2023-09-18 02:05:18
Xinhuanet, Shanghai, September 18 (Reporter He Xinrong) Lujiazui Financial and Trade Zone Development Co., Ltd. (Lujiazui), one of the four major development companies in Pudong, has launched a tens-billion-level major asset restructuring and supporting fund-raising plan in June this year. At the end of the month, the company received registration approval from the China Securities Regulatory Commission. Currently, relevant plans are in full swing.
As the first real estate company restructuring project in Shanghai following the implementation of the “third arrow” of real estate (credit, debt, and equity), Lujiazui’s restructuring and allotment plan has attracted great attention from the market. What is the quality of the assets injected into listed companies? Why should we introduce new investors to the project company? How to break the ice in equity financing while the real estate market is still in an adjustment period? Recently, Lujiazui Chairman Xu Erjin had a candid exchange with reporters.
Responding to Pudong’s leading district construction and injecting high-quality assets into core areas
Taikoo Li Qiantan, jointly developed by Lujiazui and Swire Properties, has become a check-in spot for internet celebrities.
According to the announcement, Lujiazui purchased 100% of the equity of Changyi Company and 30% of the equity of Dongyuan Company held by Shanghai Lujiazui (Group) Co., Ltd. by issuing shares, and purchased Shanghai Qiantan International Business District Investment (Group) Co., Ltd. by paying cash. It holds 60% equity of Yaolong Company and 100% equity of Qirong Company. The total consideration of this transaction is as high as 13.319 billion yuan, which is the largest restructuring of a listed real estate company in recent years.
Among them, 779 million shares will be issued to Lujiazui Group at 8.66 yuan per share. At the same time, it is planned to issue shares to no more than 35 qualified specific targets to raise supporting funds, with an amount of no more than 6.6 billion yuan.
Among the four target companies injected into listed companies, the Changyi and Dongyuan company projects are located in Lujiazui Financial and Trade Zone. Among them, the Changyi Company project is located close to Little Lujiazui, and the Dongyu Company project is also known as the “North Riverside of Lujiazui”. As the first step in the “eastward expansion” of Little Lujiazui, it will directly bear the spillover effects of Little Lujiazui. Both projects are currently under development and construction.
The projects of Yaolong Company and Qirong Company are located in Qiantan International Business District. The completed Qirong Company project will start leasing in the second half of 2022. The current occupancy rate of the office part “Qiantan International Plaza” has exceeded 90%. Yaolong Company, which is in the construction period, launched the first phase of “Century Qiantan·Tianyu” for sale in May this year, with a sell-through rate of nearly 97%.
The Lujiazui and Qiantan areas where the four target companies are located are included in the “Central Activity Zone (CAZ)” in the “Shanghai 2035″ master plan, which belongs to the highest level of urban development in Shanghai. “This major asset reorganization will help Lujiazui Co., Ltd. obtain high-quality land, residential, office and commercial property reserves in Lujiazui and Qiantan, and help listed companies participate more deeply in the eastward expansion of Lujiazui Financial City and the development and construction of Qiantan International Business District and operations, more effectively serve the national strategy of Pudong’s socialist modernization leading area, and achieve new achievements in the reform of state-owned assets and state-owned enterprises.” Regarding the original intention of the reorganization, Xu Erjin was concise and comprehensive.
After more than thirty years of development, Lujiazui has gradually formed a three-wheel-driven strategic development pattern of “commercial real estate, commercial operations and financial services”, achieving operating income of 11.762 billion yuan in 2022. After the injection of the four target companies, it is expected that a total of nearly 40 billion yuan in advance receipts (including rental income) will be generated within three years, which will not only improve the asset quality of listed companies, but also enhance their sustainable profitability.
Cooperate with “good people” to open up new space for business operations
The Minsheng Wharf silo along the Huangpu River was once the largest grain silo in Asia.
After the private placement is completed, Lujiazui holds 100% of the equity of Changyi Company, 60% of the equity of Dongyuan Company, 60% of the equity of Yaolong Company, and 100% of the equity of Qirong Company. Changyi Company and Qirong Company become its wholly-owned subsidiaries. Dongyuan Company and Yaolong Company became its holding subsidiaries.
According to the announcement, the remaining 40% equity of Dongyuan and Yaolong companies is in the hands of the controlling shareholder Lujiazui Group and the group subsidiary Qiantan Investment respectively. On August 1 this year, Lujiazui Group and Qiantan Investment respectively publicly listed and transferred their 40% stake in Dongyuan Company and 40% stake in Yaolong Company on the Shanghai United Equity Exchange. As of August 29, 2023, the above equity projects have solicited interested parties Jinyang Co., Ltd. and Lianfeng Co., Ltd. respectively. The two companies are wholly-owned subsidiaries of Swire Properties. Lujiazui intends to give up the right of first refusal to exercise the above-mentioned equity transfer. This related transaction needs to be submitted to the listed company’s shareholders’ meeting for review.
