Soho China Sells Shanghai Complex to Gaw Capital in $754M Deal

Beijing-based developer Soho China is selling a Zaha Hadid-designed project on the western edge of Shanghai to a fund managed by private equity house Gaw Capital for a total consideration of RMB 5.01 billion ($754.1 million), as the company owned by mainland power couple Pan Shiyi and Zhang Xin continues to feast on China’s bull market.

Soho expects a gross profit of about RMB 367 million ($55.3 million) from the disposal of the Sky Soho project in Shanghai’s Changning district. The deal involves cash consideration of RMB 2.95 billion ($444.8 million), plus outstanding bank loans and net working capital, Soho said in an announcement to the Hong Kong exchange.

The transaction comes less than four months after Soho offloaded another mixed-use project in an emerging commercial district of Shanghai for RMB 3.6 billion ($525 million). That sale followed the disposal of Soho Century Plaza, a commercial project in Pudong district, for RMB 3.2 billion ($485 million) in July of last year.

Beijing Landlord Sheds Another Shanghai Asset

Sky Soho, also known as Linkong Soho, is a group of grade A commercial buildings located on Beidi Road, in the Hongqiao Linkong Economic Zone, just west of downtown. The complex has a total gross floor area of around 128,175 square metres, which equates to a selling price of RMB 39,072 per square metre, and includes 103,014 square metres of office accommodation and 25,161 square metres of commercial space.

Soho picked up the site in 2010 for RMB 1.56 billion, marking one of its first acquisitions in Shanghai. The development was completed in November 2014.

Sky Soho was among a set of three Shanghai projects the company said it would put on the market in August of last year, as part of a strategy to shed non-core properties and focus on prime revenue-generating assets. The other projects consisted of Hongkou Soho and Soho Tianshan Plaza, Pan told reporters.

This past June, the developer got the first of those projects off its hands by selling Soho Hongkou, an office and retail complex in the North Bund commercial area, to a joint venture led by Singapore’s Keppel Land China and Alpha Investment Partners for about RMB 3.6 billion. The disposal of the 70,042 square metre complex came three months after SOHO said it was dropping its plans to sell the property.

Soho Slims Downs

Then in July, Soho announced it was actively marketing Sky Soho, along with its Guanghualu Soho 2 project in Beijing. In the same month, the developer signalled that its asset sale program had stepped into high gear, with Pan telling the South China Morning Post that he was willing to sell the company’s entire portfolio of 21 properties, except for “two iconic Soho buildings in Beijing and Shanghai.”

Pan did not name the iconic Shanghai property. Soho Tianshan Plaza, a large-scale office, retail and hotel development located on Tianshan Road in the Hongqiao business hub, still remains in the company’s portfolio.

Gaw Deepens Shanghai Commitment

In its own statement on the deal, Hong Kong-based Gaw Capital emphasised Sky Soho’s location and the ongoing demand for prime office and retail space generated by Shanghai’s booming economy. “We have been eyeing the Hongqiao Transportation Hub, because it is an unique integrated business district in the world connecting to both the airport and the high-speed railway station,” said Humbert Pang, Head of China for Gaw Capital Partners in the statement.

“We are extremely pleased to have the opportunity to acquire this top-grade development in such an ideal location close to the Hub and within the broad catchment area of the new cluster of cities in Jiangsu province.”

Gaw has been investing in Shanghai for over a decade, with a focus on revamping and repositioning a wide range of commercial properties. The firm’s portfolio in the city includes Cross Tower, a 22-storey office tower with a retail podium nearby the Bund, and Corporate 88, a low-density office park in Jiading district.

A report this week indicated that Gaw Capital, which is one of Asia’s most active private equity real estate investors, is bidding against Blackstone and KKR for a $2 billion portfolio of retail assets in Hong Kong.