Pan Shiyi could have looked grumpy about the US Open match or because his $3 bil deal was called OB
Mainland authorities are continuing to clamp down on the nation’s billionaires with real estate power couple Pan Shiyi and Zhang Xin, who together control and manage developer Soho China, recently joining Jack Ma and other heavyweights in the regulatory penalty box.
The Shanghai Municipal Market Supervision and Administration Bureau earlier this month that it has fined units of Soho China a total of RMB 86.64 million ($13.6 million) due to “electricity price violations” at seven of the company’s projects.
The government statement indicated that Soho had been gouging tenants on electricity charges in most of the buildings the developer owns in Shanghai, with this latest penalty coming less than two months after the Beijing Municipal Taxation Bureau announced that it was inspecting a Soho subsidiary in the city for tax evasion.
Soho’s December gift from Shanghai authorities follows the failure of Pan and Zhang’s planned $3 billion sale of the office developer to Blackstone due to China’s anti-monopoly authority failing to approve what would have been China’s largest single real estate transaction ever.
Power Gouging
The seven Soho properties accused of “violating relevant provisions of the “electricity law of the People’s Republic of China,” include the company’s most successful Shanghai project, Bund Soho on Shanghai’s historic riverfront, with another Huangpu district property, Soho Fuxing Plaza, also being fined.
Bund Soho has been the developer’s most successful Shanghai project
Soho Fuxing Plaza has earned the biggest fine among the properties at RMB 21.73 million, for having illegally collected a combined RMB 7.25 million from 275 tenants in the name of “shared energy consumption,” the government bureau said.
A total of seven properties were fined amounts ranging down to RMB 1.58 million for the same practice.
Also on the naughty list this December are Gubei Soho, Soho Zhongshan Plaza and Soho Tianhui Plaza (formerly Sky Soho and Lingkong Soho) in the Hongqiao area, Soho Donghai Plaza in Jing An district and Tianshan Soho in Changning district.
The fines levied against Soho came after chairman Pan Shiyi had finally been able to share some good news in October, when he announced improved leasing in the company’s portfolio, including reaching 100 percent occupancy at Gubei Soho during the third quarter for the first time ever.
Soho Struggles
Fortunately for Soho China, since the news of the electricity fines was released, the company’s stock has not fallen, but that may be in part due to the amount of value the developer’s shares have already lost this year.
Soho’s Hong Kong-listed shares closed at HK$1.82 per share on Friday, which is down nearly 21 percent from the start of the year and more than 60 percent below the HK$4.60 per share that the stock traded at when Blackstone’s buyout offer was announced in June.
The stock suffered fell by as much as 40 percent in September — its biggest daily drop since its 2007 IPO — after Blackstone announced the end of the buyout deal.
In officially ending the takeover, the US fund manager noted that one of the reasons was a “lack of sufficient progress in satisfying the pre-conditions” of the deal. Prior to the final cancellation, Soho China had declared to the stock exchange that regulatory approval from China’s State Administration for Market Regulation (SAMR) was required for completion of the transaction, with no notice of that hurdle having been achieved.
Billionaire Blues
The trouble for Soho’s Pan Shiyi and Zhang Xin places them among a small but growing group of mainland billionaires to face trouble in recent months as Beijing promotes “common prosperity” and seeks to rein in businesspeople seen as independent.
Alibaba’s Jack Ma has been the highest profile case with the government having scrapped an expected $37 billion IPO of the outspoken tech entrepreneur’s Ant Financial Group late last year. During 2021, ride-sharing platform Didi Chuxing ran into similar trouble with the government shutting down new registrations for most of its services after the company proceeded with a New York IPO despite regulator concerns.
Both Pan and Zhang faced criticism on mainland social media in September after having been spotted attending the US Open tennis tournament in New York while they were still attempting to sell their company to Blackstone. WIth Zhang having purchased a Manhattan townhouse in 2013 for $26 million, Pan is reported by Hong Kong news site HK01 to have spent much of 2020 and 2021 in the US.
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