CCP buying Guangzhou property for 1.39b yuan
China Central Properties, a listed investment unit of Shui On Construction and Materials, has agreed to acquire Guangzhou Dapeng International Plaza for 1.39 billion yuan (HK$1.55 billion), giving the southern mainland city a huge boost in sorting out its distressed assets.
The property sale was in line with the city government's target to clear up distressed properties by 2010 when Guangzhou holds the Asian Games, property consultants said, adding that most of the major abandoned properties in the city had been acquired for development.
CCP said the 1.39 billion yuan would comprise the cash consideration payable on completion to the vendor - Da Peng Properties - as well as the assumption by the company of certain liabilities.
But market sources said total investment would be more than that as the buyer was required to pay relocation fees of about 200 million yuan for residents who originally lived there.
Located in Guangzhou Circle Road East, next to the Garden Hotel, the property covers approximately 129,400 square metres and comprises a 51-storey office tower and a five-level retail podium. The project is expected to be completed in 2010.
The superstructure of the building was completed but owner Da Peng Properties stopped work when interior partitions were installed up to the 32nd floor few years ago, due to financial difficulties, a source said.
Agents said the Guangzhou Dapeng International Plaza has drawn strong initial interest from a number of developers over the past few years. But no deal was clinched because of the gap between the asking price and what potential buyers are willing to pay. 'The location is good and therefore it attracted buyers' interest,' said Gary Cheung Chi-chung, head of business space department at DTZ's Guangzhou branch.
But Mr Cheung said many potential buyers did not consider it a grade A office tower as the design of the property was 10 years old, less attractive when compared with newly built grade A office buildings.
Some agents expected the selling price of the completed Guangzhou Dapeng International Plaza would be around 18,000 yuan per square metre, against the 25,000 yuan per square metre for grade A office buildings.
Many Guangzhou properties became distressed in the late 1990s when Hong Kong and mainland developers faced funding problems to complete their projects.