FAR East Hotels and Entertainment is abandoning its controversial Shanghai property deal, in which the managing director planned to sell private property to the listed company for a $506 million net gain. The Hong Kong Stock Exchange questioned the deal, first proposed on June 7, earlier in the month. The company has now announced: ''Taking into account the recent financial reforms implemented by the PRC Government and the increasing uncertainties in the property market in the PRC, the directors of the company had agreed to the withdrawal of the conditional agreement.'' Managing director Derek Chiu bought the land in a joint venture deal in November 1992. There was a $40 million cost associated with the lot in Shanghai, part of which was a payment for the joint venture and a site clearing fee. Mr Chiu said the land was to be sold to the publicly listed company because it was a good long-term investment. All the valuations of the property in the proposed transaction were independently made. However, the exchange raised a number of concerns about the deal and asked for further explanation before the matter could be put before independent shareholders. It was proposed that the land be paid for through the allotment of 470.9 million new shares at $1.16 per share. The deal involved the sale of Runhigh, the sole asset of which was an interest in Shanghai Far East Entertainment Square, a co-operative joint venture entered into on November 25, 1992 with Shanghai Municipal Xizuang Books Market. The venture agreement was to develop a site at the junction of Fengyang Road and Xizuang Road Central in the Huangpu District, Shanghai. Mr Chiu informed the company that the conditional agreement would not go ahead on September 1. Far East Hotels announced a net loss for the 12 months to March 31 of $15.28 million. Group company Far East Consortium announced a 24.77 per cent decline in net profit to $120.98 million.