Economic Observer Network reporter Ding Wenting On the evening of January 28, 2022, Shimao Group (00813. HK) announced that it signed a sale agreement with Shanghai Real Estate Group to sell the Bund Mojo Hotel in Shanghai for a total consideration of RMB4.5 billion. It is expected to realize the proceeds of the sale of approximately RMB3.01 billion. The purchaser, Shanghai Real Estate Group, is a state-owned enterprise mainly engaged in property development business.
The transaction will be completed in installments, the first instalment of $3.65 billion, which will be paid by the buyer on the closing date and used directly to release the mortgage on the hotel property, the charge of accounts receivable and other encumbrances of the target company. The balance will be paid after the sale of shares and the sale of bonds.
Located at No. 199 Huangpu Road, Bund, Hongkou District, Shanghai, shanghai, located at the northern end of the Bund, a few steps from Waibaidu Bridge, the hotel has a total area of about 109,900 square meters, a total of 631 rooms (including 48 suites) and meeting rooms, restaurants, parking lots, etc. The hotel property is currently operated under the Grand Hyatt hotel brand.
In the announcement, Shimao explained the reasons for the sale of the property, saying that it was beneficial to the company to consider selling some properties to reduce liabilities, carry out the sale and realize the value of the hotel property.
In addition to the sale of The Bund Hotel Shanghai, Shimao also included InterContinental Shanghai Sheshan (Shenkeng Hotel), Shanghai Sheshan Royal Elite Hotel and Le Royal Meridien Shanghai in the sale list. In addition to Shanghai, there are 36 projects for sale in the country, including hotel projects in Nanjing, Wuhan, Wuyishan and other places.
Since December 2021, including the sale of the Bund Mo yue hotel in Shanghai, Shimao has sold four projects, and the projects sold are mostly state-owned enterprises. On January 21, 2022, Shanghai Jiushi (Group) Co., Ltd., which received the sale of The Commercial Land on Huangpu Road in downtown Shanghai, a subsidiary of Shimao Real Estate, became a wholly-owned enterprise of the Shanghai Municipal State-owned Assets Supervision and Administration Commission, mainly engaged in the operation of state-owned assets authorized by the Shanghai Municipal People's Government and investment in government projects.
On January 24, China Overseas Real Estate, the buyer who took over another Project of Shimao, Guangzhou Asian Games City, is also affiliated with China State Construction Group Co., Ltd. and is controlled by a central enterprise. At the same time as taking over the Shimao Guangzhou Asian Games City project, China Shipping also acquired the equity of Agile in the project.
An investment leader of small and medium-sized housing enterprises told the Economic Observer Network that since the fourth quarter of last year, some housing companies have alleviated the pressure on funds by selling assets and real estate projects, and there are a large number of housing enterprise projects with difficulties in the market. "It's a lot more than the previous two years." The investment person in charge said that, for example, in Shanghai, the projects that can be seen in the past have been "floating" for a long time, and they have been "dug" many times by many companies, the situation is very complicated, there are many problems, so no one is willing to take over. But as some companies start selling assets to get their money back, there are more "opportunities" to see in the market than in the past. However, he also mentioned that from the perspective of the projects currently sold in the Jiangsu, Zhejiang and Shanghai areas, most of the peripheral city projects are numerous, and the core city projects are few. There are also projects in remote townships, or projects that enterprises have taken from high land prices in the past.
"Most of them are not projects that can be quickly realized, and they are generally accepted by large state-owned assets." He introduced that from the perspective of investment, the priority order of acquiring assets is residential, commercial, office and hotel. "Because of the slow return on investment in hotel projects, which involve depreciation and renovation costs, many private enterprises themselves are facing cash flow difficulties, and they will certainly not consider it." He said.
The head of investment of another TOP20 housing enterprise also told the Economic Observation Network that whether it is Shanghai or other cities, the acquisition of holding real estate projects is basically local state-owned assets, "even large private enterprises at this stage of the possibility of taking over is relatively small, because the return rate of hotels and businesses is very low."
At the financial level, the support for high-quality real estate enterprises to open mergers and acquisitions is also increasing, and the M&A loan policy for housing enterprises is constantly being relaxed. On December 20, 2021, the Central Bank of China and the China Banking and Insurance Regulatory Commission mentioned in the Notice on Doing a Good Job in M&A Financial Services for Risk Disposal Projects of Key Real Estate Enterprises that banks are encouraged to carry out M&A loan business in a sound and orderly manner, focusing on supporting high-quality real estate enterprises to merge and acquire high-quality projects of large real estate enterprises that are insured and difficult.
On January 21, 2022, SPDB issued its first theme bond for mergers and acquisitions of real estate projects issued by a financial institution. The bond size is 5 billion yuan, the term is 3 years, and the funds raised are used for real estate project M&A loans. On January 26, according to the Shanghai Clearing House, two real estate companies, C&D Real Estate and China Merchants Shekou, successfully issued M&A notes in the interbank market, involving an amount of 2.29 billion yuan. Among them, China Merchants Shekou Bonds raised 1.29 billion yuan for purposes including but not limited to replacing the issuer's initial equity investment funds and subsequent asset investment and acquisition. In addition, central enterprises such as Poly Development and OCT have also issued bonds in the name of mergers and acquisitions.