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Hong Kong-based New World Development (NWD) has secured approval from the Shanghai Stock Exchange to spin off a real estate investment trust (C-Reit) and list it on the bourse, according to a statement on Monday. The offering size is anticipated to be around 3.82 billion yuan (USD 570 million), generating net proceeds of 3.24 billion yuan for the developer.

This spin-off involves the K11 Art Mall and K11 Atelier New World Tower in Shanghai's Huangpu district, which together comprise a gross floor area of 130,384 square meters (1.4 million square feet). NWD currently owns and operates these properties, which are set to continue operating under the K11 brand post-spin-off. Echo Huang, NWD's executive director and CEO, emphasized that the C-Reit would be the first of its kind for Hong Kong enterprises.

Huang highlighted that the spin-off underscores NWD's strong brand equity and its commitment to advancing the group's asset management and capital deployment capabilities. The move will also enable NWD to tap into new capital sources and redirect resources towards future growth projects. Analyst Jeff Zhang from Morningstar viewed the spin-off as a strategic decision to recycle capital for more value-creating ventures, with the developer expecting minimal impact on its equity valuation, given the spin-off's representational value in the firm's overall assets and earnings.

NWD's net loss for the first half of its financial year stood at HK$3.73 billion (USD 475 million), reflecting continued asset writedowns. However, the loss narrowed by 44% year on year, driven by reduced impairments on investment properties and lower financing and tax expenses tied to mainland projects. The company's net debt rose by HK$2.6 billion to HK$122.7 billion, with the gearing ratio increasing to 59.7% from 58.1% the previous year, attributing the rise to accounting treatments and construction loan repayments.

NWD plans to subscribe for at least 20% of the C-Reit, with the remainder purchased by strategic, institutional, and retail investors. The developer's controlling shareholder is Chow Tai Fook Enterprises, a business run by the wealthy Cheng family, which Forbes ranks as the third wealthiest individual in Hong Kong.