Hutchison Whampoa

Li Ka-shing to sell Shanghai property assets worth HK$6 billion

Cheung Kong firms to sell Shanghai holdings worth up to HK$6b, bringing mainland and HK divestments in the past year to about HK$25b

PUBLISHED : Tuesday, 12 August, 2014, 7:29pm
UPDATED : Wednesday, 13 August, 2014, 10:45pm

Li Ka-shing is set to sell Shanghai property assets worth almost HK$6 billion, bringing the value of disposals made by him on the mainland and in Hong Kong since August last year to about HK$25 billion.

The deals, through Li's Hutchison Whampoa and real estate investment trusts he partly owns, are part of a concerted strategy of cutting exposure to real estate and raising funds to deploy elsewhere.

"This is a pretty consistent trend across the group - to me, it's not a coincidence," Danie Schutte, CLSA's deputy head of Asia research, told the South China Morning Post.

"They [Li-led companies] have not purchased any land in Hong Kong or [mainland] China for three years.

"Victor Li talked about it and said they are cashed up and ready to buy, [but] they clearly think prices will come down."

Victor Li Tzar-kuoi is the deputy chairman of Cheung Kong (Holdings) and Li's son.

Schutte said Cheung Kong typically maintained a five to six-year land bank in Hong Kong, but today its land reserves would only last about three to four years.

The company's land bank in the mainland had dropped from 200 million sq ft to 160 million sq ft, he added.

Cheung Kong is the main property arm of the Li group of companies.

Hutchison Harbour Ring, which owns office towers in Shanghai, said in a stock exchange announcement that its parent Hutchison Whampoa was seeking to sell its 71.36 per cent stake in the firm to Shenzhen-listed Oceanwide Holdings for between HK$3.5 billion and HK$3.8 billion.

Meanwhile, ARA Asset Management, a manager of real estate investment trusts part owned by Li, is selling its International Capital Plaza in Shanghai for 1.54 billion yuan (HK$1.94 billion), according to a report in the Beijing Times.

Hutchison Harbour Ring shares jumped 35 per cent yesterday despite the fact that, at the midpoint, the selling price comprised a 12 per cent discount to the firm's pre-announcement equity capitalisation of HK$5.8 billion.

The discrepancy was explained in the announcement, alongside the offer of a special dividend of 20 HK cents per share.

The offer values Hutchison Harbour Ring at 55 HK cents to 59.8 HK cents per share, implying a valuation of 79.8 HK cents at the top.

The stock closed yesterday at 88 HK cents.

Hong Kong developers are well known to time property markets and the disposals suggest to analysts that the Hong Kong and mainland property markets are at a peak, particularly with regards to land prices.

"For the moment, [Cheung Kong has] a land bank and projects to sell. While property prices are still rising, the outlook in three or four years, when various projects are completed, prices may no longer be rising," said Alan Jin, who covers Cheung Kong for Mizuho Securities Asia.

Among recent transactions, Cheung Kong last year sold Kingswood Ginza, a retail shopping mall in Hong Kong, to Fortune Real Estate Investment Trust for a profit of HK$2.7 billion.

In January 2012, the company sold a 70 per cent stake in Sheraton Shenyang Lido Hotel on the mainland, reaping a profit of HK$1 billion.

Through Cheung Kong, the property-based conglomerate he controls, Li owns a 7.84 per cent stake in ARA Asset Management.

The largest shareholder is Singapore-based Straits Trad- ing Co, which owns 20.1 per cent of the company.