Grosvenor-Shui On JV to Buy Nanjing IFC From Sanpower for $250M

Hong Kong-listed developer Shui On Land Ltd and the UK’s family held Grosvenor Group have agreed to form a 50:50 joint venture to purchase the Nanjing International Financial Center office tower for RMB 1.62 billion ($250 million), according to an announcement to the Hong Kong stock exchange last week.

The seller, debt-riddled conglomerate Sanpower Group, is taking a 35 percent loss after buying Nanjing IFC for RMB 2.48 billion in 2014 from a fund managed by Singapore’s ARA Asset Management.

The deal marks a new milestone in the restructuring of Sanpower, a Nanjing-based conglomerate that reached for a role on the global stage with its takeover of Britain’s House of Fraser in 2014 in a £480 million ($650 million) deal, before defaulting on an estimated $400 million in debt two years ago.

Grosvenor Heads Inland for a Bargain

The property at No.1 Hanzhong Road in Nanjing’s Qinhuai district, not to be confused with Sun Hung Kai’s similarly named project in the same city, has a gross floor area of 109,196 square metres (1,175,376 square feet) and consists of a 45-storey Grade A office tower and a seven-storey retail podium. At the announced consideration, the Shui On-Grosvenor joint venture is paying the equivalent of RMB 14,835 per square metre for the tower in Nanjing’s Qinhuai district.

The transaction in the capital of eastern China’s Jiangsu province, announced on 22 December, is a departure from Grosvenor’s stated strategy of targeting Asia Pacific gateway cities like Tokyo, Hong Kong and Shanghai.

The only previous mainland asset outside Shanghai owned by Grosvenor, a property group controlled by the Duke of Westminster, was an eight-floor interest, later sold, in the China Merchants Tower in Beijing.

As of Monday, Grosvenor had made no mention of the Nanjing IFC stake on its company website, and had not commented in response to inquiries from Mingtiandi. Grosvenor’s chief executive for Asia Pacific is Benjamin Cha, scion of the founding family of Hong Kong developer HKR International Ltd.

According to Shanghai-based Shui On’s disclosure announcement, the purpose of the joint venture is “to hold, operate, lease, market, maintain, manage, improve, renovate, dispose of and sell the property for profits and any other business or activities as permitted by the business scope of the project company and as agreed by the shareholders from time to time”.

Sanpower Suffers

In February 2014, ARA Asia Dragon Fund, managed by Singapore’s ARA and invested by Li Ka-shing’s Cheung Kong Holdings (now part of CK Asset), concluded the sale of Nanjing IFC to Sanpower for RMB 2.48 billion in the largest en-bloc deal ever for a stabilised commercial asset in the Yangtze River Delta region outside of Shanghai.

The fund had acquired the then newly completed office tower from China Merchants Property Development in December 2008, while it was still vacant, for RMB 1.6 billion.

Nanjing-based Sanpower is reportedly one of the largest private enterprises in Jiangsu province. The conglomerate, which has interests spanning tech, media, property and retail, made headlines in recent years for its growing mountain of debt after an overseas expansion that saw it buy an 89 percent stake in department store operator House of Fraser for £155 million ($259 million) in 2014.

Less than four years later, Sanpower sold a majority stake in the chain after opening only two stores in mainland China.

In July of this year, mainland media group Caixin reported that Sanpower planned to restructure RMB 65.1 billion in debt through asset sales and RMB 10 billion through help from bad-debt manager China Cinda Asset Management Co Ltd.

As of March, the company had RMB 65.1 billion in interest-bearing financial debt owed to multiple creditors, including more than 130 financial institutions, according to materials seen by Caixin.