decreased by more than 30% in 2014.

In 2015, Li Jiacheng reorganized his Changhe Empire, merging the non real estate business of Changshi and Hehuang into Changjiang Hutchison Industrial Co., Ltd., and the real estate into the listed company Changjiang industrial real estate Co., Ltd.

This is intended to reduce the disadvantages of the two companies. But after the adjustment, the company's expansion in the mainland market is still weak, instead, it continues to sell its projects.

According to incomplete statistics, since 2013, Cheung ho has sold properties in the mainland of China and Hong Kong for many times, with a cash out amount of more than HK $115 billion.

At the same time, the criticism of "hoarding land and covering plates" has always existed. In October 2019, Changjiang Industrial Co., Ltd. sold the Heizuizi project in Xigang District of Dalian city to rongchuang China, with a price of more than 4 billion yuan. Changshi acquired the project in 2011 and has not been developed in 8 years. According to the land price of 1.9 billion yuan, the proceeds of the sale exceeded 100%.

He Huang Chengdu company, recently punished by Chengdu hi tech Zone, bought the Nancheng Duhui project at a low price in 2004. In July this year, he Huang transferred the project to Yuzhou group. During this period, after 16 years of "land hoarding", the development has not yet been completed.

Yan Yuejin pointed out that from the perspective of logic, Changhe Department has frequently moved assets in recent years, which has the asset operation vein of "reducing the Asia Pacific region and increasing Europe". However, the current development mode of the real estate market is not suitable for the mainland.

He said that with the end of the "golden age" of the mainland property market and the establishment and operation of a long-term mechanism for real estate, the property market cycle has been gradually "ironed out", and it is difficult for land prices and house prices to rise and fall sharply again. For real estate enterprises, relying on long-term holding to obtain asset appreciation income model has not been feasible. On the contrary, with the help of relatively stable high turnover, to improve the efficiency of the use of funds, more suitable for the development of enterprises.

But "high turnover" never seems to be the strength of Changhe department. The majority of respondents believe that the development strategy will inevitably be adjusted if not.

As of mid-2020, Changhe Department has a total of about 10 million square meters of developable land reserves, 90% of which are located in the mainland of China. Compared with 2015, the total scale of land reserve and the scale of land reserve in the mainland of Changhe Department decreased by about 26%.

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