Shui On Leads RMB 13.6B Purchase of Commercial Site Near Shanghai’s Xintiandi

In a joint effort with a pair of state-owned mainland partners, Xintiandi developer Shui On Land has won a government tender for a 78,256 square metre (842,340 square foot) prime commercial site near Shanghai’s Huaihai Lu with a bid of RMB 13.6 billion (US$2.08 billion), according to a statement from the Shanghai government today.

The developer’s purchase of the site in the city’s Huangpu district represents a comeback for Vincent Lo’s Hong Kong-listed firm after Shui On and its affiliates sold off some RMB 45 billion ($6.5 billion) of assets since 2013 in a drive to reduce debt.

Shui On’s group bid, which sees the developer taking a 25 percent stake in the project against 70 percent for Shanghai-based China Pacific Insurance and five percent for developer Shanghai Yongye Group, positions Lo’s company to develop one of the biggest sites to become available in central Shanghai in many years.

Shui On Gets Shot at Taipingqiao Project

This latest victory gives Shui On and partners control over Huangpu District Huaihai Zhong Road Land parcels 123, 124 and 132, a contiguous set of plots located just west of the South Xizang Road thoroughfare and to the east of Ji’an Road. The site is about three blocks to the east of Xintiandi and roughly the same distance from the Huaihai Lu shopping strip as the iconic entertainment zone.

The site, which is bordered to the north by Taicang Lu and Shouning Lu, and has Zizhong Lu to its south, is allocated for development of up to 242,689 square metres of commercial space, which makes Shui On’s winning bid work out to just under RMB 55,600 per square metre of built space.

Given the tender requirements set by the government, which required bidders to be among the world’s 500 largest companies and to have previous experience in developing similar projects, only two bidders made it to the tender’s final round. Shui On’s consortium is said to have bested Hongkong Land for the site just to the east of the Shui On’s 160-hectare Taipingqiao master plan for the area around Xintiandi and Taipingqiao park.

Ultimately, the price that Shui On and friends are paying for the site, which is more than twice the size of Xintiandi, is just 0.1 percent above the tender’s minimum bid.

Buying a Site After $6.5B in Asset Sales

Shui On’s involvement in the Shanghai deal is a bright spot for a developer that struggled with debt issues after failing to reproduce the success of its Xintiandi project in other mainland locations, leading to crippling debt issues for the China-focused builder.

To improve its balance sheet, Shui On agreed to sell its Dalian Tiandi project to local developer Yida China last year for RMB 4.65 billion ($701 million), just one month after agreeing to dispose of a 49 percent stake in its mixed-use Knowledge and Innovation Community (KIC) project in Shanghai for RMB 2.95 billion ($443 million), to a buyer believed to be a unit of mainland insurer China Life.

In May last year, Shui On sold off nearly 80 percent of its stake in Chongqing Tiandi complex to China Vanke for RMB 4.1 billion ($598 million).

Shui On’s largest sale to date was its disposal of Corporate Avenue in Shanghai to Hong Kong’s Link REIT for RMB 6.6 billion ($1.06 billion) in 2015.