CK Asset Said Exploring $2.9B Sale of Stake in Shanghai Project

Victor Li’s CK Asset Holdings is exploring the sale of its majority ownership in its last large-scale mixed-use development in Shanghai for up to RMB 20 billion ($2.9 billion), according to an account by Bloomberg.

Should the Hong Kong-based developer succeed in selling its 60 percent stake in the Upper West Shanghai project in the city’s Putuo district project at its target price, the disposal would rank among the largest property transactions ever in China, according to Mingtiandi’s estimates.

Now headed by second-generation tycoon Victor Li, CK Asset — as the property division of billionaire Li Ka-shing’s business empire — has been gradually selling down its real estate holdings in mainland China in recent years, as it turns its attention to opportunities in Europe and other locations.

Putting a Northwest Shanghai Mega-Project on the Block

So far, CK Asset representatives have yet to confirm the reported sale effort. “(CK Asset) frequently receives offer proposals but these don’t necessarily mean the company will accept and sell the projects,” Wendy Tong Barnes, chief corporate affairs officer for the company said in  response to the media report.

CK Assets predecessor companies had originally purchased the 197,000 square metre (2.12 million square foot) site for the Upper West project for RMB 2.2 billion in 2006, with the reported asking price for the developer’s stake putting the value of the uncompleted project now at over RMB 33.3 billion.

According to CK Asset’s 2018 annual report, the mixed-use development includes office, retail, hotel and residential elements totalling 2.16 million square metres of gross floor area, with the potential sale valuing the property at RMB 15,426 per square metre of built area. The Hong Kong-listed firm’s partner in the Putuo district project is Zhejiang-based developer Herun Group, which has not yet made a public statement regarding a potential transaction.

Construction on the Upper West started in 2009 with CK Asset previously announcing plans to anchor the project with a 320 metre supertall tower, which would be the tallest in Shanghai’s Puxi area. The development, situated on the northeast corner of the Zhenru Station on metro line 11 four stations north of where it intersects metro line 2 at Jiangsu Road station, is the largest project being built within Shanghai’s middle-ring road area and has been targeted for completion by the end of 2018.

While sales of the residential portion of the project are said to be starting this month, the opening of the project’s 220,000 square metre shopping centre, dubbed “Love@Cosmopolitan” had been pushed back from the second half of 2018 to March of this year and, after missing that deadline, has not yet been rescheduled.

Putuo Becomes Development Priority

CK Asset’s Upper West project is located in an area of major redevelopment over the past half-decade, with builders clearing away old buildings to build a project pipeline equivalent to around six million square metres of new real estate in the Zhenru area.

The local government announced this past week that the old Tongchuan Road Seafood Market, which is about one kilometer from Upper West Shanghai, has been fully demolished and is now ready for development by Shanghai-based Bright Food Group.

Last October, a consortium led by China Overseas Land & Investment won four parcels in the area, paying at total of RMB 9.4 billion to acquire around 70,000 square metres of site area. The site, which the Hong Kong-listed developer purchased for the equivalent of RMB 13,428 per square metre of space can yield up to 158,800 square metres of homes and another 67,800 square metres of commercial space.

CK Keeps the Big Sales Coming

Should CK Asset succeed in selling its ownership in the Upper West project, the deal would match the size of the RMB 20 billion sale of a half-stake in Pudong’s Century Link commercial complex by Cheung Kong Property Holdings and affiliates of Li Ka Shing (Overseas) Foundation in 2016. Cheung Kong Property Holdings was renamed as CK Asset Holdings in 2017.

That Pudong sale to an ARA Asset Management fund backed by China Life currently ranks as the second-largest single real estate transaction ever in China, according to Mingtiandi’s estimates, after China Overseas Land & Investment Ltd’s RMB 31 billion purchase of CITIC Ltd’s residential real estate division in March 2016.

The sale of the Century Link complex came after the Li Ka-shing-backed ARA Asia Dragon Fund sold the Nanjing International Finance Center (Nanjing IFC) to SanPower Group for RMB 2.48 billion in January 2014.

Last August, the company was reported to be downsizing its Shanghai team by 30 percent amid a shrinking presence in the city. If the Zhenru deal is concluded as reported, CK Asset’s remaining projects in Shanghai would include the 1.6 million square foot (151,786 square metre) Hupan Mingdi residential development in Jiading District and the 726,757 square foot City Link commercial project in Jing An District.