22 September 2018

COFCO taps HK market indirectly to step up realty game

Property income has become a key pillar of support for many Chinese state-owned enterprises. One such case is food giant China National Cereals, Oils and Foodstuffs Corp. (COFCO), which has never been shy in signaling its ambition to scale up exposure to the realty sector with a particular emphasis on commercial properties.

But right now, the continuing freeze by mainland regulators on refinancing activities through the stock market has posed a problem.

Against this backdrop, unit Hong Kong Parkview Group (00207.HK), a medium-sized investment company known for its luxury housing developments, will be given a key role to play. COFCO had acquired control of Parkview for HK$362 million (US$46.69 million) in July last year.

Parkview announced at end-September a HK$14.17 billion deal to acquire commercial property assets and shareholder loans from its parent, along with a proposal to place 2.3 billion shares.

The de facto asset injection is widely interpreted as a vital but indirect way for COFCO to tap into the Hong Kong capital market as a workaround to quench the firm’s fund thirst as it tries a bold foray into the buoyant commercial realty market in China’s second-tier cities.

Parkview said in its filing that the property portfolio from its parent includes 12 commercial property projects in six key cities in the mainland and Hong Kong, covering mixed-use complexes, hotels and integrated tourist developments including some core properties in Beijing like COFCO Plaza, Waldorf-Astoria Beijing and W hotel. Parkview will change its name to COFCO Land Holdings Ltd.

Analysts say the funding pressure must have been great as COFCO, even risking the chance of being vetoed by regulators, brooked almost no delay in injecting its assets.

Since Parkview is buying substantial assets from COFCO within two years of it being acquired by the Chinese firm, the transaction, the so-called reverse takeover, requires special review by the bourse’s listing committee.

Media reports say some other quality assets will also be poured into the listed platform to lure more investors, including Joy City, COFCO’s upscale shopping mall chain that has emerged as one of the firm’s cash cows. COFCO now operates two such malls in downtown Beijing and one in Shanghai, each covering a floor area of more than 200,000 square meters. Shenyang, Tianjin, Chengdu, Xiamen and other wealthy second-tier cities are tipped as destinations for future expansion.

COFCO chairman Ning Gaoning {寧高寧} expressed his confidence when interviewed by The Economic Observer, saying the upbeat prospects for commercial and retailing business in these cities can be a strong selling point. The capital raised in Hong Kong can further fuel Joy City’s penetration into more regions at a time when the group’s rivals are still stuck in the refinancing logjam.

– Contact the writer at [email protected] 


EJ Insight writer

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