Lower property values open doors to developers
Updated: 2012-04-18 08:04
By He Wei in Shanghai (China Daily)
The commercial property developer SOHO China Ltd has inked another deal to acquire a pricey plot of Shanghai real estate in an attempt to become a more prominent player in the city's business districts.
The purchase was the company's 11th in Shanghai since it entered the city in August 2009. It also showed how the country's current ebb in real estate prices is opening opportunities to the strongest property developers while putting others under pressure.
In a filing to the Hong Kong Stock Exchange on Tuesday, SOHO said it will pay 2.14 billion yuan ($340 million) for the entire equity interests of Shanghai Greentown Plaza Development Co Ltd, which is overseeing the development of the Tianshan Road Project in a business district in Shanghai.
According to the statement, the area is in the Hongqiao Foreign Trade Center in the city's Changning district, which is home to more than 4,400 enterprises and organizations, many of which are from overseas.
It occupies 25,594 square meters and has about 172,208 sq m in gross floor area, which can be used for office and commercial purposes.
The project has 100 million yuan in registered capital. Originally, 70 percent of it belonged to Greentown China Holdings Ltd, a Zhejiang-based property developer, and 30 percent to that company's partner, MaAnShan Hualong Real Estate Development Co Ltd.
Pan Shiyi, SOHO China chairman, said last year that his company was awash in cash, having 20 billion yuan on hand, and was looking to buy land from developers who are in need of funds as the property market softens.
Since then, the Beijing-based firm has acquired SOHO Zhongshan Plaza in Shanghai, a project that will be put toward commercial and office uses, and has bought a 50 percent stake in land near the city's prestigious Bund area. Greentown had previously held a 10 percent interest in that project.
From its latest sales of assets to Soho, Greentown China said it expects to reap 200 million yuan. It plans to use the net proceeds as general working capital.
"The net proceeds will increase our cash flow and increase our working capital, helping us to maintain our liquidity and conserve more financial resources for future investments when opportunities arise," Song Weiping, Greentown chairman, said in a regulatory filing.
Shares of SOHO closed down 0.34 percent on Tuesday afternoon, and Greentown China shares slid 0.53 percent. The benchmark Hang Seng Index, which looks at the largest companies on the Hong Kong Stock Exchange, fell by 0.23 percent.