Relocations cost Shui On 4b yuan

Developer shrugs off investor concerns on eve of share float

Shui On Land, the mainland developer seeking to float shares in Hong Kong, will spend up to four billion yuan to relocate existing residents at its project developments in Shanghai this year.

'Our capital expenditure [this year] is relatively high as we need to relocate residents at Shanghai's Taipingqiao project,' Vincent Lo Hong-sui, chairman of Shui On Land, said yesterday.

The Taipingqiao project is a huge mixed-use development with a gross floor area of more than one million square metres in the Luwan district, which includes the popular Xintindi commercial project.

Investors have raised concern about the rising relocation costs at the company's projects in Shanghai, Hangzhou, Chongqing and Wuhan, especially as they come in the wake of the central government imposing austerity measures on the real estate market nationwide.

'Relocation costs at the Taipingqiao project are a major risk,' said a spokesman for a US investment fund.

However, Mr Lo stressed that resettlement was not a concern for the company, as the offering had already received a good response from overseas investors with the international tranche of the share sale oversubscribed.

Shui On is offering 1.05 billion shares at between $5.60 and $7.55 per share to raise up to $7.9 billion. Ninety per cent of the shares have been earmarked for international institutions and other professional investors.

The remaining 10 per cent of the shares will be offered to the public in Hong Kong from today. The shares are expected to begin trading on the main board on June 23.

'Relocation has been completed at the Wuhan project and 90 per cent of residents at the Chongqing project have been resettled,' said Mr Lo. The major relocation work will be at Taipingqiao.

He admitted that the relocation costs in Shanghai had not been fixed as they would depend on current market prices. But he said the costs should not be beyond the company's affordability.

Faced with a declining interest in real estate investment trusts after the disappointing performance of the Champion Reit, Shui On yesterday emphasised that it was not listing a reit and that it would see high earnings growth potential due to several projects being built.

Shui On now has six projects with a total gross floor area of 6.8 million square metres under various stages of development in Shanghai, Hangzhou, Chongqing and Wuhan.

Mr Lo said the company was in talks with municipal governments in eight cities about future development projects, but he did not identify the cities.

Meanwhile, printed circuit board maker TC Interconnect Holdings will also launch its public offering in Hong Kong today. It will offer 60 million shares at $1 each. The stock is also expected to start trading on June 23.