Shui On Construction takes $173m step into Shanghai development

Shui On Construction and Materials will acquire a large residential project in Shanghai from its major shareholder for 185 million yuan (about HK$173 million) in a first and significant step into the mainland property market.

The project, Rui Hong Xin Cheng, in Hongkou district of Puxi, comprises high-rise residential development of up to 1.42 million square metres, a 250,000 square metre shopping centre and 50,000 square metres of amenities.

Originally 99 per cent owned by Shui On Properties, a private company held by Shui On Construction chairman Vincent Lo Hong-sui, the project will be taken up by Shui On Construction from the second phase. The first phase will continue to be developed by Shui On Properties.

Mr Lo said the investment for the second-phase development was estimated at 1.4 billion yuan. He said the development right was transferred to his listed arm at cost, and the 185 million yuan represented the money spent by Shui On Properties on the infrastructure on the 40 hectare site.

However, if the future selling price of the project exceeded 7,500 yuan per square metre, Shui On Properties could claim 20 per cent of the additional profit, he said.

Mr Lo said the first phase was sold at an average price of 6,700 yuan per square metre, 30 per cent higher than surrounding developments.