news

한어Русский языкEnglishFrançaisIndonesianSanskrit日本語DeutschPortuguêsΕλληνικάespañolItalianoSuomalainenLatina

China Communications Construction Real Estate (000736.SZ) gave up the opportunity to develop a large plot of land.

On the evening of August 21, CCCC Real Estate issued an announcement that it would give up the business opportunity of the AH10314 plot in Haizhu District, Guangzhou. The plot is located in Haizhu District, Guangzhou, with a land area of ​​67,128 square meters, a second-class residential land, and a gross floor area of ​​approximately 151,700 square meters.

CCCC Real Estate said that after examining the above business opportunities and combining the company's current operating conditions, it intends to give up this business opportunity. The controlling shareholder CCCC Real Estate Group Co., Ltd. will carry out subsequent development and construction of the project. The real estate group and the company will sign a business cultivation agreement. When the conditions for the project are ripe, the company will decide whether to exercise the right of first refusal.

The land parcel was sold just one day before the announcement. On August 20, China Communications Construction Real Estate Group Co., Ltd. and Guangzhou Jiaotong Ruijun Real Estate Co., Ltd. jointly acquired the land parcel at the Sanjiao Interchange in Haizhu District, Guangzhou, at a base price of 4.74 billion yuan, with a floor price of 31,000 yuan per square meter.

China Communications Construction Real Estate Group Co., Ltd., which acquired the land this time, was established in 2015. It is a subsidiary group of the state-owned enterprise China Communications Construction Group responsible for real estate business. It also includes China National Building Materials Group, China Communications Construction Real Estate, China Communications Construction Real Estate, Greenland China, China Communications Construction Overseas, China Communications Construction Dingxin, Beijing United Real Estate and many other real estate companies. China Communications Construction Real Estate is the only A-share listed platform.

As the parent company holds the land, why did the subsidiary listed platform declare to give up development? This is related to the past restructuring issues of the "CCCC system".

The predecessor of CCCC Real Estate was Chongqing Industry. As early as 2007, China Construction Group made Chongqing Industry a listed company through asset restructuring and private placement, and issued a letter of commitment to avoid competition in the same industry. In 2010, China Construction Group was merged into CCCC. After a long internal integration, CCCC Real Estate Group became the indirect controlling shareholder of CCCC Real Estate in 2015.

The announcement stated that China State Construction Group had made a commitment in 2008 on the issue of intra-industry competition: in areas where China Communications Construction Real Estate conducts real estate business, if China State Construction Group or other companies controlled by China State Construction Group have any business opportunities or participate in real estate businesses that may compete with China Communications Construction Real Estate, China Communications Construction Real Estate will have the priority right to obtain business opportunities.

After the controlling shareholder was transferred to China Communications Construction Real Estate Group, China Communications Construction Real Estate inquired about the aforementioned commitments to its shareholders. The latter stated that for the commitments that China Communications Construction Group has not yet fulfilled and are applicable to the real estate group, the group will take over and continue to perform relevant obligations.

In fact, in the past few years, CCCC Real Estate has repeatedly given up the opportunity to bid for or develop land plots, leaving them to be cultivated by the controlling shareholder CCCC Real Estate Group, all on the grounds that they did not meet the investment standards. In 2023 alone, CCCC Real Estate handed over projects in Changsha and Sanya to the controlling shareholder for cultivation.

This time, China Communications Construction Real Estate once again gave up the business opportunity of the Guangzhou land and explained that the company's current investment focus and product positioning principles are to control the total amount, control the total price, differentiated positioning, and focus on turnover efficiency. The estimated investment amount for the Haizhu District land is large, and there is a certain uncertainty in the project's investment return rate and turnover efficiency. There is a large risk of uncertainty in the construction and development of the project, which does not meet the company's current investment requirements.

"At this stage, the project is being nurtured by the real estate group. The real estate group and the company will sign a corresponding business nurturing agreement, stipulating that when the conditions for the project are ripe, the company's shareholders' meeting will decide whether to exercise the right of first refusal. The company reserves the opportunity to incorporate the business and project when conditions are ripe in the future, which is a better option at present." China Communications Construction Real Estate said.

Chen Xueqiang, research director of the South China branch of China Index Academy, told Caixin that China Communications Construction Real Estate's decision to give up the commercial opportunity of the land was mainly related to its business strategy. On the one hand, the company was cautious in its investment due to insufficient liquidity caused by the decline in real estate market sales; on the other hand, the investment amount of the land was high, and there was a certain uncertainty in the project's investment return rate and turnover rate, which posed a certain risk to the company's development.

Looking back at the basic situation of this land, this is the first residential land sold in Haizhu District this year. It is located on the roof of Haizhu Sanjiao Interchange, with rivers and Nanzhou Road on the north side and Guangzhou Ring Expressway on the south side. The land area is 67,000 square meters and the gross floor area is 152,000 square meters.

Although the traffic conditions are convenient, the plot is an irregular plot surrounded by multiple main roads and crossed by an elevated road. The Sanjiao Interchange passes through the plot in the east-west direction, dividing the plot into north and south parts. In addition, the Guangzhou-Foshan Metro Line also passes under the plot. From the perspective of the industry, the plot is not easy to develop, and the noise and dust interference brought by the surrounding highways are difficult to avoid after completion.

The land transfer contract also stated that "the transferee must reasonably optimize the building layout and take effective measures to reduce the impact of traffic noise on residents' lives and ensure that the indoor noise of the building meets the standards." In addition, of the 67,000 square meters of land area, only 30,000 square meters are planned for construction, the remaining 17,000 square meters are for municipal roads, and 20,000 square meters are for green space.

CCCC Real Estate gave up the business opportunities of the above-mentioned plots of land, which was also due to its own operating performance and financial strength. In the past 2023, CCCC Real Estate rarely recorded losses, with operating income of 32.468 billion yuan, a year-on-year decrease of 15.6%; net profit attributable to the parent company was -1.673 billion yuan, a year-on-year decrease of 5029.65%. Since 2019, this has been the fifth consecutive year that the net profit attributable to the parent company of CCCC Real Estate has declined.

By 2024, CCCC Real Estate's performance has not improved. On July 5, CCCC Real Estate released its 2024 semi-annual performance forecast, and the company expects a net profit loss of about 1 billion yuan in the first half of the year, an increase compared with the loss of 569 million yuan in the same period last year.

China Communications Construction Real Estate stated that the main reason for the decline in the company's net profit attributable to shareholders compared with the same period last year was: affected by factors such as changes in the company's carry-over project structure, the gross profit margin of the projects delivered in this period of real estate development business declined significantly compared with the previous year; with the increase in completed real estate projects, the company's expensed interest increased, and the financial expenses in this period increased compared with the same period last year.