(Yicai Global) Aug. 2 -- Ronshine China Holdings Ltd. [HK:3301] has acquired 55-percent stakes in two subsidiaries of Hailiang Real Estate Holding Group Co. (Hailiang) to work with the latter to jointly expand their business.
Ronshine said on July 27 that it purchased stakes in Anhui Hailiang Real Estate Co. and Ningbo Hailiang Real Estate Investment Co. for USD342 million (CNY2.3 billion) and CNY633 million, respectively.
"The two firms are complementary in terms of market presence," Zeng Feiyan, executive director and chief financial officer of Ronshine, told Yicai Global. "The acquisition has helped Ronshine establish a strategic presence in core Chinese cities."
"Ronshine's projects are mainly located in the Yangtze River Delta (sic) and the economic zones on the West Coast of the Taiwan Straits, while Hailiang's are concentrated in central and western China," Zend said. "The two companies can thus complement each other, given the difference in their business presence."
"Provincial capitals in central and western China boast great development potential," said Zeng. "Establishing presences in these cities fits in with our strategy."
The partnership involves 35 projects in cities including Suzhou, Hefei, Zhengzhou, Xian, Lanzhou and Yinchuan, Ronshine said. More than 5 million square meters of floor space -- equivalent to half of Ronshine's total land reserves as of late last year -- are available for sale under the partnership.
Before this deal, Ronshine had no projects in Suzhou, Hefei, Xian or Lanzhou. The acquisition has helped the company build its presence in and around provincial capitals in central and western China.
"By working with Hailiang, we can solve problems together and speed up project implementation to reduce our operational risks in the early stage of entering new cities," Zeng said.
Ronshine will learn from Hailiang's business philosophies focusing on high-turnover and low-cost operation in this cooperation, said Zhang Huadong, research director of EH Research.
"It has become a trend for property developers to form partnerships," said Yan Yuejing, research director of E-house China R&D Institute's Think-Tank Center. "Compared with direct project acquisition, cooperation between Ronshine and Hailiang will become a new cooperation model that can help the firms guard against risks and develop faster."
Over 80 percent of Ronshine's 10.6 million square meters of land reserves are in core first- and second-tier cities, mostly near the mouth of the Yangtze River, per the company's annual report for last year.