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Soho China considers selling stake in commercial property holdings

The deals, including at least eight office towers in Beijing and Shanghai, would fetch as much as US$8b


SOHO China is considering selling a majority of its commercial property holdings in deals that may fetch as much as US$8 billion, according to people familiar with the situation.

At least eight office towers in Beijing and Shanghai are being discussed as part of the planned sales, said the people, who asked not to be named because the discussions are private.

An initial batch of projects worth as much as US$3 billion is being shopped to potential buyers. Sovereign wealth funds and private equity groups are said to be among those being approached. The talks are still at an early stage and the final number of projects is still to be decided.

The developer's Hong Kong-listed stock closed up a record 18 per cent on Wednesday, erasing most of 2019's decline. Trading volume of 163 million shares was the highest since the week of Soho's initial public offering in October 2007.

The potential sales signal Soho China may be shifting away from the nation's office market, which has been hit by declining rents and decade-high vacancy rates as economic growth slows.

Beijing has suffered one of the biggest declines in office rent yields globally in the past three years, according to Savills.

If completed in a single line, the deal would be China's biggest commercial property transaction.

China Overseas Land & Investment paid US$4.4 billion for Citic's property assets in 2016 as part of a government-backed restructuring, according to data from Real Capital Analytics.

However, Soho China will probably sell the assets in stages. Soho China's properties were worth US$8.6 billion as of June 30, according to company filings.

The company's price-to-book ratio is near a record low of 0.3, suggesting the assets would be more highly valued in the private market.

The company has already started to offload some non-core real estate assets. In June, it began marketing individual floors in 13 properties for a combined $1.1 billion. In September, it sold parking lots under nine of its buildings for US$108 million to a Hong Kong private equity fund.

The buildings being evaluated for potential sale include its signature Bund SOHO in Shanghai's city centre and the landmark Wangjing SOHO in Beijing, designed by the late Zaha Hadid, the first woman to receive the prestigious Pritzker Architecture Prize. BLOOMBERG

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