CK Asset Sold RMB 4B Dalian Project to Sunac China as China Disposals Continue

CK Asset Holdings has sold a real estate project in the northeastern Chinese city of Dalian to Sunac China Holding for over RMB 4 billion ($560 million), according to an account by the Chinese business news site Caixin.

The sale is the latest in a series of moves by the Hong Kong-based developer controlled by Li Ka-shing that shrink CK Asset’s presence in the mainland, as the company turns its attention to opportunities in Europe and other locations.

A Reuters story later indicated that CK Asset had confirmed that it had entered into a sales agreement with Sunac about six months ago to dispose of the 143,000 square metre (1,539,239 square foot) mixed-use site without commenting on the reported price of the disposal.

Project Uncompleted After 8 Years

The deal was finally sealed four months ago, according to Reuters. The transaction was not mentioned in the interim results reports issued followed the closing of the period from January through June for either CK Asset or Sunac. CK Asset’s 2018 annual report indicates that the company owned a 100 percent interest in a 1.5 million square foot Heizuizi site in Dalian’s Xigang district.

At the reported price of RMB 4 billion, CK Asset, which is now helmed by Li Ka-shing’s eldest son Victor, would have taken home a capital gain of RMB 2.1 billion after paying RMB 1.9 billion to acquire the site in 2011.

The 143,000 square metre site is designated for residential and commercial development with Cheung Kong Holdings and Hutchison Whampoa, which spawned CK Asset through a company restructuring in 2015, having planned staged investments equivalent to $700 million and $500 million on top of the land premium paid, according to media reports from the time that the group took on the project.

Over the past eight years Li Ka-shing’s companies did not report having made progress on the project in Liaoning province, and no sales of homes have taken place. Tianjian-based Sunac China, which has been ramping up its project pipeline, is reportedly applying for syndicated loans from an unidentified creditor to finance its investment in the project.

CK Downplays Importance of Dalian Project

In its comments to Reuters, CK Asset represenatives soft-pedaled the importance of the project, indicating that the company’s income from the project sale was equal to less than two months average home sales revenues from its mainland residential projects. CK Asset took in an average of around HK$28 billion per year from sales of homes on the mainland over the last decade, according to the company.

Following the sale, CK Asset said that its contracted sales for this year remain in line with its performance over the last 10 years, and the developer still has over 50 projects in more than 20 cities in the mainland. CK Asset’s 2018 annual report showed that, including the recently sold project, the company had nine mainland developments in its pipeline as of 31 December, including The South Bay, which occupies a 3 million square foot site in the city.

The company will continue to seek opportunities in various industries in key markets, CK representatives added.

The Hong Kong-based conglomerate has sold a string of real estate assets in mainland China in recent years, reaping profits from a surge in land prices and property values.

CK Asset’s land bank in mainland China decreased by 23 percent between 2016 and 2018, while the firm’s overseas reserves remained unchanged. Its land bank in Hong Kong was down by 33 percent, according to annual reports.

In May, the company was said to be exploring the sale of its majority ownership in the Upper West Shanghai project in Putuo district — its last major mixed-use project in the city — at a price of up to RMB 20 billion.

Sunac Continues to Build Pipeline

As CK Asset gradually sells down its real estate holdings in mainland China, Hong Kong-listed Sunac China has been ramping up its project pipeline despite its high-profile chairman Sun Hongbin having vowed earlier in the year to take a more cautious approach towards land acquisition due to what he termed an ambiguous outlook for property sales.

In late September, Sunac won a residential plot in Shanghai’s suburban Qingpu district, agreeing to pay the city government a total of RMB 3.09 billion ($430 million) for the site.

That Shanghai acquisition came two months after the developer had paid RMB 6.7 billion to acquire a site in Hongkou district as one of a set of three Yangtze River delta projects it purchased from financially troubled mainland competitor Xinhu Zhongbao.