Soho China, builder of Zaha Hadid's curves, is in talks with Blackstone in US$4 billion privatisation deal

By Pearl Liu and Chad Bray pearl.liu@scmp.com

/ https://www.scmp.com/business/companies/article/3074472/soho-china-builder-zaha-hadids-curves-talks-blackstone-us4?utm_medium=partner&utm_campaign=contentexchange&utm_source=EdgeProp |

March 18, 2020 4:20 PM SGT

Soho China Limited, whose curvilinear office buildings gave Beijing's chessboard cityscape its futuristic skyline, is being taken private in one of the country's largest privatisation deals.

The developer, founded in 1995 by a husband-and-wife team, is in exclusive talks with Blackstone in a US$4 billion deal, Reuters reported, citing people with direct knowledge of the matter. The US private equity group will pay HK$6 per share, almost double Soho China's average price of HK$3.03 in January, to take the company private, according to the report.

"The potential privatisation by Blackstone may come as a positive surprise to shareholders who have anticipated its asset disposal, as the potential privatisation offer price implies 0.8 times of price-to-book ratio in 2019," said CGS-CIMB Securities' property analyst Raymond Cheng, adding that the deal suggests Soho China's assets would be better valued in private hands.

The deal marks a formal exit from the equity market for Soho China's Chairman Pan Shiyi and Chief Executive Officer Zhang Xin, who together built the company into one of the country's major developers of mixed-used residential and commercial property. Soho China had been trying to sell its assets since last year, offering eight office towers in Beijing and Shanghai for as much as US$8 billion, according to a Bloomberg report.

Soho China's Chairman Pan Shiyi (left) and Chief Executive Officer Zhang Xin (right) during an award ceremony sponsored by Montblanc in Beijing on 18 May 2004. Photo: Post Magazine

The developer, who commissioned the late Iraqi-British architect Zaha Hadid to design several of its office buildings in Beijing and Shanghai, put 20,000 square metres (215,278 square feet) of space on the market for 7.8 billion yuan (US$1.12 billion) last June.

"Soho's investment property is too large and too focused now " most are office properties," founder and chairman Pan said when he announced his sales plan. "Our property's return is 3 per cent, falling short of bank loan cost which stands at 4 per cent. In the future. we will not buy rent-yielding property, but instead develop sites to sell property."

A view of the Galaxy Soho shopping centre, designed by the late Zaha Hadid, in Beijing on February 13, 2018. Photo: Simon Song

The exit also comes amid a glut of offices in several of China's largest cities, from Beijing in the north down to Shenzhen in the nation's south, with the vacancy rate of Grade A offices standing at 12 per cent at the end of last year in the Chinese capital, according to data by Cushman & Wakefield. Soho China's real estate holdings were valued at US$8.6 billion as of June last year, according to its latest interim report.

The transaction, excluding debt, would be the largest take-private transaction in Asia since a consortium led by China Vanke, Goldman Sachs' former China chairman and Hillhouse Capital acquired GLP for US$11.6 billion in July 2017, according to Dealogic. The GLP transaction was the largest take-private deal ever in Asia.

In June, Blackstone agreed to buy US industrial warehouse properties from GLP for US$18.7 billion in the largest-ever private real estate transaction.

Soho China "from time to time [discusses] market conditions and potential transaction opportunities in commercial real estate in the group's principal markets," the company said last October in response to Bloomberg's report.

Soho China shares jumped 37.6 per cent to HK$4.10 on March 10 before trading was halted on the Hong Kong stock exchange. Blackstone declined to comment.

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This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2020 South China Morning Post Publishers Ltd. All rights reserved.

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