Soho China, struggling with flagging profits and stock price, put up US$1.13 billion office assets for sale

By Zheng Yangpengyangpeng.zheng@scmp.com / https://www.scmp.com/business/companies/article/3016580/soho-china-struggling-flagging-profits-and-stock-price-put-us113?utm_medium=partner&utm_campaign=contentexchange&utm_source=EdgeProp | July 2, 2019 11:51 AM SGT
Soho China, one of the country's largest commercial developers, is putting 7.8 billion yuan (US$1.13 billion) of office assets up for sale, making its biggest disposal in the company's two-decade history to raises capital to buy land to expand its land bank.
The developer on Friday put 20,000 square metres of office space in five Beijing and Shanghai projects on the market.
The move conflicts with a pledge by its chairman Pan Shiyi a year ago not to sell core assets in either of the two mainland cities.
Unlike many of its peers, Soho China has shifted away from the "build to sell" model which relies on high turnover. Since 2014 it has following the model used by Hong Kong developers who act as landlords, earning recurring income from rental property.
Developers Country Garden and Evergrande have favoured an aggressive building programme based on quick sales, amid low rental income yields that do not cover the borrowing rate.
Soho China's rental income from investment properties rose 4 per cent to 1.735 billion yuan in 2018. It reported net profit of 1.9 billion yuan, benefiting mainly from a 1.09 billion yuan asset revaluation gain. The profit result reflected a drop of 59.3 per cent from a year earlier.
"Soho's investment property is too large ... in the future we'll not buy rent-yielding properties but development sites to sell properties," Pan said Friday. "We'll retain our core assets in the two cities [Shanghai and Beijing] and we remain bullish on the market for long term."
Soho China made a number of asset disposals in 2016 to 2017. These included the sale of the Shanghai Hongkou Soho, an office-commercial project, for 3.57 billion yuan and the Shanghai Lingkong Soho for 5 billion yuan.
If the developer is successful in disposing of its Shanghai and Beijing properties for the 7.8 billion yuan asking price, the disposal would be the largest in its history.
Soho China chairman Pan Shiyi announces the company's expansion plans in tier 1 and 2 cities on June 20, 2018. Photo: Handout alt=Soho China chairman Pan Shiyi announces the company's expansion plans in tier 1 and 2 cities on June 20, 2018. Photo: Handout