Swire JV Buys Xi’an Taikoo Li Site for $407M as Mainland Portfolio Expands

Hong Kong’s Swire Properties this month announced a fourth addition to its Taikoo Li commercial projects on the mainland, having formed a joint venture to acquire a high-end retail site in the second-tier city of Xi’an through a government land sale for RMB 2.57 billion ($407.4 million).

The 70:30 joint venture is agreeing to invest up to RMB 10 billion in the retail-led project in the city’s Xiaoyan Ta area, also known as the Small Wild Goose Pagoda historical and cultural zone. The mixed-use project, dubbed Taikoo Li Xi’an, will feature retail and hospitality properties as well as built-to-sell business apartments, according to a Swire press release on Friday.

Plans for the Taikoo Li Xi’an project were revealed about one week before Swire’s chairman Guy Bradley announced that over the next 10 years the company would invest more than HK$100 billion in a mainland-centric development pipeline for Greater China and Southeast Asia, focusing on retail-led mixed-use developments.

“The transaction is in line with one of Swire Properties’ key business strategies of creating long-term value by developing and owning transformational mixed-used projects in urban areas,” Swire said in the announcement. “(It) is also in line with Swire Properties’ other key business strategy to remain focused principally in Hong Kong and the Chinese mainland.”

Gaining Foothold in Xi’an

“As we celebrate Swire Properties’ 50th anniversary in 2022, we are very pleased to have secured our first major investment in Xi’an which testifies to our confidence in Xi’an and our long-term commitment to the Chinese mainland,” said Tim Blackburn, chief executive of Swire Properties.

The partners will contribute an initial investment of RMB 3.65 billion in the joint venture company, with Swire Properties committing RMB 2.55 billion and state-run Xi’an Qujiang New District Management Committee bringing in RMB 1.09 billion, according to the developer’s announcement to the Hong Kong Stock Exchange.

Both parties have agreed to pay about RMB 9,564 per square metre of potential floor area for the development, with plans to feature a low-rise, open-plan architectural design that would align with the style of previous Taikoo Li projects. The Sino-Ocean Taikoo Li Chengdu, which is located adjacent to that city’s ancient Daci Temple, features a similar low-rise, lane-driven design.

Aside from retail and hotel properties, Swire’s 269,218 square metre (2.9 million square foot) Xi’an project will comprise serviced residences, cultural facilities, an underground parking lot and other ancillary facilities.

The 119,906 square metre site, located south of Youyi Road, west of Chang’an Road, north of Stadium North Road and east of Zhuque Street in Xi’an’s downtown area, is also at the intersection of metro lines 2 and 5, which run north to south and east to west of the city.

Betting on the Mainland Market

Swire’s latest project was unveiled after sales at each of its mainland retail projects grew by at least 11 percent year-on-year in the fourth quarter of 2021, according to its quarterly operating statement. This had followed a 77 percent increase in the developer’s mainland retail sales on an attributable basis for the first six months of that year.

The fourth Taikoo Li project, which will be built around the over 1,300-year-old Small Wild Goose Pagoda, had been in the works for the past few years, with Yao Lijun, deputy secretary of the Communist Party Working Committee for the city’s Qujiang New District, having confirmed in October 2019 that the project would be moving forward in Xi’an.

The Taikoo Li Xi’an project brings Swire into its fifth mainland city, following the developer’s successful projects in Beijing, Shanghai, Guangzhou and Chengdu. Its completed portfolio on the mainland currently comprises 1.3 million square metres of space, representing a 44 percent increase from the completed space recorded in its portfolio for the first half of last year.

The project, set for completion in 2025, would be opening four years after the completion of Swire’s retail complex in Shanghai’s Qiantan business district, home to high-end brands including Bulgari, Hermes and Saint Laurent. As of 31 December 2021, the project recorded a 90 percent occupancy rate, which included space allocated to prospective tenants that have signed letters of intent, according to Swire’s operating statement.

The first and second Taikoo Li commercial projects, located in Beijing and Chengdu, were completed within the last 14 years, with Sino-Ocean Taikoo Li Chengdu being the first of the commercial project series to open in a second-tier city — also featuring luxury stores such as Gucci, Cartier and Ralph Lauren.

Group Struggle Session

The blue-chip developer is cashing in on the mainland after a series of asset disposals in recent months while parent company Swire Pacific struggled with losses at its Cathay Pacific unit.

Compared with the HK$7.9 billion profit in the first half of 2019, Swire’s holding company suffered losses attributable to shareholders of HK$7.7 billion in the first six months of 2020, followed by a HK$792 million loss in the same period of last year.

The developer’s latest mainland investment followed a series of disposals outside of China, with the most recent being the sale of a Fort Lauderdale development site in Florida to a joint venture between multifamily giants Aimco and Kushner Companies for $49 million in January.

Three months before the Fort Lauderdale disposal, Swire announced the sale of its 352-key East Miami hotel — the hospitality portion of its $1.05 billion Brickell City Centre complex — to a joint venture between funds managed by Honolulu-based Trinity Real Estate Investments and New York-headquartered Certares Real Estate Management in a $174 million deal.