China property

Soho China sells Shanghai project to Singapore’s Keppel Group for US$522m

PUBLISHED : Monday, 26 June, 2017, 3:47pm
UPDATED : Monday, 26 June, 2017, 10:56pm

Soho China, the biggest commercial developer in the Chinese capital, said on Monday it has sold a Shanghai office-commercial project for 3.57 billion yuan (US$522 million), three months after an attempt to sell the same property failed because of Beijing’s tighter capital controls.

Hongkou Soho was sold to Keppel Land China, Alpha Investment Partners and a third unnamed co-investor, with a price equivalent to 51,000 yuan per square metre, or 53 per cent higher than its cost, according to Soho China statement. Both Keppel Land and Alpha are subsidiaries of Keppel Group, one of Singapore’s largest multinationals.

Soho’s Hong Kong shares jumped 4.3 per cent to close at HK$3.85 Monday after the disposal was disclosed.

In late March, Soho China dropped its planned sale of Hongkou Soho at the last minute after plans to use the proceeds to fund an overseas investment became unfeasible under the central government’s tougher outbound payment controls. At the time of the sale announcement, chairman Pan Shiyi described the buyer as “famous”.

When the deal was later terminated, Pan explained: “Compare holding renminbi cash and domestic properties, [and dropping the deal] became an obvious choice.”

Soho drops plan to sell Hongkou property, snared by China’s capital control rules

It is not clear whether Pan would use the proceeds this time to buy overseas property.

Soho China said in its statement that the deal “represents a good opportunity for the company to realise its investment gains in terms of high profitability and strong cash flow,” and the net proceeds from the disposal will be used “as its general working capital.”

The company declined a request by the South China Morning Post to specify how the proceeds would be used.

If Soho China is able to use the proceeds for overseas asset purchases, it would indicate an easing of capital control by Beijing. However, overseas asset purchases once again became a sensitive focal point in China last week after it was revealed that the country’s banking regulator ordered banks to check on overseas mergers and acquisitions by some private conglomerates.

Toni Ho, a property analyst at RHB Osk Securities, said overseas investment was still under strict scrutiny by Chinese government, but there are some property developers that have received the green light on specific projects recently.

“It all depends on whether Soho can get regulators’ approval to bring the money out of the country.”

With a total gross floor area of 90,000 sq m, including a leasable area of approximately 70,000 sq m, Hongkou Soho was designed by renowned architect Kengo Kuma. It is located in Shanghai’s North Sichuan Road business hub, with convenient access to two of the city’s subway lines. Major tenants include Panasonic, China Pacific Insurance and Soho China’s shared office brand Soho 3Q.