Last Fri, shareholders gave the go-ahead to tender for land with an total area of 113,399 sqm at Wuchang in Yuhang.  This development will have gross floor area 8 times the size of Linping Times Square.

Being even nearer to Hangzhou city than Linping, the Wuchang locale is more valuable and will be developed into high-end commercial real estate and serviced apartments.

The tender amount of Rmb 203.4 million is a fraction of its market value, which Mr Ye estimates to be around Rmb 700 million.

As purchase consideration, land authorities will allow 8Telecom to exchange 2 parcels of industrial land nearby in addition to topping up an estimated Rmb 63 million (S$12.7 million) in cash.

8Teelcom’s foray into real estate will be funded internally and from bank borrowings, said Mr Ye. 

He rules out any possibility of new share issue as this will result in over-dilution to minority shareholders.

After all, tender monies alone amount to more than half of 8Telecom’s current market cap of S$76.6 million.

Their second commercial project is slated to launch at the end 2012, after MRT stations open in the suburban vicinity.  Mr Ye is expecting buyers and tenants to be hi-tech companies ranging from behemoths like China Mobile to small and medium enterprises.

Despite China's curbs on speculative property demand, market prices for commercial property within the vicinity have risen to Rmb 10,000 to Rmb 15,000 per sq meters, according to Mr Ye. 

Mr Ye explained that the government policies are targeting the shortage and spiraling prices in residential property, rather than commercial real estate.