Shui On Land, in a bid to pare its debts, is reported to have signed a memorandum of understanding with a buyer to sell off a 50 percent stake in its Ruihong Xincheng mixed-use project for RMB 8 billion ($1.16 billion), according to a report in the South China Morning Post.
The deal gives the investor a half-stake in a set of four sites in Shanghai’s Hongkou district sites that add up to 667,955 square meters. The sites involved are residential lots 1 and 7 and commercial lots 3 and 10. Following the model that Shui On made famous at its landmark Xintiandi project, Ruihong Xincheng is built around a kilometre-long Ruihong Tiandi retail strip, but also includes entertainment venues, boutique hotels, and luxury offices.
Vanke Rumoured to Be in the Mix
The South China Morning Post reported that China Vanke is Shui On’s partner in the transaction, however, brokers familiar with the deal told Mingtiandi that the Shenzhen-based developer is not involved. In 2015, Vanke teamed with Hong Kong’s Lee Kum Kee group to purchase Shui On’s Corporate Avenue 3 project in Shanghai for RMB 5.7 billion.
Should the deal be consummated it would value the Hongkou project at RMB 16,000 per square metre for the commercial space and RMB 40,000 per square metre for the residential element. In February of last year, Shui On reportedly sold 352 units in its The Upper residences at Ruihong Xincheng for RMB 80,000 per square metre.
Shui On had put the Ruihong Xincheng project on the block as the company continues to shape up its ailing balance sheet. The developer’s debt to common equity ratio stood at 123.8 percent according to its most recent financials, and this comes after Shui On has sold off a string of its most valued assets since 2013.
Shui On One of China’s Leading Sellers of Projects and Assets
In an attempt to make good on their debts, the company sold more than 16.7 billion RMB in assets between 2015 and 2016, the biggest being Hong Kong’s Link REIT snatching up Shui On’s Corporate Avenue for RMB 6.6 billion in 2015.
In 2014, Shui On sold two hotels next to Xintiandi to Great Eagle, the developer run by older brother of company chairman Vincent Lo, for RMB 2.7 billion.
In 2016 Shui On sold the Lingnan Tiandi project in Foshan, Guangdong province to Country Garden for RMB 1.73 billion ($267 million), taking a record loss of RMB 90 million ($13.9 million) on the transaction.
Shui On now is pinning its hopes on propagating its Knowledge and Innovation Community (KIC) concept across China. The developer has been leasing office space and selling homes around its its tech-friendly Shanghai KIC in Shanghai for several years, and now says it wants to build ten more such projects nationally.
In August last year, Shui On was reported to be seeking potential buyers for the KIC project in Shanghai’s Yangpu district.