Why aren’t good projects fully developed by listed companies? Why bring in Swire Properties as a new investor? Faced with questions, Xu Erjin answered them one by one.
“As a local development company in Pudong, Lujiazui’s strength is project construction, but in terms of product planning and operation management, we are still far behind leading companies such as Swire Properties. For example, the industry standard for elevator waiting time in Grade A office buildings is no more than 40 seconds , Swire can do it in 30 seconds. In addition, when it comes to commercial project operations, many international big names belong to Swire’s ‘circle of friends’, and their ability to attract investment is what Lujiazui values very much.” He said.
Before this equity transfer, the Qiantan Taikoo Li project jointly developed by Lujiazui and Swire Properties quickly became Shanghai’s first store in Shanghai following its opening on September 30, 2021, with its collection of many international brands “first stores in China” and unique space experience. “Internet celebrity check-in point”. The project’s current opening rate exceeds 95% and is expected to achieve its profit target ahead of schedule. Qiantan Lot 21 developed by Yaolong Company is only separated from the Qiantan Taikoo Li project by a road. If the commercial development of this land can continue to cooperate with Swire Properties, it will better complement the advantages of Taikoo Li Qiantan and work together to build Qiantan International Business District.
As for the Yangjing land parcel developed by Dongyuan Company, it has historical buildings such as the Minsheng Wharf silo. It was once the largest granary in Asia and an important industrial heritage along the Huangpu River. Swire Properties has extensive experience in the development of silos, a special space that integrates commercial offices and historical building protection, and its cooperation will allow Lujiazui to benefit from it.
Lujiazui management said it hopes to find good developers for the development of two key projects. Companies like Swire Properties with rich development experience and long-term investment concepts are important partners for listed companies.
Raised 6.6 billion yuan to test real estate equity financing
In addition to injecting high-quality assets and finding partners, raising 6.6 billion yuan in financing is a major focus of Lujiazui’s tens-billion-level restructuring plan. While real estate is still in an adjustment period, whether Lujiazui’s equity financing can be successful will have a strong demonstration effect on the market and test the confidence of various investors.
In order to increase the activity of the real estate market, policies have been implemented frequently this year. On the evening of September 1, Shanghai and Beijing successively issued notices on optimizing the identification standards for the number of housing units in personal housing loans, marking the full implementation of the “house recognition but not loan” policy in the four first-tier cities of Beijing, Shanghai, Guangzhou and Shenzhen.
After the introduction of the new real estate policy, market confidence has been significantly boosted, and the number of customer visits to some projects in Lujiazui has increased by more than 50%. This is good news for real estate sales and financing investments.
The reporter learned from interviews that despite the frequent introduction of favorable policies, the confidence in the real estate market is still relatively fragile, and some customers are still in a wait-and-see state. This is due to expectations for further relaxation of policies and the inertia of buying up rather than buying down. The continued recovery of the real estate market requires the joint efforts of many parties.
Under such circumstances, Lujiazui’s upcoming 6.6 billion yuan allotment is bound to withstand the test of the market. In addition to the support of local state-owned enterprises and large investors, Lujiazui also worked with underwriting brokers to conduct roadshows for institutional investors in the market in an orderly manner.
“In addition to external conditions such as policies, the most fundamental factor in attracting investors to participate in Lujiazui’s allotment is whether the operating performance of listed companies can support their own stock prices.” Regarding this, Lujiazui management has a clear understanding and full confidence.
First of all, listed companies have a long-term accumulation of hard work in Shanghai’s core business district. Lujiazui’s commercial real estate projects have a relatively long holding period and relatively low land costs. Project rentals have become an important source of income for listed companies. In cooperation with the government’s investment promotion, Lujiazui also gave up high rents to introduce some promising projects, which also guaranteed the steady growth of listed companies.
Secondly, Lujiazui itself is also undergoing transformation and upgrading. From the perspective of strategic planning, Lujiazui is not a traditional real estate developer, but a comprehensive modern service industry operator. In the overall development of Qiantan and other land parcels, Lujiazui has formed a development model that integrates headquarters business, high-end commerce, international education, culture and media, sports and leisure, providing various services including shopping, renting, and education for office workers. services, greatly improving user experience and customer stickiness.
In addition, the Pudong Art Museum under the Lujiazui Group has opened, the Qiantan 31 Cultural and Performing Arts Center is regarding to open, and the Lingang Snow Ice and Snow World planned to open next year all have the potential to become Internet celebrity landmarks. Once these modern service industries are connected to the commercial real estate of listed companies through digitalization and other means, they will generate huge comprehensive operational value.
“The future of Lujiazui is not to simply build and rent buildings, but to continuously expand the circle of friends and provide all-round, multi-level derivative services for the business office crowd. We will repay the market with steady operations and sustained growth in performance. Investors’ trust,” Xu Erjin said. (over)
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