Shimao sold its Hyatt on the Bund in Shanghai to a government-controlled company earlier this year
Shimao Group has agreed to sell its stakes in two Beijing residential projects to red-chip developer China Resources Land for RMB 3.3 billion ($480 million), continuing this year’s theme of state-owned enterprises bailing out distressed mainland builders.
Shimao’s interest comprises 49 and 51 percent stakes in four property companies that own and develop the land and handle interior decoration for the projects, the company said Wednesday in a filing with the Hong Kong stock exchange. The remaining interest is held by independent third parties.
The defaulting developer chaired by Hui Wing Mau, also known by his Mandarin name Xu Rongmao, announced in January that it was looking to sell $12 billion in assets to help pay off $1.7 billion in offshore debt maturing this year and another RMB 8.9 billion in domestic obligations set to come due by the end of 2022.
“The disposal is being carried out as part of the measures in reducing the indebtedness of the company,” Hui’s son, Shimao president and vice chairman Jason Hui, said in the HKEX filing.
Loss-Making Disposal
Trade in Shimao’s Hong Kong-listed shares has been suspended since April, and the troubled developer has yet to file an annual report for 2021 after requesting several delays.
Shimao chairman Hui Wing Mao
According to its annual report for 2020, Shimao acquired its stakes in the two Beijing land parcels, known as Beijing Fenzhongsi L-39 and Beijing Fenzhongsi L-41, in July of that year for a combined RMB 5.4 billion.
“Subject to final audit, it is expected that the group will realise a loss of approximately RMB 86 million for the disposal, which is calculated by reference to the carrying value of the project companies as at 31 July 2022,” Shimao said this week.
Together the two sites in the Fenzhongsi Village area of southwestern Beijing measure 47,582 square metres (512,168 square feet), with a maximum gross floor area of 228,197 square metres for residential purposes.
Mop-Up Duty
Since the start of the year, Chinese state-controlled entities have been stepping in to acquire assets from embattled mainland developers, with China Resources Land securing $3.6 billion in financing from China Merchants Bank for that purpose.
Shimao in early January announced that it would sell an office project on the North Bund in Shanghai’s Hongkou district to state-owned enterprise Shanghai Jiushi for RMB 1.06 billion ($170 million). On the same day, state-backed China Overseas Land & Investment disclosed an agreement to buy out Shimao’s and Agile Group’s respective stakes of 26.67 and 26.66 percent in their Guangzhou development joint venture with COLI for a combined RMB 3.7 billion ($580 million).
In late January, Shimao agreed to sell the Hyatt on the Bund Hotel to Shanghai Land Group, a property investment firm controlled by the city government, for RMB 4.5 billion ($707.5 million).
Further south, state-run conglomerate CITIC in July took over stakes in five of defaulting developer Kaisa Group’s projects in Shenzhen worth more than RMB 60 billion ($8.9 billion) as part of a debt restructuring.
CITIC had previously come to Kaisa’s rescue in 2015 after the developer’s projects were locked up by the Shenzhen government as part of a corruption investigation, causing Kaisa to default on a $26 million dollar bond. CITIC and insurer Ping An gave Kaisa a lifeline by offering loans of RMB 30 billion and RMB 50 billion, respectively, that helped pay off the company’s debt.
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