State-owned developer to get funds from PE firm

A subsidiary of COFCO Property (Group) Co, a State-owned developer, signed an agreement Thursday with a private equity (PE) company to raise capital for its real estate project development.

Analysts said it is rare to see a State-owned developer turn to PE for financing, which indicates that the developer has faced significant pressure in capital shortages.

COFCO Nanjing, the subsidiary, will gain investment of 700 million yuan ($114.31 million) from PE firm Shanghai Zhongcheng Yongyue Investment Center, COFCO said in a filing on the Shenzhen Stock Exchange Thursday.

This capital will be used on the development of a real estate project in Nanjing, East China's Jiangsu Province.

COFCO Nanjing bought the land plot in Nanjing at 2.34 billion yuan in June, 67 percent higher than the price offered by the local government.

Normally COFCO gained financing from bank loans and financing guarantees by its big shareholders, and it is unusual for the developer to finance from PE, the National Business Daily reported Thursday.

Although sales revenue in the first half by COFCO saw a 139 percent rise year-on-year, its gross profit rate still declined by 8 percentage points to 30 percent.

Developers have showed much enthusiasm in purchasing land plots given the recent home price hikes. There have been at least 10 cases of land sales at record-high prices in cities like Beijing and Changsha, provincial capital of Central China's Hunan Province, since May.