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Soho China extends buying spree with 3.2b-yuan deal

Updated: 2011-05-07 07:53

By Carmen Zhang and Joy Li(HK Edition)

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Soho China extends buying spree with 3.2b-yuan deal 

A security guard walks on patrol past a SOHO sign in Beijing where the company is based. The Hong Kong-listed SOHO China announced its seventh acquisition in Shanghai Friday. Frederic J. Brown / AFP

Shanghai to host firm's highest priced acquisition so far

SOHO China Limited, a leading Chinese commercial property developer, announced Friday it had signed a 3.2 billion yuan acquisition agreement with Shanghai Trio Property Development Company Limited for Shanghai New World Changning Commercial Center.

This is Hong Kong-listed SOHO China's seventh acquisition in Shanghai in two years and its highest priced conquest in the city so far.

The project, including two office buildings and underground space, will be renamed "SOHO Zhongshan Plaza" after the acquisition. It occupies an area of 16,176 square meters for both commercial and office use, with gross floor area of 142,184 square meters. Of this, 100,199 square meters will be for offices and 12,664 square meters for commercial use.

Situated at Zhongshan West Road, SOHO Zhongshan Plaza is set to be the core of the Hongqiao commercial district, only 2 kilometers from Xujiahui, one of the best known commercial areas of Shanghai.

The acquisition is in line with SOHO China's strategy of focusing on commercial property projects at prime business locations along major transportation networks in Beijing and Shanghai.

From its first entry in Shanghai with the acquisition of The Exchange SOHO in August 2009, the Group has presented itself in seven of the city's most vibrant commercial locations, with an accumulated investment of 14.7 billion yuan. The latest acquisition is the third in a series following Caojiadu land and Hailun Lu land since last month.

"SOHO China has very strong cash flow position; it would be a waste if they don't make acquisitions. Meanwhile, they don't have many projects to be completed this year, which means their contracted sales will be affected if (they are) without acquisitions," said Eric Ng, property analyst at CITIC Securities International, commenting on the acquisition momentum.

The company has announced its annual acquisition target of 15 billion yuan earlier this year.

Under a series of cooling measures from last year as well as the government's housing policy, the residential property market has experienced the most significant impact in stark contrast to the booming commercial real estate market.

"Commercial real estate has great potential. Looking at the rate of rental yield alone, where apartments and homes earn 3 percent, commercial real estate earns at least 6 percent, effectively doubling profits," said Pan Shiyi, chairman of SOHO China.

According to Deloitte's research, the residential property price index of Beijing and Shanghai this April registered a year-on-year growth of just 4.41 percent and 2.03 percent, down 7.58 percent and 7.53 percent respectively, the lowest in the first quarter this year.

In contrast, research from Jones Lang Lasalle showed the rentals of Grade A offices in Shanghai in the first quarter increased by 6.6 percent from the fourth quarter last year, with a 24.1 percent year-on-year growth.

"At the current stage, the commercial real estate market in China has not shown signs of bubble and is less subject to policy crackdowns. As a result, we will see more developers setting foot in the commercial property market," noted Ng from CITIC Securities.

China Daily

Soho China extends buying spree with 3.2b-yuan deal

Soho China extends buying spree with 3.2b-yuan deal

Soho China extends buying spree with 3.2b-yuan deal

(HK Edition 05/07/2011 page3)

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