Shenzhen Metro: Building a new development mode of ＂rail+property＂ to promote intensive utilization of urban space

Company profile
 
Shenzhen Metro Group Co., Ltd., founded on July 31, 1998, is a large-scale sole proprietorship SOE under the direct control of the State-owned Assets Supervision and Administration Commission of the People's Government of Shenzhen, and the leader in the construction and operation of rail transit of the city, with main businesses covering metro engineering construction, metro operation, investment and financing, resources operation and property management, engineering investigation and design, etc., formed a quaternity industrial chain of metro "investment and financing, construction, operation, resources operation and property development". As of the later 2017, Shenzhen Metro Group Co., Ltd. possesses registered capital of 44.07136 billion Yuan, total assets of 366.2 billion Yuan, net assets of 219.8 billion Yuan, with 23 secondary subsidiaries and holding companies, and 19,000 employees.
 
Challenges
 
As an important part of the public transportation system, urban rail transit has the characteristics of large volume, high speed, high safety, convenient travel and environmental protection. It can effectively promote the optimization and adjustment of urban spatial layout. Therefore, Shenzhen has continued to promote the rail transit construction in recent years. However, it also faces many problems. On the one hand, after nearly 40 years of construction, Shenzhen faces multiple bottlenecks such as shortage of land resources and limited spatial development pattern, and urban development needs to release more space. On the other hand, the problems of large investment demand for urban rail transit construction, short-term poor profitability, and high dependence on government financial resources confuses the  rail transit enterprises. Whether they can find a sustainable development model has been a difficult problem that has long plagued the industry.
 
Solutions
 
Shenzhen Metro explored the implementation of the "rail+property" development model for the first time in China. This is a comprehensive development model that integrates investment and financing, construction, operation and comprehensive development of land along the line. Its essence is the simultaneous planning, design and construction of the above-underground property and metro line construction, which can create a large number of urban land resources and make intensive development and secondary utilization.
 
Exploring the Rail + Property development model to improve the land utilization
 
Through the integrated implementation of rail construction and property development, Shenzhen Metro makes full use of the above-underground space to rebuild land resources, build a large platform above the planned rail transit parking lot (station), and carry out residential real estate development on it. It also includes the development of commercial housing, industrial parks, shopping malls, office buildings, hotels and other properties. The development mode optimizes the simple transportation function to the functions of residential, office, commercial and other three-dimensional composite urban functions, and can improve the utilization of land and increase the secondary utilization and spatial expansion of urban land. In addition, the Shenzhen Metro has also used the above-underground property of the metro to build affordable housing and talent housing for Shenzhen, effectively alleviating housing difficulties and insufficient land supply for low-income families.
 
Through the open tendering, Shenzhen Metro introduced well-known real estate developers to jointly invest and develop, share risks and revenues, improve property development quality and market value. At the same time, it has formed a variety of development models such as independent development, agreement cooperation development, corporate cooperation development and subcontracting construction development, which lays a good foundation for building a metro property brand and achieving sustainable development. Shenzhen Metro has successively introduced industry giants such as Hong Kong MTR, China Railway, CSCEC, and Vanke to jointly promote the construction of rail transit and the development of above-underground property.
 
Broadening diversified financing channels to enhance self-sufficient function
 
The main source of funds for Shenzhen Metro is the above-underground property of rail transit and the land transfer income along the transit. However, since the property development income lags behind the investment demand of metro construction in time, it is necessary to implement a diversified financing strategy.  Under the premise of grasping the general direction of metro construction and operation, Shenzhen Metro has extensively introduced domestic and foreign capital and management resources to form a BOT consortium of rail + property, and built rail transit into a variety of social capital participation of engineering construction, operation management, equipment supply, property development, etc., which has gained a strong boost of development.
 
The Shenzhen Metro reduces the government's financial burden by means of bidding and land auctioning. In 2008, Shenzhen Metro obtained the first land development right of the above-underground property through bidding and auctioning. The Shenzhen Municipal Government returned the premium of Shenzhen Metro in accordance with the prescribed land price in the form of registered capital. Land premiums and development gains are earmarked for project capital and operational losses for rail transit construction. In 2013, after the land premium contribution policy was introduced, Shenzhen Municipal Government directly injected the land premium of the above-underground property into the Shenzhen Metro as the government's investment in rail transit construction.
 
Shenzhen Metro also expanded its diversified financing methods, and adopted multi-channel and diversified financing methods such as bank acceptance bills, short and medium term bank loans, syndicated loans, financial leasing, and corporate bonds to raise funds for rail + property to get a steady growth.
 
Achievement
 
Social benefit
 
Expanding urban space and realizing secondary utilization of land. The 12 above-underground property development projects of Shenzhen Metro have a land area of approximately 1.19 million square meters, of which the re-construction of the Metro Cover Platform covers an area of nearly 1 million square meters, equivalent to the newly rebuilt land of one square kilometer for Shenzhen.
 
Helping to build affordable housing and alleviating the housing demand of urban residents. The Shenzhen Metro has built a total of 1.85 million square meters and a total of 22,000 affordable housing units in four metro sections, namely Qianhai, Henggang, Tanglang and Shekou West, which accounts for 30% of the total construction of the city's affordable housing, and all were completed and delivered. 1,200 sets of talent housing in Antuoshan and 736 sets of talent housing in Tanglang F plot have also started construction to further meet the housing needs of urban residents. Shenzhen Metro was listed in the top two of Shenzhen Real Estate Social Responsibility Benchmarking Enterprises in 2016 and 2017.
 
Economic benefit
 
The development of the above-underground property in turn helps rail transit construction. After years of exploration, the development model of rail + property of Shenzhen Metro has gradually moved towards a stable and mature development stage. The relevant land resources and future development income obtained by Shenzhen Metro are expected to exceed 100 billion yuan. As of the end of 2017, 12 above-underground property projects under construction have a total area of 3 million square meters , of which 7 projects have been in the market, with a sales area of 600,000 square meters and sales totaling more than 44 billion yuan. After deducting the cost of house construction and facility equipment installation and the necessary taxes and fees, property development has in turn helped the construction of the rail with more than 25 billion yuan.
 
In recent years, the Jinshang Garden, Huilong Business Center, Tanglang City and other projects developed by the Shenzhen Metro have entered the market and won a good reputation. The development model of Rail + Property has been recognized and gradually expanded to other cities in China and overseas. The appreciation benefit of Shenzhen Metro with the above-underground property and the property along the line in turn helped the rail transit construction and operation, effectively offsets the investment and operating losses of the subway construction, and gradually reduces the company's dependence on public finances. It has developed a self-sufficient mechanism for the company's management development to build a sustainable profit mechanism.
 
Prospect
 
In the future, Shenzhen Metro will adhere to the concept of operating the metro and serving the city, practice the rail + property development model, and continuously improve the self-sufficient capability to provide more high-end, convenient and environmentally-friendly above-underground property projects for the city. Shenzhen Metro will explore housing industrialization, promote a new round of affordable housing construction, and create a model of urban space intensive use to enhance the value and quality of land around rail transit stations. By leveraging the guiding role of rail transit, it will strive to achieve the transformation of rail transit from simple transportation services to supporting urban development, and promote regional linkages and industrial upgrading to facilitate sustainable urban development.