Shui On consortium wins prime Shanghai site for US$2 billion in government tender
The plot near Xintiandi – expected to generate more floor space than Hong Kong’s IFC One and Two – requires a total investment of US$3.8b, say analysts
A consortium led by Shui On Land has won a prime commercial plot in Shanghai in a government tender for 13.6 billion yuan (US$2.08 billion), a mere 0.1 per cent higher than the starting price.
The tender only drew two bidders at the final stage of the bidding because of the tough development requirements and the massive capital investment needed for the site, which was offered for 13.58 billion yuan.
The Hong Kong-listed developer’s partners in acquiring the lot on one of Shanghai’s main commercial thoroughfares Huaihai Zhong Road are China Pacific Insurance, which has a 70 per cent stake in the consortium and state-owned Yongye Group, a 5 per cent interest. Shui On owns a 25 per cent stake.
“Shui On has been selling assets for years but regained its bidding interest mainly because of the scarcity of prime site put up for sale,” said Raymond Cheng, head of research in Hong Kong and China research and property at CGS-CIMB Securities, in a research note.
Bidding with a consortium could reduce Shui On’s risk as huge capital investment was required to develop the site, Cheng said.
“The other two cash rich partners will also leverage on Shui On’s expertise in property development, particularly when its Xintiandi [entertainment district] has become an icon in Shanghai,” he said.
