Beijing Oriental Plaza, will Li Ka-shing sell it to death? Not so

"Oriental Plaza" is located in the center of Beijing, at a prime location at No. 1 East Chang'an Street. Everyone who works within the Second Ring Road of Beijing should be very familiar with it. In the previous article, the author talked about the land age of "Beijing Oriental Plaza" and Li Ka-shing's buyout of the income rights of domestic partners. This article talks in detail about "how Li Ka-shing reduced and sold Beijing Oriental Plaza" and Why would he do this.

First of all, it is said that Beijing Oriental Plaza belongs to Li Ka-shing, but now in the companies directly controlled by Li Ka-shing and his son, the investment of "Oriental Plaza" cannot be found at all.

In fact, the land use rights and building ownership of Beijing Oriental Plaza belong to a domestic company called "Beijing Oriental Plaza Co., Ltd.", and since 2011, a company called "Hong Kong Huixian Investment" "The company holds 100% of the shares of "Beijing Oriental Plaza Co., Ltd."

Hong Kong Hui Xian Investment Co., Ltd. is indirectly held by "Hui Xian Real Estate Trust" through the offshore company Hui Xian BVI. Through the layers of equity penetration, we found that the income rights of Oriental Plaza have finally fallen into the hands of "Hui Xian Real Estate Trust". So, what is the relationship between "Hui Xian Real Estate Trust" and Li Ka-shing?

Looking at the history of the trust, we found that before 2011, Li Ka-shing’s family business Cheung Kong Holdings was the controlling party of the predecessor of the trust. The core asset of the trust was Beijing Oriental Plaza, which was closed in 2011. On April 29, Li Ka-shing's Cheung Kong Holdings Group's shareholding ratio in Huixian also dropped significantly due to its separate spin-off and listing.

As of the end of December 2020, Li Ka-shing’s Cheung Kong Holdings’ shareholding ratio in Huixian Real Estate Trust (the parent company of Oriental Plaza) has dropped to 32.49%, which also means that the Li Ka-shing family’s shareholding in Beijing Oriental Plaza Plaza’s shareholding is less than 1/3, and the so-called “kill it without selling it” is just a rumor.

When Huixian REIT was listed in 2011, Gan Qinglin, chairman of Beijing Oriental Plaza Co., Ltd., said that the proceeds from the listing were mainly returned to the original shareholders of Oriental Plaza, so there was no actual foreign exchange involved. The issue of remittance of overseas fund-raising funds into the country. These words tactfully tell the outside world that this listing is actually a disguised reduction of the original shareholders' holdings in Oriental Plaza.

We checked the 2011 interim financial report of Hui Xian REIT and found that Hui Xian repaid approximately 11.707 billion yuan in loans to fund unit holders after its listing. After Li Ka-shing's Cheung Kong Holdings and other original shareholders received this repayment, they have actually achieved a "capital withdrawal" from the Oriental Plaza project.

So, here comes the question. Beijing Oriental Plaza sits on the out-of-print lot in Beijing called "1 East Chang'an Street". Why does the Li Ka-shing family want to split it up and reduce its holdings? This starts with the asset valuation of Oriental Plaza.

Oriental Plaza has a total construction area of ??800,000 square meters and is mainly composed of four parts, namely Oriental Xintiandi shopping mall, 8 Grade A office buildings, two Oriental Plaza apartments and the five-star Oriental Plaza Yue Hotel. According to the financial report of Hui Xian Real Estate Trust, the parent company of Oriental Plaza, the valuation of the entire Oriental Plaza is as follows:

From the valuation chart, we found that an office building with a construction area of ??310,000 square meters in the Second Ring Road of the Capital is estimated to be The value turned out to be only 14.9 billion yuan, and the equivalent unit price was only 48,300 yuan/square meter. The equivalent unit price of Oriental Haoting Apartment was only 26,900 yuan/square meter. This valuation method obviously seriously underestimated the value of Oriental Plaza.

Why is the management’s valuation of Oriental Plaza so conservative? The reason is that Oriental Plaza’s land life and overseas operation rights only have 20 or 30 years left.

According to Gan Qinglin, chairman of Oriental Plaza, revealed in 2011: "The current asset valuation for listing has fully taken into account relevant factors." The land term of Beijing Oriental Plaza expires in April 2049. Huixian's right to operate Oriental Plaza expires in January 2049. Gan Qinglin's original words were "it is still unclear whether it will be extended (renewed) by then (2049)."

No one can be sure what will happen in a few decades. It is precisely because of this uncertainty that the value of Oriental Plaza held by Hui Xian REIT will be greatly reduced; perhaps it is also for this reason that Li Ka-shing Only after the original shareholders did they package and list the assets of Oriental Plaza in advance.

To this day, although Oriental Plaza is still operated by the Li Ka-shing family, Oriental Plaza has been divested from Cheung Kong Holdings, and its shareholding ratio in Hui Xian Real Estate Trust, the parent company of Oriental Plaza, is only 32.49%. , excluding the year 2020 affected by the epidemic, the dividends it received from Hui Xian REIT in the past were approximately 500 million yuan per year, and Oriental Plaza is no longer important to the Li Ka-shing family.

Oriental Plaza, which "will not sell it to death", has finally drifted away from the Li Ka-shing family.