Soho China Considers Listing Shared-Office Unit

Soho China, one of China’s largest commercial property companies, is considering a spinoff and initial public offering of its shared-office business unit Soho 3Q.

Soho Chief Financial Officer Sharon Tong said Tuesday at a conference briefing on Soho China’s 2017 earnings that the spinoff of Soho 3Q will take place “when the conditions are suitable,” with the listing’s timing and location depending on its business growth and market environment.

Tong said the stock price of Hong-Kong-listed Soho China doesn’t reflect the value of Soho 3Q.

Soho China launched Soho 3Q, a community-focused, shared-office-space sub-brand, in 2015. By the end of last year, the country had 26 Soho 3Q projects, in Beijing, Shanghai, Hangzhou, Shenzhen and Nanjing. The average rental rate of Soho 3Q projects was 87%, according to Soho China.

Soho China plans to expand the space of Soho 3Q projects to be able to accommodate 50,000 seats this year, up from 26,000 at the end of 2017.

On the same day, Soho China reported a 420% jump in net profit to 4.73 billion yuan ($746.4 million) in 2017 due to higher valuation gains on investment properties. Its revenue grew by 24% to 1.96 billion yuan, in which rental income increased 11% to 1.67 billion yuan.

Chairman Pan Shiyi said the company has completed its transition to an asset-light business model and has no plans to sell more assets.

Soho China’s remaining properties are all core assets after it sold over 20 billion yuan worth of properties in the last three years, Pan said.

In October, Soho China sold Sky Soho, a flagship office complex in Shanghai designed by the late British-Iraqi architect Zaha Hadid, for 5 billion yuan and made an estimated gross profit of 367 million yuan from the sale.

Earlier last year, the developer sold Hongkou Soho in northern Shanghai, a 90,000-square-meter (969,000-square-foot) mixed-use office and retail complex, for 3.57 billion yuan.

Pan has said the sales are part of the company’s strategy to capitalize on the rising commercial property market and shift toward focusing on core assets in prime locations in first-tier cities.

The company is currently developing a 100,000-square-meter mixed-use office and retail complex in Shanghai and mixed-use Leeza Soho tower in Beijing. Pan expected continuous valuation gains after these two projects are completed.

Soho China’s shares plunged nearly 7.5% Tuesday to close at HK$4.48 (57 U.S. cents).