Shui On Sells Dalian Tiandi to Yida Group for $701M


Shui On chairman has now sold off around RMB 45 billion ($6.5 billion) of assets

Shui On Land is selling off its mixed-use Dalian Tiandi project to a Chinese business park builder in a deal totalling RMB 4.65 billion ($701 million), marking the latest in a seemingly endless series of asset sales by the developer of Shanghai’s landmark Xintiandi.

Under the agreement announced Tuesday, Yida China Holdings will buy out the remaining stake it does not own in the 3 million square metre mixed-use project in the northeastern city of Dalian from Shui On Land and its affiliated joint venture partner SOCAM Development.

Through the deal with Yida – best known as the developer of Dalian Software Park – Shui On is continuing an “asset-light” drive that has seen the Hong Kong-listed firm chaired by Vincent Lo dispose of some RMB 45 billion ($6.5 billion) of assets since 2013.

Yida Buys Out 3 Million Square Metre Project

Master-planned by Shui On, Dalian Tiandi integrates office, residential, commercial, and retail properties along with hotels, educational facilities and a business park. The ambitious, partly-completed project is located within the national government-backed Dalian High-Tech Zone in the western suburbs of the port city.

Some 300,000 square metres of the mixed-use Dalian Tiandi project have been completed

Yida already owns an effective 30 percent stake in Dalian Tiandi, through its ownership of a 22 percent interest in the project plus a 10.3 percent stake in holding company Richcoast Group, which in turn holds a 78 percent interest in the project.

Through the transaction, Yida will buy a 61.5 percent equity interest in Richcoast Group from a unit of Shui On Land for RMB 3.19 billion ($481 million), and a 28.2 percent interest from SOCAM Development, which is also helmed by Vincent Lo, for RMB 1.46 billion ($220 million). The RMB 4.65 billion deal will give Yida full ownership the project.

In its own stock exchange filing, Hong Kong-listed Yida said the acquisitions would enable the group “to rapidly increase its saleable resources and realise sales return,” as well as boosting the group’s operational efficiency in the Dalian business park district.

As of year-end 2016, Yida had a portfolio of six business parks, including Dalian Software Park – a 680-hectare IT hub in the Dalian High-Tech Zone – and the nearby Dalian Ascendas IT Park, a 50-50 joint venture with Singapore-based Ascendas, according to the group’s most recent annual report.

Shui On Offloads Loss-Making Project

By disposing of Dalian Tiandi, Shui On will generate net proceeds of just over RMB 3.1 billion ($467 million), which the group says it will use to reduce its bank borrowings. “The Transaction enables the Group to optimize the value of some of its mature and/or underperforming properties, to improve its overall asset turnover rate, and to recycle its capital into other new opportunities,” Shui On announced.

Most of the project has yet to be built. Shui On said in its 2017 interim report that 300,000 square metres of residential, office, retail and serviced apartment space had been completed (not counting 490,000 square metres of car park and other facilities), while another 880,000 square metres was under development and 1.57 million square metres is planned. Some 285,000 square metres of space is expected to be completed from the second half of 2017 through 2020.

Shui On reported that its associates and joint ventures suffered a RMB 251 million ($37 million) loss in the first half of the year, “which was mainly from the Dalian Tiandi development.” The project’s operator Richcoast Group saw a net loss of nearly RMB 570 million in 2016.

Vincent Lo Sheds Another Asset

The Dalian Tiandi sale is only the latest move by the developer of Shanghai’s Xintiandi complex to bail out its balance sheet by offloading projects. The serial seller of assets agreed just last month to dispose of a 49 percent stake in its mixed-use Knowledge and Innovation Community (KIC) project in Shanghai for RMB 2.95 billion ($443 million), to a buyer believed to be a unit of mainland insurer China Life.

In May, the developer sold off a nearly 80 percent stake in its Chongqing Tiandi complex to China Vanke for RMB 4.1 billion ($598 million). And Shui On was reported in March to be in the process of selling a 50 percent stake in Ruichong Xincheng, another mixed-use Shanghai project, for RMB 8 billion ($1.16 billion).

Shui On’s largest sale to date was its 2015 disposal of Corporate Avenue in Shanghai to Hong Kong’s Link REIT for RMB 6.6 billion ($1.06 billion).