Apartment developer to take commercial focus
Date:2007/06/08 Source:
SHANGHAI Shimao Co (Stock Code: 600823) plans to place 7.5 billion yuan (US$980 million) worth of non-public shares in trading for more than 10 commercial properties as it switches focus to shopping malls and office projects.
Shimao, a luxury apartment developer owned by Chinese mainland's second-richest man, Xu Rongmao, will sell up to 700 million shares to three units of Xu's Shimao Property Holdings Ltd at 10.68 yuan each, it said in a statement posted on the Shanghai Stock Exchange yesterday. In return, the company will receive 4.07 million square meters of space in 12 commercial projects and 750 million yuan in cash.
"Shanghai Shimao will shift to focus on commercial projects including hypermarkets, shopping malls and office buildings after the transaction while Shimao Property will focus on residential and hotel development," said the Shanghai-based developer in the statement.
Shimao, which used to develop luxury apartments on the mainland, will profit on the sale and leasing of commercial projects after the deal is completed by the end of this year. It expects the deal to widen its profit margin by exploiting the robust retail market.
"The move will help boost Shimao's bottom line by reducing the negative impact of government curbs on the housing market," said Wei Wei, an analyst at West China Securities Co.
"Commercial properties are delivering bigger profits given China's booming domestic consumption."
China's austerity measures, combining tax, lending and land controls, have made project approvals harder to come by. The government has unveiled a string of new policies restrict overseas real estate investment and ease the pressure on surging property prices. Foreigners are required to remain in China for at least a year before they can buy homes or apartments in the country.
In the meantime, retail sales jumped 13.7 percent in 2006 to 7.64 trillion yuan, up from the 12.9 percent gain a year earlier as the government cut taxes, raised minimum wages and increased spending to improve education, welfare and health care. Annual disposable incomes among city dwellers advanced 12.1 percent to 11,759 yuan while those in rural regions climbed 10.2 percent year on year to 3,587 yuan.
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