Prime Central building is sold

Hysan takes nearly $1b less than purchase price

Hysan Development yesterday sold the Entertainment Building in Central for $2.7 billion, almost $1 billion less than it paid for it in 1996.

The Hong Kong-listed property firm made the sale to cut its debts, the company announced last night.

Hysan sold its wholly owned subsidiary, Jarrow Properties, which owns the building, to Join-in Investments, whose owners are not linked to Hysan. As part of the deal, Hysan also sold to Join-in Investments some loans of an undisclosed amount made by Hysan to Jarrow Properties.

Hysan, which paid $3.64 billion for the prime Queen's Road Central retail-office site, said it expected to book a gain of $262 million from the transaction. The book value of the building, which has a gross floor area of 211,148 sq ft of office and retail space, was $2.43 billion as of June 30.

The $2.7 billion payment will be in cash, with $270 million paid yesterday, the balance on completion. The deal is expected to be wrapped up by the end of this year.

'The proceeds of the transaction will be applied towards reduction of the company's debts, which Hysan believes will considerably strengthen its financial position,' the announcement said.

As of June 30, Hysan had $3.28 billion of long-term bank borrowings, $1.55 billion of debt from fixed rate notes and $2.69 billion of deferred tax liabilities, according to its 2005 interim report.

When Hysan bought the Entertainment Building in November 1996, the acquisition represented an average value of more than $17,000 per sq ft, 20 per cent higher than prices paid for office property in Central. Entertainment Building contributed a net profit of $38.86 million in 2004 and $29.41 million in 2003, Hysan said.

On August 27, the South China Morning Post reported that Watsons, the health and beauty chain of Hong Kong tycoon Li Ka-shing, was being forced out of Entertainment Building after Hysan lured in fashion retailer Joyce Boutique Holdings and doubled the rent.