Coordinating a Leasehold Factory Disposal in Shenzhen

SBM were tasked to help find a solution for their former manufacturing facility in Shenzhen, China: a four-storey factory building of around 7,700 sqm, comprising of a warehouse, a staff dormitory block and various ancillary structures on a 5,040 sqm site, held under a 50-year land use agreement with around 16 years remaining.

The site had recently been vacated and the fit-out stripped out, and early market feedback was far from encouraging. Several advisers questioned whether the building was saleable at all. Others suggested that, if a transaction was achievable, it would likely require a heavily discounted price or possibly reverse premium.

The challenge was not primarily about demand, it was about deliverability.

The challenges

The transaction required navigating Chinese land use rights and tripartite legal agreements, securing multiple stakeholder approvals including third-party interests at a local level, establishing an escrow structure within the Chinese banking system, and managing cross-border signing requirements across both China and Hong Kong.

Several of these steps required bespoke solutions. Opening an escrow account alone required direct negotiation with local institutions and alternative verification arrangements. Physical presence at specific locations, on specific dates, proved critical at more than one point in the process.

Our role

Our team served as the central point of contact and the main driving force throughout, coordinating the full professional team and keeping all workstreams moving.

This included managing international legal advisers, local agents and client stakeholders; structuring a transaction that addressed both the property interests and the underlying land use rights; and coordinating documentation across jurisdictions in two languages, including notarisation requirements in Hong Kong.

Documentation evolved throughout the process as new requirements emerged from local authorities, counterparties and other stakeholders. The approach was to work within the constraints of the market and legal framework, finding solutions that worked rather than attempting to force a conventional structure onto an unconventional asset.

The outcome

The transaction completed with a substantial positive capital receipt for our client.

Given that potential liabilities had been considered as a scenario at the outset, this represents a significant improvement on initial expectations. All legal and structural requirements were satisfied, funds were secured through the agreed escrow mechanism, and the transfer of rights and interests was fully documented and executed.

Complex cross-border disposals require a different kind of engagement: not just commercial negotiation, but sustained problem-solving across legal, logistical and jurisdictional challenges, often at the same time. This transaction is a good example of what that looks like in practice.

If you have a property disposal that presents unusual challenges, we would be delighted to discuss how we can help. Get in touch with our team.