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Shui On Land

Shui On sells prime Shanghai property projects to China Life for 4 billion yuan

The sale, which includes three malls, is expected to generate a gain of 1.2 billion yuan for the developer as it pursues an ‘asset-light’ strategy

PUBLISHED : Wednesday, 20 December, 2017, 7:04am
UPDATED : Wednesday, 20 December, 2017, 7:04am

Shui On Land has struck a deal to sell almost half its stake in a portfolio of prime Shanghai property projects to China Life Insurance for 4.16 billion yuan (US$630 million), its latest move to pursue an “asset-light strategy”.

The sale is expected to generate a gain of 1.2 billion yuan for the property developer founded by tycoon Vincent Lo Hong-sui, it said in a filing to Hong Kong’s bourse late on Tuesday.

“In accordance with the ‘asset-light strategy’ which the Group has been pursuing since 2015, the transactions enable the group to optimise the value of some of its mature investment properties and to recycle its capital into other new opportunities,” it said.

The strategy involves partnering with financial institutions, land owners or other investors to diversify funding sources and reduce capital outlay and debt load when financing projects, it added.

State-backed China Life Insurance, the nation’s largest life insurer, will form a partnership with sister firm China Life Properties to make the purchase.

China Life Insurance said it will contribute virtually the whole amount while 100,000 yuan will come from China Life Properties.

The funds will be used to buy 21.4 per cent of Shanghai Ruihong Xincheng – a subsidiary of Shui On Land.

The purchase will give the 20-year partnership a 49.5 per cent interest in three shopping malls and an office and commercial complex with gross floor area of 280,000 square metres, which are under construction.

The projects are located in the Hongkou district, in the prime inner ring of Shanghai.

The entire greater Ruihong Xincheng project, located in the city’s golden triangle area between The Bund waterfront, the northern Bund and the Lujiazui business district, has a proposed gross floor area of 1.74 million sq m.

It comprises Ruihong Tiandi, a landmark kilometre-long commercial street with 550,000 sq m of retail space, as well as high-end residences, entertainment, fashion, food and beverage retailers, boutique hotels and high-end offices.

Shui On expects to reap net proceeds of 3.61 billion yuan from the latest stake sale, after paying taxes and transaction fees.

Shui On said on Tuesday it has also entered into a “strategic cooperation” agreement with China Life Capital for potential cooperation on real estate projects in the mainland.

It comes after the developer sold for 2.95 billion yuan to China Life in October a 49 per cent stake in a bundle of properties comprising retail, office, hotel, car parking spaces and a clubhouse – commonly known as the “Knowledge and Innovation Community” and located in the Yangpu District of Shanghai.

In May this year, Shui On sold a 79.2 per cent stake in Chongqing Tiandi to China Vanke, the nation’s second-largest developer, for 4.1 billion yuan, reaping a gain of 1.7 billion yuan.