Shui On Land in talks about selling prime office projects worth 10b yuan
Mainland-focused developer Shui On Land says it is talking to various parties about the sale of two office/retail projects in Shanghai that could fetch as much as 10 billion yuan.
Mainland-focused developer Shui On Land says it is talking to various parties about the sale of two office/retail projects in Shanghai that could fetch as much as 10 billion yuan.
"The negotiations are in the advanced stage and it is hoped a decision will be finalised before the end of June," chairman Vincent Lo Hong-shui said after the company's annual general meeting yesterday.
It is looking to sell phases one and three of Corporate Avenue - next to Shanghai's Xintiandi retail and entertainment area - which include grade-A office and retail space.
Lo said the projects had attracted serious buyers from the mainland and abroad.
They are among several assets under wholly owned subsidiary China Xintiandi, its commercial arm, which is switching focus to managing, designing, leasing, marketing and enhancing investment properties in urban areas on the mainland.
Four years ago Lo was forced to shelve a US$1.5 billion plan to spin off China Xintiandi in a separate listing because of poor market sentiment.
He said yesterday there was no timetable for reviving the spin-off plan and the group had no intention of selling China Xintiandi at a steep discount.
"What's most important [for China Xintiandi] is creating value instead of just relying on rental income," Lo said.
The asset disposal could shore up China Xintiandi's cash flow and it could team up with Shui On Land to make acquisitions in the future, he said.
Lo said in February that the group would sell up to 57 billion yuan (HK$72 billion) of assets - almost half its portfolio - to boost cash flow and reduce debt.
Shui On changed strategy early this year to accelerate asset sales amid a more challenging fundraising environment for the real estate industry.
Lo said the group's asset turnover ratio was just 9 per cent, compared with 30 per cent among mainland developers.
He said profit margins on the mainland could be squeezed significantly by the land appreciation tax if the group continued to hold a large portfolio of assets - even those with low returns.
The group, with an estimated 110 billion yuan worth of assets, said earlier that 52 per cent were generating low investment returns. Such properties were burdened with annual interest rates of 7 per cent to 8 per cent but generated annual returns of just 2 per cent to 3 per cent.
Except for landmark projects like Shanghai Xintiandi and the Hub, an office-retail-exhibition complex, the sale of other assets would be considered if an attractive offer was received, Lo said.
Shui On said it had contract sales of 1.27 billion yuan in the first four months of the year.
The company's shares rose 1.195 per cent to close at HK$2.54 yesterday.
