June 29 (Bloomberg) -- - Shui On Land Ltd. will spend about 8 billion yuan ($1.2 billion) to develop an office and restaurant precinct under its Xintiandi brand near Shanghai’s smaller airport and high-speed rail station.
The company expects “high returns” from Hongqiao Tiandi because it sees rents catching up to the level of Xintiandi, which the developer built into a bar and restaurant district from Shanghai century-old homes nine years ago, said Chairman Vincent Lo in an interview in the city yesterday. The investment amount includes the cost of the land, Lo said.
“We are very bullish as Hongqiao will be the central business district for the whole Yangtze River Delta because of the high-speed rail,” said Lo. “I believe all the businesses are very keen to get established here.”
Shui On is developing the 280,000-square-meter (3 million-square-foot) project as the Chinese government plans to spend 2.8 trillion yuan on railways by 2015 that will boost the network to about 120,000 kilometers (74,580 miles), according to the railway ministry. Hongqiao’s transportation hub has 1 million people passing through in a location where 75 million are within an hour’s train ride, according to the company.
The stock gained 2.1 percent to HK$3.34 at the close in Hong Kong trading, the highest in almost three weeks.
While Hongqiao will provide some similar facilities to the Shanghai district, it will include offices, shops, and a luxury hotel, which is expected to be finished as early as the second quarter in 2013, Lo said.
Lots of Activities
Xintiandi, which means New Heaven and Earth in Chinese, is a residential and commercial complex built through the redevelopment of houses dating back to the 19th and 20th centuries located in downtown Shanghai. The project attracted local and international retailers and restaurants, including Paulaner Brahaus and Starbucks Corp.
Shui On has no fundraising plans for Hongqiao as banks are “very keen” to provide loans, Lo said. The company is unveiling the project later today in Shanghai.
The Shanghai-based developer said it paid 3.2 billion yuan for the site. The total building area including park lots will be 380,000 square meters, Lo said.
“We believe there will be a lot of activities for business people who are conscious of time in Hongqiao Tiandi,” he said. “In the future you can check in at our site, have a cup of coffee and walk to the airport.”
Shui On is working to spin off its property leasing business in China and seeking an initial public offering, which will likely be in Hong Kong, Lo said. There is no timetable, the billionaire said.
The company is seeking financing as the Chinese government tightened credit and extended measures to control the risks in the property market, said Lo without elaborating.
“Under the current circumstances, all developers will have to plan for the worst-case scenario,” he said. “Developers do have to look for alternative sources of funding. We’ll do that like everybody else.”
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