Land disposal to net Shanghai government-linked firm 1.17b yuan
Shanghai Industrial Urban Development, a property development company controlled by the Shanghai government's investment arm, Shanghai Industrial Investment (Holdings), will pocket 1.17 billion yuan (HK$1.47 billion) from the disposal of a 25 per cent stake in a piece of land in the city.
The company expected to book 584 million yuan in profit from the sale, as a result of the difference in the consideration and the net asset value of the site.
The earnings serve as a lifeline for the company after it reported HK$190.2 million losses last year, following HK$601.6 million losses in the previous year.
"Since the company has been exploring different ways to unlock the true value of some of its projects that are booked at costs in its financial states, the disposal is beneficial to realise part of the hidden value of the particular project," the company said.
Earn Harvest, the vehicle company holding the 25 per cent stake in the land, recorded an unaudited profit of HK$23.9 million in 2011, followed by HK$5.6 million profit last year.
The price of the land is valued at more than 200 times its historical earnings.
It is not clear why the buyer would pay such a premium. The buyer's holding company is controlled by Liang Yanfeng, according to the announcement.
Adding to the mystery, the buyer will only be responsible for the development and management of a very small portion of the land - 21,600 square metres of the 510,000 sq metres in total. The land will be developed for mixed use, including offices, commercial buildings and hotels.
Completion of the deal is scheduled to take place by Friday.