Iceland land deal 'purely commercial' project

Updated: 2011-09-01 16:47

By Hu Yuanyuan (China Daily)

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Iceland land deal 'purely commercial' project

Zhongkun Group's booth at a property exhibition in Beijing. The company plans to build a resort in Iceland with a total investment of at least $100 million. [Photo / China Daily]

BEIJING - Zhongkun Group's planned $100 million investment in Iceland is a purely commercial move without any political motive, the company's Vice-President Xu Hong told China Daily on Wednesday.

"It is a purely commercial decision based on our strategic business plan, and the land parcel we aim to get is an inland pasture without any military significance," said Xu, who has been involved in the entire project since the very beginning.

Beijing-based Zhongkun plans to buy 300 square kilometers of land in Iceland and build a high-end resort, with total investment of at least $100 million.

The resort will include a hotel, golf course and recreation areas, Xu said.

The Financial Times said on Monday that obtaining the site in Iceland would give China a strategic foothold in the North Atlantic.

"As a property developer committed to tourism real estate, the beautiful scenery of Iceland could complement our existing resorts. It is groundless that some people add a political factor into such a completely commercial decision," said Xu.

"Besides, it was Iceland that came to us first to promote the project."

Xu said Zhongkun signed a memorandum with the local government in Iceland and the land's owner on Aug 24, on the premise that the deal would be approved by the governments of both countries.

The deal has been agreed with private landowners but must still be approved by the Icelandic government, which owns part of the land.

Zhongkun's move is one way to explore another aspect of the property market, as the Chinese government's tightening measures targeting residential properties are set to continue.

Shao Mingxiao, Longfor Properties Co Ltd's CEO, said the company will increase the proportion of tourism real estate and commercial properties to diversify its risks.

"As the country's economy will be more consumption driven, demand for these two sectors will surge, and we expect the sales value of tourism real estate and commercial properties will account for 10 percent each within two to three years," said Shao.

Despite the sluggish residential market, Pan Shiyi, chairman of SOHO China Ltd, said he expected sales of his new commercial project, Wangjing SOHO, to exceed 20 billion yuan ($3.1 billion) in the second half.

According to Lance K. Josal, president of RTKL Associates Inc, a US-based architectural design company, about 50 percent of his company's business in commercial property design came from the United States in 2007.

But now, 65 percent of that business is coming from China, a signal of Chinese property developers' rapidly growing demand for commercial property projects.