Shui On Land Ltd. (272), the Chinese developer that’s been selling assets to cut debt, said Chief Executive Officer Freddy Lee quit after less than three years and billionaire Chairman Vincent Lo will resume a more active role.
Lee also resigned as an executive director and managing director effective today, the developer said in a statement to Hong Kong Stock Exchange, without disclosing the reasons for the resignation. Lo will resume a more active role in the business while the company looks for a new CEO, it said. Lee was promoted as CEO in March 2011 replacing Lo.
Shui On has been selling assets as it seeks to pay down debt and improve its cash position. The developer announced last month that it will sell a project in Shanghai to China Life Insurance Group Co. for 3.32 billion yuan ($549 million). New York-based Brookfield Property Partners in November invested $500 million into Xintiandi, which operates the popular entertainment complex in Shanghai.
“The company’s business model is not sustainable, and the management is not doing enough to improve it,” said Jeffrey Gao, a Hong Kong-based property analyst at Nomura Holdings Inc., in a phone interview. “Besides its redevelopment projects, the company should work better on residential property sales and not hold on too many properties in non-core markets.” Gao initiated coverage of the company Jan. 6 with a neutral rating on the shares.
Shui On sold 16.6 billion yuan of properties last year, almost triple the amount from a year earlier, it said in a statement on Jan. 7.
Only 9.9 billion yuan came from selling homes, while the rest came from en-bloc sales of buildings, according to Johnson Hu, a Hong Kong-based property analyst at CIMB-GK Securities Research, who also questioned the company’s business model. En-bloc sales refers to the collective selling of a building by owners to one developer.
The developer on Nov. 29 sold office premises and car park spaces in a project in the western Chinese city of Chongqing for 2.4 billion yuan.
“We are a bit surprised about Lee’s resignation,” said Eva Lee, a Hong Kong-based property analyst at UBS AG, who maintained a neutral rating on the stock. “The impact on the company won’t be too big, however, because Chairman Lo is still taking the leadership. The key is to see what their contracted sales trend would be this year.” Lee changed her recommendation on the shares from a buy in November.
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