Shui On Land to boost spin-off with 68b yuan asset injection
Quality commercial property to be injected into China Xintiandi after listing to attract investors
Shui On Land yesterday unveiled a major restructuring plan to inject its commercial portfolio, valued up to 68 billion yuan (HK84.6 billion), into its listing candidate China Xintiandi, in an attempt to boost investors' confidence.
Xintiandi, a wholly owned subsidiary, will start operations on March 1.
Shui On announced plans to spin off Xintiandi in May last year. Chairman Vincent Lo Hong-sui will take the lead in setting up and positioning the subsidiary.
"Although China Xintiandi won't have any assets in the beginning, it will have capital for acquisitions after raising funds through the listing. Shui On's quality commercial assets will be its primary acquisition targets," Lo said.
These include Shanghai's Xintiandi entertainment district and other similar projects in Foshan, Chongqing and Wuhan.
The group will today break ground for its new commercial project, Corporate Avenue, next to Xintiandi. The project will be included in the asset injection plan.
The proposed spin-off was expected to raise US$1.5 billion last year but was postponed as market sentiment weakened.
Shui On chief executive Freddy Lee Chun-kong said the group owned 630,000 square metres of retail, office and hotel space worth about 28 billion yuan. An additional 40 billion yuan of commercial properties totalling 990,000 square metres will be completed over the next two years.
Lo said negotiations were under way with several strategic investors with experience in asset management to take a stake in China Xintiandi but added it was too early to work out the spin-off timetable.
"It really depends on the market condition and whether we can achieve a good pricing [for China Xintiandi]. We want to start the operation first and show [investors] our earnings ability."
He rejected suggestions that the spin-off would weaken the attractiveness of Shui On, saying it would remain the major shareholder of China Xintiandi. The restructuring would also free up Shui On's capital for property development, he said.
"Shui On will generate working capital from selling commercial projects to China Xintiandi and help speed up its developments," Lo said.
Shui On warned on Monday that its profits this year are likely to decline significantly.
To improve revenue, Lo said the firm would in future choose small to medium-sized projects over large developments.
He also said the country's new leadership's focus on urbanisation would provide greater opportunities for small and medium-sized projects.
Shui On shares rose 2.67 per cent to close at HK$3.84 yesterday, before the group announced the restructuring.