Shanghai Shimao Co. (600823), the luxury apartment developer owned by billionaire Xu Rongmao, will buy commercial properties for about 7.5 billion yuan ($983 million) in stock as the company switches its focus to malls and offices.
The Shanghai-based company plans to sell as many as 700 million shares to units of Shimao Property Holdings (813) Ltd. at 10.68 yuan each in exchange for 4.07 million square meters (43.8 million square feet) of developments and 750 million yuan of cash, it said in a statement to the city's stock exchange today.
Shanghai Shimao, which has developed luxury apartments in Shanghai and other cities, can shift its focus to shopping malls, office buildings and other commercial projects with the deal. Shimao Property will focus on housing and hotel development, Shanghai Shimao said.
China's government, concerned that speculators were inflating real estate prices and making homes out of reach of average wage earners, tightened bank loans to developers and imposed land controls and taxes. Overseas buyers have also been restricted from buying villas and luxury apartments.
``The company is making the change to reduce the impact of the government crackdown,'' said Ping Jingwei, Shanghai Securities Co.'s analyst, speaking by phone today. ``Commercial properties may be less affected and have higher profit margins.''
Shanghai Shimao's shares jumped by the 10 percent daily limit today to 17.77 yuan, after resuming trading after a two- week suspension. The stock has quadrupled in the past 12 months, compared with a 410 percent surge in shares of China Vanke Co., the country's biggest listed builder, in the same period.
Shanghai Shimao last year reached a preliminary agreement with Warner Bros. International Cinemas to build a ``film metropolis'' in Shanghai. There is ``no progress'' on the project, Shanghai Shimao official Yu Feng said in a phone interview today.
The company is controlled by Xu Rongmao, who has a net worth of $3.5 billion, according to Forbes magazine's annual survey of billionaires.
Shares of Shimao Property were unchanged at HK$17.9 on Hong Kong's stock exchange. Shares of Shimao International Holdings Ltd., also controlled by Xu, were unchanged at HK$1.02.
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