Squeeze forces owners of prime Shanghai site to sell
The credit squeeze on the mainland has forced Shanghai Zendai Real Estate and Greentown China to sell their stake in a prime Shanghai site to Soho China for 4 billion yuan (HK$4.9 billion).
Soho China said yesterday it had signed agreements with the subsidiaries of Shanghai Zendai Real Estate and Greentown China to indirectly hold a 50 per cent stake in Shanghai Haizhimen Real Estate, thereby acquiring a 50 per cent stake in the Bund 8-1 Land project in Shanghai. The other half interest in the site is owned by Fosun International.
It became the most expensive site in Shanghai last year when Shanghai Zendai paid 9.22 billion yuan for the property at a land auction.
There were concerns whether Shanghai Zendai could afford such a large land price and construction costs. The company only had HK$500 million cash on hand in the first half of 2009. Two months later, Greentown China, Shanghai Forte Land and Panshi Investment agreed to establish a joint venture with Shanghai Zendai to develop the project.
'We will see more developers being forced to sell their sites, and their cash flows will come under pressure in the next few months. Chinese New Year is a traditional repayment date for many loans,' said Du Jinsong, Credit Suisse's head of Asian property research.
Soho China is paying 33,000 yuan per square metre of developable floor area. 'It is a good price, but no one knows what will happen in the commercial property market when the project is completed in two or three years,' Du said. 'Investors have reservations about the deal.'
Soho China chairman Pan Shiyi said yesterday that the company had 13 billion yuan cash on hand after the deal and would continue buying sites in Beijing and Shanghai. It's Soho China's seventh acquisition in Shanghai.
The 45,472-square-metre site on Zhongshan East Road in Huangpu district is suitable for a mixed development combining office space, a hotel, retail and cultural facilities with a total gross floor area of 422,825 square metres. The developers expect the project to be completed by later 2014 or early 2015.
Meanwhile, China Overseas Land and Investment chairman Kong Qingping sold 3.5 million shares in the company earlier this month.
His stake has been cut by 40 per cent to 5.3 million shares. That's less than 1 per cent of the outstanding stock, according to data compiled by Bloomberg.
Shares of China Overseas Land dropped 4.9 per cent to close at HK$13.12, the lowest level in a month.