Swire in $1.3B Deal to Buy 40% Stakes in Pair of Lujiazui Group Projects in Pudong

Swire Properties is picking up a 40 percent stake in two mixed-use projects in Shanghai’s Pudong district at a combined value of $1.33 billion through separate joint ventures with government-backed Lujiazui Group, including a previously announced joint development in the Qiantan area.

Through an official process for buying assets from state-run enterprises, Hong Kong-listed Swire Properties said it is bidding for a slice of a 600,000 square metre (6.5 million square foot) mixed-use project in the Qiantan area after signing a letter of intent with Lujiazui Group last September. The other project is a 390,000 square metre development along the Huangpu River in Pudong’s Yangjing subdistrict, according to a Monday filing with the HKEX.

The reserved consideration for the Yangjing shares is about RMB 6.6 billion ($910 million) while the reserved price for the Qiantan shares is RMB 3.1 billion, said Swire Properties, the development subsidiary of centuries-old trading group Swire Pacific.

Swire Properties chief executive Tim Blackburn linked the Pudong deals to the company’s previously announced plan to invest more than $6.5 billion in mainland China by 2031. “Shanghai is an international metropolis, and we hope to continue to expand our investment in the city,” Blackburn said in a statement. “With our successful experience in developing and managing integrated commercial projects, we can further help Shanghai’s urban renewal and development into an international urban consumption hub.”

Partnership Grows

Both projects are to comprise retail, office and residential space, with the Yangjing plot to accommodate cultural uses as well. Swire Properties is the only qualified bidder for the 40 percent stakes, and Lujiazui Group’s development arm is expected to recommend that its shareholders waive their right to acquire the relevant shares.

The 600,000 square metre megaproject will be on a site to the east and across the street from Taikoo Li Qiantan, a 116,000 square metre mall that opened last September as the first joint development of Swire and Lujiazui Group and enjoyed committed occupancy of 95 percent at the end of June.

The Yangjing project began construction in November of last year opposite Yangpu district along the banks of the Huangpu River and is expected to be completed in 2028. The Qiantan project broke ground in March 2020 and is targeting a June 2025 completion date, according to an account in Guandian.cn.

The latest partnership with Swire gives Lujiazui Group, which is the master developer for Qiantan, a second opportunity to develop the site after another Hong Kong commercial property specialist walked away from the project more than three years ago.

Lujiazui Group had signed a cooperation framework agreement with Hongkong Land in 2015 to jointly develop the site at an estimated investment of RMB 20 billion. But the deal was terminated in December 2018 because “certain conditions precedent were not fulfilled”, according to a statement by the division of Jardine Matheson Group in March 2019.

The Pudong government has focused on attracting regional and international developers to Qiantan, with US-based Tishman Speyer having opened its Crystal Plaza mixed-use project there in 2018 and Shun Tak Holdings currently building its New Bund 31 in the area formerly occupied by the Shanghai Expo.

Mainland Momentum

The Pudong deal is Swire Properties’ latest major move to expand its mainland portfolio as China continues to struggle through a property downturn.

The Hong Kong stalwart last December announced that it was taking full ownership of the Sino-Ocean Taikoo Li Chengdu mall through a deal to buy out cash-strapped Sino-Ocean Group’s interest in the 50:50 joint venture for RMB 5.55 billion ($800 million).

During the same mainland visit in which he signed the letter of intent with Lujiazui Group last September, Blackburn also broke ground on Swire’s second luxury retail project in Guangzhou and pushed forward the builder’s Taikoo Li mall project in Xi’an.