Soho China sells part of Shanghai project to Ctrip

Mainland commercial property developer Soho China has agreed to sell just under half of its uncompleted office-retail project in Shanghai to Ctrip Shanghai for HK$3.85 billion, nearly double what it paid for the project site in 2010.

In a filing with the stock exchange, Soho said it had acquired the site for the office-retail project Sky Soho for HK$1.96 billion in 2010. The project is expected to be completed in the next quarter.

The Beijing-based developer said it had entered into a pre-sale framework agreement with Ctrip Travel Network Technology (Shanghai) over the sale of 100,167 sqmetres of Sky Soho.

The price tag translates into HK$38,435 per square metre.

"The company believes that the sale to an end user will bring more people and activities to Sky Soho, which will in turn facilitate the leasing of the remaining part of Sky Soho," chairman Pan Shiyi said.

After the completion of the sale, Soho will retain 128,130 sqmetres - 102,964 sqmetres of office space and 25,166 sqmetres of retail premises - as investment properties.

Ctrip intends to use the property as offices for its employees, especially for the technology and business innovation centres.

Sky Soho, located in the Linkong Economic Park in Hongqiao, is about eight minutes' walk from the Songhong Road Metro Station on Line Two of Shanghai's subway network.

"The price is reasonable," said Albert Lau, the managing director of Savills China.

Lau said office space in the area was going for 30,000 yuan (HK$38,000) to 40,000 yuan per square metre.

"We have seen fewer international investors in the office investment market in expectation of slow economic growth on the mainland," he said. "That is because they have been unable to find a deal they consider would provide stable performance.

"Thus domestic investors will be the main drivers in the market because they are the end users and need space to accommodate their employees."

In the first quarter, Soho sold two office projects in Shanghai - Soho Hailun and Soho Jingan - to Financial Street Holdings for 5.25 billion yuan. Soho Hailun fetched 3.05 billion yuan and Soho Jingan 2.2 billion yuan.

Lau said the Shanghai commercial investment market remained quiet in the third quarter as it was dominated by end users.

Four large-scale office acquisitions concluded in the second quarter, fetching a total of nine billion yuan, according to Savills' quarterly report on the Shanghai office sector.

Ping An Trust paid 4.4 billion yuan for Greenland Centre Phase II in Xuhui, while BM Holding acquired the Ruijin Building in Huangpu for 1.65 billion yuan. A buyer paid 91,173 yuan per square metre for 25,525 sqmetres at Poly One56 in Pudong.