Nearly a Decade in the Making, Shui On Land Readies IPO of Xintiandi Unit

In the wake of Wednesday’s report that Shui On Land had picked two banking giants to lead the IPO of its Xintiandi unit, the Shanghai-based property firm looks set to fulfil a listing plan first proposed when Barack Obama and Hu Jintao were in office.

Sources told Bloomberg that HKEX-listed Shui On plans 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.

The developer controlled by Hong Kong billionaire Vincent Lo confirmed in a late-Wednesday filing with the HKEX that it was “considering a possible spin-off and separate listing of the commercial investment properties and property management and asset management businesses” of the group on the main board.

In his capacity as chairman, Lo cautioned that no decision had yet been made by the board as to whether or not to proceed with the possible spin-off.

First Try Fizzled

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.

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.

Shui On has tried to duplicate the success of Shanghai Xintiandi elsewhere in China, with mixed results. The Xintiandi portfolio includes projects in Chongqing, Nanjing, Wuhan and Foshan, though the group announced in July that it was abandoning further development of the Foshan Lingnan Tiandi complex and returning the remaining two plots to the local land department — reportedly to repay an existing debt of more than RMB 68 billion ($10.5 billion).

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.

New Verve

Shui On seems to have put its financial woes behind it, as evidenced by a deal struck late last year to form a 50:50 joint venture with the UK’s family held Grosvenor Group in order to purchase the Nanjing International Financial Center office tower for RMB 1.62 billion.

The seller, debt-riddled conglomerate Sanpower Group, took a 35 percent loss after buying Nanjing IFC for RMB 2.48 billion in 2014 from a fund managed by Singapore’s ARA Asset Management.

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 last month 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.