Southeast Asia’s biggest property developer, CapitaLand Ltd., has agreed to purchase the real estate assets of Orient Overseas (International) Ltd. in China for $2.2 billion. The move doubles CapitaLand’s real estate portfolio in the world’s most populous nation.
In a statement made by the Singapore-based developer, the acquisition of the Orient Overseas Developments Ltd. unit includes seven sites in Tianjin, Shanghai and Kunshan, with a floor space of around 1.48 million sq metres. About half of the space is designed for residential purposes and the rest is for hotels, offices, and retail, CapitaLand said.
CapitaLand raised S$2.8 billion ($2 billion) from the first public offering of CapitaMalls Asia Ltd. in November. The biggest container line in Hong Kong, Orient Overseas, is exiting property projects in China after an excessive capacity in the shipping industry and a crash in the global trade, leading to its first loss in 10 years. Orient Overseas incurred a loss amounting to $231.8 million in the first half that ended in June 30.
“It’s a good price,’ said Geoffrey Cheng, a transport analyst at Daiwa Institute of Research in Hong Kong. “Orient Overseas should be using the cash to focus on shipping.”
According to Orient Overseas, the property unit has lost money in the last two years. It said it will keep a 7.9 percent share in its wholly owned Wall Street Plaza in New York City and in Beijing Oriental Plaza in the Chinese capital after the deal.
Orient Overseas, managed by the family of Tung Chee-Hwa, the former Hong Kong Chief Executive, earned a revenue of HK$14 million from property development in H1 2009.
CapitaLand will resume trading today, after being suspended in Singapore yesterday. Orient Overseas will also resume trading after being halted in Hong Kong yesterday.
The developer said it will take over a shareholder loan worth $1.05 billion, which Orient Overseas Developments owed to its parent, and use its internal cash resources to fund the acquisition.
The sale comes after the attempts of the Chinese government to cool the mainland real estate market.
“Any measures that the Chinese government takes to stabilize the market, we welcome them,” said Liew Mun Leong, Chief Executive Officer of CapitaLand at a briefing yesterday.
Chief Financial Officer Olivier Lim said that CapitaLand may consider other acquisitions in China, and “also Vietnam and possibly Singapore” after this deal.
Lim added that the purchase “will have some impact on the decision-making process” regarding whether to shell out a special dividend from the CapitaMalls Asia IPO.