Guangzhou Investment Co (GZI) yesterday announced it had agreed to buy five hotels in China and Hong Kong, including Hong Kong's South China Hotel from Guangdong Investment (GDI). The South China Hotel alone was being bought for $500 million. Guo Peinan , the executive director of GZI, which is the listed arm of the Guangzhou municipal government, said the aim was to increase the company's hotel portfolio and broaden its income base. The total amount involved in the purchases was not available. 'The deal of the South China Hotel in North Point will be concluded on April 20 and a surveyor is being appointed for revaluation,' he said. Reliable sources said GZI would pay $500 million to GDI, which is the listed arm of the Guangdong provincial government, for the 204-room hotel. It is understood the deal was reached because GZI offered to buy the hotel from GDI as it wanted to own a hotel in Hong Kong. GDI director and deputy general manager Berger Hou Bojian confirmed the deal and said the hotel was sold at a reasonable price. 'We [GDI] decided to sell the South China Hotel to Guangzhou Investment as a result of a financial restructure within the company and a close co-operative relationship with our 'brother' company,' Mr Hou said. He said GDI's subsidiary, GD International Hotel Management Co, would continue to manage the hotel for the next two years. He said the disposal of the South China was decide on because it was bearing a fairly high interest burden which was arranged in 1990. 'The return of the hotel is relatively low compared with its asset value despite its occupancy rate being 89 per cent last year,' Mr Hou said. GDI bought the hotel from its parent company, the provincial government's commercial arm, Guangdong Enterprises, for about $290 million. Mr Hou said GDI would realise about $300 million in the deal which would be used to acquire or build new hotels in Hong Kong and China. He said the hotel was still a core business for GDI. GDI has six hotels in Hong Kong and one in Shenzhen with an asset value of $300 million to $400 million.