(Yicai Global) April 13 -- Shanghai police summoned China Overseas Land & Investment’s local general manager Cui Shuai for investigation of suspected collusive bidding in concert with China Vanke and China Resources Land.

The investigation of the three well-known realty companies mainly stems from the auction of a plot in Shanghai’s riverside Hongkou district which went for its CNY3.43 billion (USD487.4 million) starting price on March 31. China Overseas Land & Investment clinched the parcel at the starting price for an average floor price of CNY63,000 (USD8,952.3) per square meter.

The average price of surrounding properties is about CNY100,000 per square meter, and the price for the lot in the city center is therefore a steal, an industry insider said.
The three companies were shortlisted in the bidding and all offered CNY3.43 billion. China Overseas Land & Investment carried the day with a higher overall credit score.
“Bidding in cahoots is actually a strategy that many developers are now resorting to. Generally, their general managers get in touch to see if the others want to take the land together before a bid, thereby lowering the cost of land acquisition. Sometimes a company takes a plot in its name and then transfers equity to the other firms,” a city-level general manager at a listed real estate company told Yicai Global.

Collusive bidding refers to the means and behavior of several bidders to mutually agree to restrict competition and exclude other buyers so that a certain stakeholder secures the sale on the cheap.

China Overseas Land & Investment’s shares [HK:0688] were trading up 2.29 percent at HKD26.80 (USD3.46) at mid-morning.

Editors: Zhang Yushuo, Ben Armour