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China Daily Website

SOHO selling Shanghai properties to 'rebalance'

Updated: 2013-11-13 14:18
By Wang Ying in Shanghai ( China Daily)

SOHO China Ltd Chairman Pan Shiyi said in a micro blog posting that the company is rebalancing its portfolios in Beijing and Shanghai, indirectly confirming media reports that the company is selling some properties in Shanghai.

Media reports said that Hong Kong-listed SOHO China had put three projects up for sale in Shanghai - two commercial projects (Hongkou SOHO and SOHO Hailun Plaza) and one commercial-residential project (SOHO Jing'an Plaza).

"We are doing business, and selling is as normal as buying.Don't read too much into the matter," Pan wrote, apparently aiming to quash speculation that the transactions represented a flight from the increasingly pricey domestic property market.

SOHO's move follows a reported decision by Hong Kong tycoon Li Ka-shing to reduce his holdings of properties on the Chinese mainland. Li reportedly sold more than 10 billion yuan ($1.64 billion) of property in the nation recently, including an office building in Shanghai's Pudong New Area.

Li's moves were taken by many observers as a sign that risks are looming in China's highly speculative property market.

"We have invested up to 50 billion yuan in the Shanghai property market, accounting for 75 percent of SOHO's total. As Beijing and Shanghai will be our joint focus, we are optimizing our investment portfolios between the two cities," wrote Pan.

Some analysts said that Pan's explanation was reasonable.

"Compared with SOHO's other projects in Shanghai, the three projects are less competitive. Selling them and getting cash back could help the development of other projects," said Zhang Hongwei, research director of Shanghai-based property consultancy ToSpur.

As of April, SOHO China had acquired 12 projects in Shanghai, with an aggregate transaction value of 28.7 billion yuan.

"SOHO China's expansion pace in Shanghai is a bit too fast, and to sell some of [the projects there] is understandable," said Regina Yang, head of research and consultancy with Knight Frank, Shanghai.

"For the record, SOHO is not the kind of developer that holds projects for long-term investment. It's better to find new buyers and get proceeds from the sale than operate unsuccessful projects and have to sell them later", said Yang.

After 12 months of softening, the average asking rent in Shanghai was flat at 250.80 yuan per square meter per month in the third quarter, up just 0.3 percent quarter-on-quarter on a like-for-like basis, according to global commercial real estate services firm CBRE Group Inc.

Office supply in the city is expected to rise in the next six months, with total new completions of 380,000 sq m. Although office demand might rise as the economy improves, tenants will still have the upper hand because of the new supply that will become available, CBRE said.

In spite of the huge demand, there will be abundant supply in the next three to five years, which requires operators to make adjustments and position themselves accordingly, said Zhang.

At least 5 million sq m of office space will be released in the next three to five years in the Hongqiao central business district, Pudong's former Shanghai 2010 Expo sites and the Putuo district, he said.

In August, Pan said in SOHO's interim report that the company has transformed its business model from selling properties to owned-and-operated projects.

 
 
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