New World injects another $500m into mainland projects

NEW World Development will inject about $500 million into its China projects this year taking its total cash investment on the mainland to $2.2 billion.

The additional cash will be poured into highway and airport projects in Wuhan and the redevelopment of Beijing's Chongwen district.

New World assistant general manager Mr So Ngok denied the company having any immediate need to raise cash to fund the China projects. He explained that New World would gradually inject fund into its China investments and not do it as a one-off lump sum exercise.

There has been speculation that the US$1.2 billion-Beijing Chongwen redevelopment may cause some financial problems for New World and that it is likely to need a cash call.

New World is responsible for 60 per cent of the redevelopment project and, as such, the company will invest around US$720 million (about HK$5.6 billion). Other shareholders are the Chongwen district government with 30 per cent, and the agricultural planning bureau and Jingtai Company, with five per cent each.

The Chongwen old district will be developed into a commercial and residential area of not less than two million square metres over the next 25 years. The first phase will see the development of 1.5 hectares of residential space and 40 hectares of commercial and recreational facilities.

New World has provided $150 million yuan as start-up capital for the project. The first phase is expected to be completed in 10 years. Land costs will be paid by instalments.

''We do not need to put in a huge amount of money because the return from the pre-sale on the residential units is expected at the end of this year or next year, and $200 million in cash will be put in over two years,'' said Mr So. ''The cash return willbe reinvested into the second phase and onwards. We do not, therefore, need to put in a huge amount of money.'' Around 6,600 square metres of commercial space will be ready to be leased out in June 1995.

Besides the Beijing Chongwen project, the Wuhan highway and airport projects will require around $300 million in cash this year.

''We've arranged a US$40 million syndicated loan for the Wuhan highway, so we only need a cash injection of around $200 million this year,'' Mr So added.

Another US$50 million syndicated loan has also been arranged for the Wuhan airport and infrastructure project. Mr So believes the amount is more than enough to cover the project this year.

Meanwhile, the company is teaming up with Singapore property and trading company Amcol Holdings to develop residential and commercial projects in China and enter the hotel business in Vietnam.

The company is on the verge of signing an agreement with Shanghai authorities to develop a large commercial, office and residential complex on a prime site in the city.

The Shanghai project is said to be worth several hundred million dollars and will be owned equally by Amcol, New World and the Shanghai authorities through a state agency.

In Vietnam, Amcol is looking to take a stake in New World's two hotel projects in Ho Chi Minh City besides teaming up with the latter for new projects.