Soho China Ltd. on Thursday, Dec. 29 agreed to pay 4 billion yuan ($632 million) for a 50% stake in the owner of a parcel of land located in Shanghai's exclusive Bund waterfront area. A day earlier, E-House (China) Holdings Ltd. agreed to buy the 45.9% it doesn't already own of China Real Estate Investment Corp., a Nasdaq-listed real estate information and consulting firm, for cash and stock worth $603 million.
The deals come amid a government-engineered slowdown in the Chinese real estate market, which has boomed in recent years due to a mixture of cheap funding from local lenders and huge demand stoked by rising individual wealth and commercial property developers.
Earlier this week the Agricultural Bank of China, one of China's four big lenders, said that the government should aim to reduce house prices by as much as 25% to provide "reasonable levels" of affordability to individuals.
Soho China will buy a 50% interest in Shanghai Haizhimen Real Estate Ltd., the owner of the Bund 8-1 Land, from Hong Kong-listed developers Shanghai Zendai Real Estate Co. Ltd., which will receive RMB 2.96 billion for a 40% stake, and Greentown China Holdings Ltd., which will get RMB 1.04 billion for its 10% holding.
The acquisition is Soho China's seventh in Shanghai this year, taking its total spending to RMB15.4 billion. Soho and other cash-rich builders have benefited from government curbs on lending to developers and the instigation of mortgage controls that have left poorly funded players scrambling to liquidate their holdings. Shanghai Zendai last month sold an initial RMB 9.57 billion stake in the Bund 8-1 land parcel admitting that developing the site would be too much of a financial burden.
"Soho China currently has RMB 17 billion cash in hand and is actively looking for more project acquisition opportunities." Soho Chairman Pan Shiyi said in a statement. "In today's credit tightening environment, the company has received many requests from other property developers to transfer their projects."
The 45,742 square meter Bund 8-1 site will be developed with a mixture of office, hotel and retail buildings totaling about 272,000 square meters of gross floor area. Soho will share the project with Fosun International Ltd.
Separately, real estate services firm E-House China on Wednesday agreed to pay $1.75 and 0.6 of an E-House share for each China Real Estate Information Corp, or CRIC, share. The offer values Nasdaq-listed CRIC's shares at about $4.30 per share, a 7.5% premium to its December 28 closing price of $4 per share.
The deal was struck after E-House increased the cash portion of an October 28 offer from $1.60 per share. E-House said at the time of its initial bid that the combination would create a one-stop shop for property developers in China that are seeking consulting and online services.
The transaction comes a month after E-House paid about $25 million to IFM Investment Ltd. for a one third stake in Century 21 China Real Estate, the exclusive franchiser of the Century 21 real estate brand in China.
E-House's acquisition is expected to complete by mid-2012.
E-House took legal counsel on the deal from a Skadden, Arps, Slate, Meagher & Flom LLP team that included Michael Gisser and Z. Julie Gao, and from Conyers Dill & Pearman's David Lamb. CRIC took financial advice from Credit Suisse Securities (USA) LLC's Stuart Rogers. It received legal advice from Shearman & Sterling LLP's Lee Edwards, O'Melveny & Myers LLP's Gregory Puff and Maples & Calder.
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