Sino Land Buying Raffles City Stakes From CapitaLand, GIC for $252M

Hong Kong developer Sino Land is sticking around at CapitaLand’s Raffles City Shanghai mixed-use development, agreeing to pay S$339 million ($252.1 million) to maintain its effective stake in the property’s mainland-based owner at 22.35 percent.

The deal enables the developer controlled by Singapore billionaire Robert Ng and his family to retain its ownership stake in the combined office and retail project next to central Shanghai’s People’s Square.

The transaction is related to CapitaLand’s announcement Monday that funds managed by the company were selling down their stakes in a set of six Raffles City projects in China, with the Canada Pension Plan Investment Board also revealing that it was selling down its interest in the portfolio.

Mainland insurer Ping An is taking over the stakes in the $7.2 billion portfolio sold by CapitaLand and its investment partners, which also include Singaporean sovereign wealth fund GIC.

Portfolio in Flux

Sino Land is maintaining its stake in the 139,593 square metre (1.5 million square foot) Raffles City Shanghai through a deal that includes buying shares in a Singapore entity that controls a local Shanghai vehicle, which ultimately controls the 18-year-old commercial complex.

Raffles City Shanghai is owned by locally incorporated Shanghai HQREM, which in turn is 95 percent held by a Singapore-based firm, HQH. As part of the Raffles City portfolio transaction, HQH agreed to sell a 60 percent interest in Shanghai HQREM to a third party, HKEX-listed Sino Land said in a disclosure to the exchange.

Under the terms of the deal, Sino Land will purchase a 22.68 percent stake in HQH from Singaporean property giant CapitaLand for S$190.7 million and a 17.65 percent stake in HQH from Singapore sovereign fund GIC for S$148.3 million.

Upon completion of the transaction, CapitaLand will hold a 36.14 percent stake in HQH and GIC will have exited entirely, Sino Land said.

CapitaLand said in its Monday announcement that it expects to collect net proceeds from its sale of the stakes — which include slices of combined retail, office and residential projects in Shanghai, Beijing, Hangzhou, Ningbo and Chengdu — of more than $1.5 billion. CPPIB expects to generate net proceeds of around $650 million from the same disposal.

The agreed value of the six-property portfolio is RMB 46.7 billion ($7.2 billion). CapitaLand said it would retain an effective stake of 12.6 percent in Raffles City Shanghai via holding vehicle Raffles City China Income Ventures Ltd upon completion of its divestment.

“CapitaLand will continue to hold stakes in and provide asset management services for these six Raffles City developments,” said group CEO Lee Chee Koon.

Maturing Asset

In its presentation explaining the Raffles City divestment, CapitaLand said the asset sale was a continuation of the Temasek Holdings-controlled group’s shift towards more tech-oriented property holdings.

The 2003-vintage Raffles City Shanghai is the eldest of the nine Raffles City developments in China. The bustling commercial hub consists of 91,578 square metres of office space and a shopping mall situated at Xizang Zhong Road and Fuzhou Road in Huangpu district.

In its HKEX disclosure, Sino Land characterised its investment in Raffles City Shanghai as a long-term investment generating steady, recurrent income for the company.

The purpose of its stake purchase in HQH is to restore its effective interest in Shanghai HQREM and Raffles City Shanghai to 22.35 percent after HQH’s divestment, Sino Land said.