Larry Silverstein’s Silverstein Properties and their local mainland Chinese partner outbid several Hong Kong and other mainland Chinese companies to win a 12.5 acre development site in Shenzhen’s pilot Qianhai financial zone, in China’s southern Guangdong province.
Qianhai is a 15 square kilometer special zone on the west side of Shenzhen, that officials are seeking to develop into a financial services hub.
Silverstein Properties, the developer of both the original, and the new, World Trade Center in New York, and local Chinese partner Qianhai International Energy Financial Center have made the successful bid of US$2.2 billion (13.4 billion yuan or HK$17.2 billion) for the site.
Silverstein properties, with newly installed sole CEO Marty Burger, is the first foreign developer to come to Qianhai, and the company beat out four other consortiums with their bid for the development site, including one led by Chow Tai Fook Jewellery and another by Gemdale Properties, according to the Hong Kong Standard. This is the sixth site auction since last July in this Qianhai Bay economic zone.
The land Silverstein Properties are buying will permit investment in buildings with a planned area of over 5.2 million square feet of gross buildable floor space. A mixed use development is planned, about two thirds will go for office space and the rest for retail, hotel and some condominium space.
So far Qianhai itself has struggled to take off as an “onshore” version of an offshore financial center, with easier access to the Chinese currency the yuan, even though the city of Shenzen itself is already a hugely successful high-tech, manufacturing and services center in its own right.
The new Silverstein development is expected to be pitched as an international financial center, much like the original World Trade Center itself in Lower Manhattan.
Just one hour by car from Hong Kong, the mainland Chinese authorities have expressed a clear goal to establish this part of Shenzen as a “mini” Hong Kong, its sometimes fractious, semi-autonomous, current link to the outside world of international trade and finance in southern China.
“It’s a pretty fair market price, although it is much cheaper compared with land price for office buildings in Hong Kong, ” said Joseph Tsang, a Managing Director at global property consultancy Jones Lang LaSalle in Hong Kong to the South China Morning Post. He continued:
“Qianhai is a development focus for the mainland and has a very good outlook as more financial companies move their back offices there.”
The price tag is higher than the price per square foot paid last November by Shimao Property for a commercial office development and also topped the previous peak price paid by China Resources Land for a commercial site in Qianhai last August.
The government of China is making Qianhai, part of the Shenzhen economic zone, a testing ground for freer yuan usage and eventual capital account convertibility for the yuan. Presently the yuan, or renminbi as the Chinese currency is also called, is not freely convertible in international financial markets. However China’s enormous role in international trade suggests this must eventually come about.
Companies in Qianhai will be encouraged to sell yuan denominated bonds in Hong Kong and to experiment with cross border loans in the Chinese currency, Zhang Xiaoqiang the Vice Chairman of China’s National Development and Reform Commission said when Qianhai was set up originally in 2012.
“It lacks many details and seems to be a small-scale move, but highlights the determination of Chinese policy makers to open the capital account, ” Dariusz Kowalczyk, a Hong Kong-based strategist at Credit Agricole CIB, wrote at the time. “We expect convertibility within five to 10 years, but the new zone means it may happen sooner rather than later.”