(Yicai) June 24 -- A number of flagship projects in major Chinese cities, including Chongqing, Fuzhou, Nanjing and Shenzhen, owned by cash-strapped developers are being put up for judicial auction, with starting prices ranging from several hundred million Chinese yuan, which is equivalent to tens of millions of US dollars, to several billion yuan. However, industry insiders believe that due to the difficulty of revitalizing such large-scale developments, local state-owned investment platforms may come to the rescue.

One such project is the Chongqing Jiangbeizui International Financial Center. Once positioned as "the tallest building in Chongqing," it is scheduled to be auctioned on July 9 and July 10, according to Alibaba Group Holding's judicial auction platform. The auction is being handled by the Intermediate People's Court of Gansu Mining Area. The asset has been valued at CNY2.5 billion (USD370 million), with a starting auction price of CNY2 billion. However, a security deposit of CNY200 million (USD29.4 million) is required, and whether a buyer will emerge remains uncertain.

Back in October 2012, Chongqing Sunac Huacheng Real Estate Development acquired the land for CNY1.7 billion (USD250 million) and planned to build a super tall tower called "World Flower." However, the project stalled due to funding problems. In May 2017, Sunac China Holdings stepped in, acquiring a 60 percent stake in Sunac Huacheng and related debt claims for CNY2.1 billion. The project was rebranded as the A-ONE, with plans to include five buildings, the tallest of which would reach a height of 470 meters.

However, with the changing real estate landscape and a series of liquidity crises among property developers, this massive project was put on hold. Foundation work was completed between 2017 and 2018, and the main construction began in 2019. However, construction was suspended in July 2022 and has remained halted since then. Currently, only one of the buildings has reached 25 stories above ground.

Although the site is located in a core area of Chongqing’s western financial center, the challenges involved in disposing of this asset should not be underestimated, China Residence Information Circle Chongqing said.

First, the project’s scale is enormous, creating a very high investment threshold, it said. Second, with 70 percent of the space designated for commercial use, returns rely heavily on long-term rental income from Grade A office space and high-end retail properties, resulting in a lengthy absorption and payback period. Third, completing a super tall building presents significant technical challenges and requires substantial additional capital investment.

Given the project’s financial characteristics, large investment requirements and debt background, potential buyers are more likely to be asset management companies or local state-owned platforms, it said.

In other cities, many landmark projects are also waiting for a "white knight" investor to step in. For example, in 2008, Suning Real Estate Group acquired a plot for CNY429 million (USD63 million) and planned to build a 400-meter landmark tower in Nanjing's Hexi Central Business District. However, due to funding issues, development was halted. In 2023, the foundation pit was filled in and the site was converted into an urban park. After two failed auctions, the project is set to enter a judicial sale on July 1 with an asking price of CNY1.5 billion (USD220.4 million), representing a discount of more than 40 percent from its appraised value.

Editor: Kim Taylor