Shanghai's biggest public land auction was held Tuesday with land covering 26,800 square meters in the city's downtown area being sold off for 1.14 billion yuan (US$137.85 million).

This is the largest amount ever paid in an auction in Shanghai.

Three enterprises paid the 100 million yuan (US$12.1 million) deposit.

Bidding started at 983,269,600 yuan (US$118 million) with minimum bid increments of 1 million yuan (US$120,000).

After 85 rounds of bidding lasting for 32 minutes, No 066 won the lot. But the bidder left immediately without saying anything.

According to the registration, a Shenzhen-based real estate company called Zhongjian Shekou Development Co Ltd made the winning bid. The other two bidders, 001 and 008, are both local companies, according to Lin Yiping, general manger of Shanghai Auction Co Ltd, which was in charge of the auction.

"The competition is rather cut-throat in my experience," said Yu Jingyu, the auctioneer. "It lasted longer than other land auctions. The auction price is also a little higher than our expectation."

The auctioned land is located on Sichuan Beilu in the city's northeast Hongkou District. It is near the crossing of the Huangpu River and the Suzhou Creek, which is a major business and shopping area. At the moment Hongji Holiday Mall composed of some two-or-three-floor shops and restaurants stands on the land.

The original developer owed 120 million yuan (US$14.51 million) so commissioned Wuxi Intermediate People's Court to auction the land, said Zhou Jian from the court.

The tenure of the land is 50 years, from 1994 to 2044. The original floor space ratio - the ratio between construction area and land area - was 7.9.

But the buyer is expected to apply for a new floor space ratio because the standard was changed by the government. The current highest floor space ratio for the land for commercial purposes is 4.0.

"According to this auction price and the existing floor space ratio, I think the price is reasonable," said Ying Kunhua, vice-president of the Shanghai Real Estate Economic Association.

"Now the demand and need in the city's market of commercial land is rather balanced, so I think public auction is a good way to take full advantage of land.

"Shanghai is short of land resources; it is definitely impossible to auction all the land without control," the expert said. "But as for land for commercial purposes in the downtown area, according to my point of view, too much control is not necessary. A more flexible way of commercial land trade will embody the real value of the land, it will benefit the city's development."

(China Daily February 23, 2005)