China Fair Land stock falls on Fuzhou deal

PUBLISHED : Thursday, 04 October, 2007, 12:00am
UPDATED : Thursday, 04 October, 2007, 12:00am

Shares of China Fair Land Holdings, a small Hong Kong property developer, fell almost 22 per cent yesterday after the company announced the purchase of a multipurpose project in Fujian province for HK$3 billion.

The stock fell 20 HK cents to close at 71 HK cents after trading resumed following its suspension on September 17. It has more than tripled this year, compared with a 41 per cent gain in the Hang Seng Index.

China Fair Land said it would issue 114.2 million shares at 50 HK cents each, HK$2.7 billion of 10-year zero-coupon convertible bonds and HK$250 million of promissory notes to buy the project from investor Chen Chengwei.

The bonds can be swapped for China Fair Land shares at 50 HK cents each, and assuming all are converted, Mr Chen and his wife will own 95 per cent of the company.

The acquisition came after Beijing introduced a new set of drastic policies at the end of last month including tighter credit for home loans and higher down payments for second-home buyers to cool the property market.

The project, in Fuzhou, comprises flats, offices and shops. It would have a total gross floor area of about 225,784 square metres, China Fair Land said.

The project is now owned by Fujian Zhonglu Real Estate Development, a venture 95 per cent held by Mr Chen's Dalong Industrial Group and 5 per cent by Fujian Zhonglu Group.

Fujian Zhonglu was at the centre of a storm in 2005, when it agreed to transfer control of the Huaqiao Hotel to Dalong Industrial.