Shui On Land Files for Long-Awaited Xintiandi IPO in Hong Kong

Shanghai-based property firm Shui On Land took the first formal step towards the long-sought IPO of its Xintiandi division this week as it submitted an application for listing the unit on the main board of the Hong Kong stock exchange.

Under the proposed spin-off, Shui On’s commercial investment properties, property management and asset management businesses will operate under a stand-alone listed entity called Shui On Xintiandi, the developer controlled by billionaire chairman Vincent Lo said Monday in a release.

Shui On Land, meanwhile, plans to carry on as a separate listed company focused on master planning and development of mixed-use communities and properties, as well as the sale of developed properties at such communities. The developer will remain the controlling shareholder of Shui On Xintiandi after the latter’s listing.

“As we celebrate the 50th anniversary of Shui On Group and the 20th anniversary of Shanghai Xintiandi this year, we also look towards the future with enthusiasm,” Lo said. “We have always been committed to long-term sustainable growth for our communities, and this proposed spin-off is a major step that we have taken after a rigorous review of various options to create value for our many stakeholders, including our shareholders and employees.”

A Decade in the Making

In August, sources told Bloomberg that HKEX-listed Shui On planned to separately list China Xintiandi Holding Co, the ownership vehicle for the group’s mainland commercial properties, in Hong Kong next year via an initial public offering that could raise at least $500 million. Morgan Stanley and UBS Group would oversee the share sale.

As far back as May 2012, Shui On had announced its intention to sell shares in the Xintiandi platform, which is seeded with the landmark shopping and entertainment complex of the same name in central Shanghai.

After an IPO plan fizzled, Brookfield in 2013 agreed to invest $500 million and take a 21.7 percent stake in the subsidiary, but the Canadian asset management giant exited in late 2018, leaving the unit once again wholly owned by Shui On.

Under the new plan, a portfolio of Shui On’s 13 completed commercial assets, including Shanghai Xintiandi, will be transferred to Shui On Xintiandi, which will primarily engage in the investment in and ownership of commercial properties, as well as property management and asset management in Greater China.

Unlocking Shareholder Value

Shui On said the separate listing of the Xintiandi unit will enable equity investment in a pure commercial property portfolio situated primarily in Shanghai. Unlocking the value of Xintiandi’s portfolio will in turn create value for the group as the controlling shareholder of Shui On Xintiandi.

According to Shui On’s financial report for 2020, the Xintiandi portfolio consists of about 1.2 million square metres (12.9 million square feet) of leasable gross floor area. The properties raked in RMB 2.8 billion in rental and related income last year, down 7 percent from 2019.

In the middle of the last decade, Shui On sold off some of its most valuable buildings in downtown Shanghai in a bid to bail out its debt-laden balance sheet and raise cash as the cost of new projects climbed and sales slowed.

The proceeds of the IPO will let Shui On acquire future land bank and maintain a healthy gearing ratio, the group said.

In Shui On Land’s interim financial results released last month, the developer reported a profit of RMB 1.29 billion (now $200 million) for the first half of 2021 as profit attributable to shareholders totalled RMB 1.08 billion, marking a sharp recovery from a net loss one year earlier during the worst of the COVID-19 crisis.

Vincent Lo’s father, Lo Ying Shek, launched the family’s Hong Kong-based property firm, Great Eagle, in 1963. The son started a construction materials venture of his own in the 1970s and by the turn of the century had created a development giant in Shui On Land, focused on the fast-growing city of Shanghai.

Forbes reported in July that Lo was clearing a path for his daughter Stephanie, a 38-year-old Wellesley College architecture grad, to take the reins at Shui On. Stephanie Lo was promoted to executive director in 2018 after joining the business in 2012.