• Fri
  • Dec 26, 2014
  • Updated: 1:46am
PropertyHong Kong & China
ACQUISITIONS

Cofco Land in talks to buy malls from parent

PUBLISHED : Tuesday, 29 July, 2014, 3:35pm
UPDATED : Wednesday, 30 July, 2014, 3:09am

Cofco Land Holdings is in "smooth talks" to acquire several shopping malls from its state-controlled parent company, Cofco Land chairman Zhou Zheng said.

The commercial property developer has an option to acquire six Joy City projects - two in Beijing and one each in Shanghai, Tianjin, Shenyang in Liaoning province and Yantai in Shandong province - from Cofco Group, the mainland's largest supplier of agricultural and food products.

"We are busy talking about it now and face no obstacles internally," Zhou said in a recent interview in Beijing, without giving a timetable.

Analysts widely expect the transfer to be completed before the end of the year.

To finance the asset injection and the building up of land reserves for development in the next three to five years, Zhou said Cofco Land would consider all possible options to raise funds overseas, including the issuance of shares or new debt.

However, he said cash flow was positive and that the company enjoyed easier and cheaper access to relatively expensive onshore bank loans than its peers.

"Of course, we will need to ensure our debt structure is within a reasonable range," he said.

The company could also sell some of its non-core assets, such as office buildings in Hong Kong, Shanghai and Beijing, to speed up the expansion of its core Joy City shopping malls in order to generate a stable rental income, Zhou said.

Another Joy City mall is being built in Chengdu, in Sichuan province.

The developer is planning to operate 20 such projects within the next five years and is seeking opportunities in other cities, including Hangzhou in Zhejiang province and Shenzhen.

In a typical mixed-use project, which can include residential, hotel, office and retail property, the company often sells the non-retail portion to fund a mall of between 150,000 and 200,000 sqmetres that it will hold for the long term.

"The aim is to create sustainable and stable rental yield for Cofco Land," Zhou said.

"To achieve that, we aim for a 30 per cent annual increase in sales revenue generated by newly opened Joy City projects and double-digit growth for those projects at a more mature stage."

The Joy City mall in Xidan district, in Beijing, is more than 98 per cent leased at more than 900 yuan (HK$1,127) per square metre.

 

In this week's C-Suite, Zhou talks about possible opportunities brought by Beijing's reform of state-owned enterprises and about Cofco Land's expansion plans

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