For the second time in one week, Shui On Land is said to be close to selling a prime office project in Shanghai, this time for a reported RMB 3.57 billion ($575 million).
The project on the block this week is reported to be phase three of Shui On’s Corporate Avenue commercial complex, which a consortium made up of China Vanke, private equity firm PAG Real Estate Partners and Tishman Speyer are said to be acquiring from the heavily leveraged developer.
Should the project sale go through (the deal is said to still be unsigned) it would mark the seventh sale of commercial property assets by the Shui On Group in two years, provided that last week’s reported sale of Corporate Avenue phase one is confirmed.
Consortium Planning on $509M Loan
The consortium deal is expected to include China Vanke, the country’s second largest developer by sales, taking a 50 percent stake in the acquired project, with PAG assuming 45 percent, and US-based Tishman Speyer acquiring a five percent interest.
Tishman Speyer and Vanke have previous experience working together in San Francisco, where the two developers cooperated in building and marketing the successful Lumina condo project.
Just last week Shui On was reported to be selling Corporate Avenue phase one to Hong Kong’s Link REIT, in a RMB 7.4 billion ($1.19 billion) deal which apparently has not yet been finalised.
The buyers are said to be seeking a $509 million syndicated loan for the project, which has only been cleared for construction, without substantial work having been done on the site to this point. Real estate brokers contacted by Mingtiandi regarding the project said that they did not yet have a slated completion date for Corporate Avenue phase 3, and that leasing of the project was “not yet on their radar.”
The site for the project is located at the eastern end of Shui On’s Taipinqiao complex, which originally was to have been bordered by the successful Xintiandi retail and entertainment project on the west, with more retail to the south, and a set of residential projects along the southern border of a park and lake that form the center of the development.
The Corporate Avenue office towers formed the northern border of the development, but should the two recently reported sales be finalised, Shui On will have sold off four out of five office towers in the project, retaining only the 3 Corporate Avenue building in phase two of the three phase commercial project.
Local media reported that Standard Chartered Bank will be lead bank and book runner for the $509 million loan. The bank earlier had been appointed by Shui On to market Corporate Avenue phase one, and Shui On chairman Vincent Lo had said during a press conference in May that the developer was seeking to sell Corporate Avenue phase 3. Lo said at the time that Shui On hopes to raise RMB 10 billion ($1.6 billion) from sale of the two phases of the project.
Shui On Asset Sale Continues
Prior to the reported sales of Corporate Avenue phase one and phase three this month, Shui On had sold Corporate Avenue Chonqing to Sunshine Life Insurance in 2013, as well as parting with its Xihutiandi project in Hangzhou. Also in 2013, Shui On sold 5 Corporate Avenue, in the project’s second phase, to China Life.
In August of last year, as the developer’s share price continued to be punished by investors, Shui On sold two hotels in Shanghai to Great Eagle Holdings, which is controlled by Vincent Lo’s family. Then in May this year, Shui On Group subsidiary SOCAM sold the Four Seasons Hotel in Pudong to local Chinese developer BM Holdings.