Continental Holdings Sells Off Stake in Shanghai Mall for $167M

Hong Kong-based jewellery trader Continental Holdings is exiting its main property investment in mainland China by selling its 50 percent stake in a Shanghai shopping mall for a total of about HK$1.31 billion ($167 million).

Under the terms of the deal, announced to the Hong Kong exchange this week, the company will offload its interest in the Yangpu district mall, Bauhinia Square, to its joint venture partner, A Glory Communications, which is reportedly controlled by Hong Kong’s King of Toys — Francis Choi. The Hong Kong entrepreneur had already held a 50 percent stake in the Shanghai retail asset, and as part of the transaction, will now take over responsibility for a shareholder loan owed to Continental Holdings by the joint venture.

The 11-storey mall with 500 parking spaces is located above the Jiangpu Road metro station along Shanghai’s metro line eight. Completed in 2015, the property spans 98,881 square metres of gross floor area featuring a retail mix including food and beverage outlets, lifestyle and fast fashion stores, children’s education, a cinema and a supermarket, and is said to be almost fully leased out.

Continental Exits Shanghai Mall After Leasing Out 95%

Continental Holdings expects a gain of about HK$439 million from the sale before tax and expenses. “The Disposal is a good opportunity for the Group to realize its investment,” a company spokesperson said in a statement, citing the “revitalising property market condition” and the agreed price of the asset as motivating factors. The sale proceeds will be applied to reduce the company’s borrowing and improve working capital.

After acquiring the 18,101 square metre, two-parcel site, the joint venture partners started foundation work on the building in early 2011. The retail spaces were said to be over 95 percent leased out in the company’s most recent annual report. Rental revenue was reported to be stable and had achieved double-digit growth since the mall’s opening in 2016.

The joint venture that owns the mall reported a net after-tax profit of HK$246 million in the year ended June 30, 2017.

Hong Kong Jewellery Trader Shifts Property Focus

Continental Holdings has branched out from its core business of designing, making, and distributing fine jewellery to invest in real estate in Hong Kong and the mainland. In July of last year, the firm agreed to buy a piece of land from Phoenix Property Investors in Hong Kong’s Wanchai district for HK$1.18 billion, which it will redevelop into a 25-storey, premium office and retail building spanning 86,970 square feet.

That acquisition followed the conglomerate’s sale of Continental Place, a 29-storey commercial building it had developed at 236-242 Des Voeux Road Central, in Hong Kong’s Causeway Bay retail hub, for a total of about HK$1.13 billion.

“The Group has experience and financial capability to engage in property investment and development business and will continue to develop this segment,” Continental Holdings said in its latest announcement. The company has over 800 employees, most of them working at its mainland production plant.