Shui On May Sell Shanghai Office Towers Adjacent to Xintiandi

Shui On Land Ltd. may sell part of a Shanghai prime-office project next to its iconic Xintiandi entertainment complex in preparation for a public listing of its commercial property unit.

The firm is in talks with Chinese and overseas buyers to sell two of the four phases of Corporate Avenue, which could raise more than 10 billion yuan ($1.6 billion), Chairman Vincent Lo told reporters in Hong Kong Wednesday. The company hopes to make a decision on the sale by the end of June, he said.

Shui On has been talking about spinning off its commercial property subsidiary, called China Xintiandi, since 2012 to allow the company to focus on property development. China Xintiandi is “refining its business strategy” and will continue to improve its financial position by selling assets ahead of a planned listing in 2016, Shanghai-based Shui On said in March.

“In the short term, the earnings aren’t enough to give us an attractive valuation if we sold shares,” he said, referring to Corporate Avenue’s rental income. “I really hope when we do the listing we won’t have to give such a big discount, but if we’re only collecting rent, then it’ll be discounted more.”

Brookfield Property Partners, a New York-based commercial real estate operator, has a stake in China Xintiandi and has two representatives on the board.

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