Shimao Selling Shanghai’s Hyatt on the Bund to State Developer for $708M

Defaulting real estate developer Shimao Group has agreed to sell the Hyatt on the Bund Hotel in Shanghai to a property investment firm controlled by the city government for RMB 4.5 billion ($707.5 million), the Hong Kong-listed company said in a statement to the stock exchange late Friday.

The disposal of the 631-room luxury hotel to Shanghai Land Group comes after the company had said on 11 January that it was in discussions regarding potential asset sales in response to local media reports indicating that it had put its entire property portfolio up for sale.

“The proceeds from the Disposal are currently intended to be used as to approximately 80 percent for reducing the indebtedness of the Group, and as to approximately 20 percent for general corporate purposes,” Shimao said in its statement, while pointing out that it would realise a gain on the disposal of just over RMB 3 billion.

Shimao’s disposal of the 5-star hotel brought its declared asset sales to state-backed entities to more than RMB 7.4 billion within one week, as it fights to raise cash to pay off $1.7 billion in offshore debt maturing this year, with another RMB 8.9 billion in domestic obligations set to come due by the end of 2022.

North Bund Exits

First opened near the Huangpu riverfront in Shanghai’s Hongkou district in 2007, the 33-storey property has not contributed much to Shimao’s bottom line recently, losing RMB 53.1 million in 2020, followed by an estimated RMB 63.8 million lost last year as the pandemic dragged on.

Known for its views of the Bund waterfront to its south, the 109,905 square metre (1.2 million square foot) property includes four restaurants and is operated under the Grand Hyatt brand. At the stated compensation, Shanghai Land is paying the equivalent of RMB 40,945 per square metre for the property, or just over RMB 7.1 million per room.

Shanghai Land Group is owned directly by the city government and has previously developed infrastructure-related property projects around the city, including teaming with another local state-run enterprise, Shentong Metro Group, in 2008 to buy a Pudong site for a 250,000 square metre mixed-use venture.

The sale of Hyatt on the Bund was the second state-backed buyout of a Shimao project on the same block last week after the developer had announced late on 21 January that it was selling a site at 199 Huangpu Road in Hongkou district to a unit of the Shanghai Municipal State-owned Assets Supervision and Administration Commission for just over RMB 1 billion.

Shimao had purchased the Huangpu Road site, which is located adjacent to Hyatt on the Bund, in 2002 for RMB 1.38 billion through a government auction, and had not cleared or developed the 4,989 square metre commercial plot in the 20-year interim.

Guangzhou Games

In addition to its two Shanghai sales, Shimao on 24 January had announced the disposal of its 26.67 percent interest in a Shenzhen joint venture with Agile Group, China Overseas Land and Investment and Country Garden Holdings for RMB 1.84 billion.

Together, Shimao and Agile, which is facing its own debt challenges, sold their pieces of the 3.5 million square metre Guangzhou Asian Games City project in the Guangdong provincial capital to state-backed partner China Overseas Land & Investment for a combined RMB 3.7 billion.

Agile, COLI and Country Garden had paid RMB 22.5 billion to win the rights to the stadium site for the Guangzhou Asian Games in 2009, but had continued to expand the project with Shimao joining later.

In addition to the sales which it has announced to the stock market, Shimao, which was revealed early this month to have defaulted on a $101 million project loan, was said in a report in Shanghai’s thepaper.cn on Tuesday to be in talks to sell the RMB 15.1 billion Shimao Shenzhen-Hong Kong International Center, a 600-metre supertall in Shenzhen expected to be completed next year.

The local media report indicated that the company led by tycoon Hui Wing Mau had put up for sale additional commercial projects in Chongqing, Changsha and Shanghai, including the Shanghai Shimao Plaza next to the city’s People’s Square.

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