Soho China to sell three more non-core sites, all in Shanghai

Commercial real estate firm Soho China plans to sell another two to three non-core properties to cash in on the rising market, as it continues to focus its attention more on securing recurring rental income in first-tier cities.

Announcing the company’s interim results, which showed a 344 per cent surge in profit, the chairman Pan Shiyi said on Wednesday that three Shanghai sites had been identified for sale: Tianshan Plaza, Hongkou SOHO, and Lingkong SOHO, all of which are in areas away from the centre of the metropolis.

Tianshan Plaza is still under construction, and is expected to be finished before the year-end.

The sell-off plan comes after the company offloaded Soho Century Plaza in late July for 3.22 billion yuan, or 76,700 yuan per square metre, a 21 per cent premium on its book value.

Pan insisted, however, that the company’s new “build-to-hold” business model had not changed, and the project still only represents 3.7 per cent of Soho’s leasable areas.

“Soho will continue to hold and operate its core assets in Beijing and Shanghai,” Pan said.

He defined “core-assets” as those in prime locations in first-tier cities.

“The sales are just an application of the lasting business principle, of ‘buy low, sell high’.”

However, he dodged the question of when he expected the market to peak.

“Only god knows”, he said, explaining he sells properties only when he sees the price is reasonable.

He added, the company had been encouraged by the rise in its stock price since the Soho Century sale and the board has now proposed a 0.19 yuan special dividend on the back of it, and the company’s increasing profit. No interim dividend is being paid.

Zhang Xin, Soho’s CEO, revealed net profit surged 344 per cent in the first half to 600 million yuan, while revenue increased 85 per cent to 727 million yuan.

The company said during the period it also redeemed several of its earlier US dollar notes and cut its foreign-currency debt to 6 per cent of the total liability, from 56 per cent in the six months before.

Net gearing ratio has been cut to 37 per cent and average debt costs reduced to 4.4 per cent.

The company had seen its revenue and profit decline since the launch in 2012 of a shift in its business model from “build-to-sell” to “build-to-hold”. Rental income had failed to match past sales revenue.

However, Zhang said he expected rental income to continue rising, and the company’s focus will increasingly be on its asset value, rather than revenue.

“2016 could be a watershed for our tough transition,” she said.

Shares in Soho China remained unchanged at HK$4.31 on Thursday. The stock has risen 38.9 per cent in value over the past six months.