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Monday, Nov 18, 2019

Soho China considers 8 billion dollars office tower sales

An insider said that initial batch of projects worth as much as $3 billion was being shopped to potential buyers with sovereign wealth funds and private equity groups among those being approached.

real-estate Updated: Oct 30, 2019 12:33 IST
Bloomberg
Bloomberg
It has been reported that at least eight office towers in Beijing and Shanghai were being discussed as part of the planned sales. Image used for representation
It has been reported that at least eight office towers in Beijing and Shanghai were being discussed as part of the planned sales. Image used for representation (Bloomberg photo)
         

Soho China Ltd. is considering selling a majority of its commercial property holdings in deals that may fetch as much as $8 billion, according to people familiar with the situation.

At least eight office towers in Beijing and Shanghai are being discussed as part of the planned sales, said the people, who asked not to be named because the discussions are private.

An initial batch of projects worth as much as $3 billion is being shopped to potential buyers, the people said. Sovereign wealth funds and private equity groups are among those being approached, one of the people said. Talks are still at an early stage and the final number of projects is still to be decided, the people said.

Shares of Soho China jumped as much as 10% in afternoon trading in Hong Kong, it’s biggest intraday gain in almost two years. Before today, the shares had slumped 18% this year.

The potential sales signal Soho China may be shifting away from the nation’s office market, which has been hit by declining rents and decade-high vacancy rates as economic growth slows. Beijing has suffered one of the biggest declines in office rent yields globally in the past three years, according to Savills Plc.

Soho China declined to comment.

China Office Vacancies Reach Decade High on Slowing Economy

If completed in a single line, the deal would be China’s biggest commercial property transaction. China Overseas Land & Investment Ltd. paid $4.4 billion for Citic Ltd.’s property assets in 2016 as part of a government-backed restructuring, according to data from Real Capital Analytics.

However, Soho China will probably sell the assets in stages, the people said.

Soho China’s properties were worth $8.6 billion as of June 30, according to company filings. The company’s price-to-book ratio is near a record low of 0.3, suggesting the assets would be more highly valued in the private market.

The company has already started to offload some non-core real estate assets. In June, it began marketing individual floors in 13 properties for a combined $1.1 billion. Last month, it sold parking lots under nine of its buildings for $108 million to a Hong Kong private equity fund.

The buildings being evaluated for potential sale include its signature Bund SOHO in Shanghai’s city center and the landmark Wangjing SOHO in Beijing, designed by Zaha Hadid, the first woman to receive the prestigious Pritzker Architecture Prize, the people said.