Highly indebted Greentown China and another mainland developer are to sell a prime development site in Shanghai to Soho China for 2.13 billion yuan (HK$2.6 billion) in the face of a credit crunch.
Soho China said it had entered into a framework agreement to acquire the entire interest in Greentown Plaza Development, of which 70 per cent is ultimately owned by Greentown China and the remaining 30 per cent held by Maanshan Development.
Greentown Plaza Development is responsible for the development of an office, hotel and commercial project at Tianshan Road in the Changning district. The site will generate a total gross floor area of 172,208 square metres of offices and commercial uses.
In a company statement to the Hong Kong stock exchange, Greentown said the estimated gain on the property disposal was 200 million yuan. Greentown expected 'the disposal would improve the gearing level and the financial position' of the company.
In March, Greentown said it had total borrowings amounting to 32.1 billion yuan. Its net gearing ratio was 148.7 per cent as of December, up from 132 per cent a year earlier.
Last year, Greentown generated a total of 3.23 billion yuan in cash flow from the disposal of five projects.
The sale comes after Hangzhou Glory Real Estate became the first developer to file for bankruptcy since the central government introduced curbs on the housing market last year.