Li Ka-shing Sells Chongqing Complex to Own REIT for $638M

Asia’s richest man sold another mainland property asset last week as two companies controlled by Li Ka-shing’s transferred a commercial development in Chongqing to a related real estate investment trust (REIT) for RMB 3.91 billion ($638 million).

According to a statements by the companies involved, Cheung Kong (Holdings) and Hutchison Whampoa – both holding companies belonging to Li – agreed to sell the Metropolitan Plaza complex in the western Chinese city to Hui Xian Real Estate Investment Trust. Hui Xian is the first RMB-denominated REIT listed in Hong Kong, and until its acquisition of the Chongqing property, held only two assets.

The sale by two Li controlled companies to a Li-controlled REIT follows less than one week after Asia’s richest man sold a company that controlled two Shanghai office towers for $621 million, as the investor known in Hong Kong as “Superman” continues to sell down his China assets.

Li Ka-shing Sells 7th China Asset in One Year

This latest asset to be unloaded by a Li-controlled company is a mixed-use complex that includes a 90,000 sqm, 12-storey shopping mall; a 54,000 sqm Grade A office building; and a 353-space car park.

The total gross floor area of the project in the area that Hui Xian refers to as the “Future ‘Wall-Street’ of Western China” is 164,000 square metres.

In the previous week’s transaction, Li had sold off Hutchison Whampoa’s 71.36 percent stake in Hutchison Harbour Ring Ltd to mainland real estate investment firm China Oceanwide for HK$3.8 billion ($621 million). Hutchison Harbour Ring controlls two downtown Shanghai office buildings.

This latest sale means that companies controlled by Li have sold seven real estate assets in the last 12 months, including buildings in Shanghai, Nanjing and Guangzhou. Even Superman’s son, Richard, has been dumping China real estate, after the younger Li sold a Beijing mixed-use development for US$900 million during January.

Following this most recent deal, Hui Xian Asset Management – which manages the REIT – intends to rebrand “Metropolitan Plaza” to “Metropolitan Chongqing Oriental Plaza”, and position it as the second “Oriental Plaza” under the Hui Xian REIT.

Helping Investors While Li Helps Himself

While the presentation praises the positive potential of the Chongqing complex for the REIT’s investors, the fact that Li didn’t keep it for himself – along with his other recent asset disposals – signifies that the billionaire may have lost faith in the market’s upside.

In a document explaining the related-party transaction which was seen by Mingtiandi, Hui Xian stressed the upside of the Chongqing investment, as well as the opportunity for the lightly invested REIT to diversify its revenue sources.

Hui Xian emphasised the value of the Metropolitan Plaza’s location in Chongqing’s Jiefangbei business district, the appeal of Chongqing’s economy, and the current tenants of the property. According to Hui Xian, REIT investors will benefit from the Plaza’s status within “Chongqing’s biggest shopping destination and tourist spot,” which the developer says attracts more than 300,000 visitors each weekday.

In an interview last year, however, Li sounded cautious regarding the China market, saying, “Land prices in China have surged, and we’re unable to win auctions for land.” The billionaire indicated that housing prices may have gone out of control in noting, “People are struggling to cope and developers need to be cautious.”

The completion of the acquisition is conditional upon the approval of the deal by independent unit holders of the REIT. Li already seems to have cast his vote regarding property projects in China.