KUMAGAI Gumi (HK) is selling wholly owned hotel subsidiary King Tai Development to the Lippo Group for $1.29 billion. King Tai owns the 313-room Ambassador Hotel in Tsim Sha Tsui which is also its principal business. The value per room achieved under the deal is $4.12 million. The Ritz-Carlton Hotel in Central had a room sale rate of $5.3 million. Kumagai's executive director Frederick Ma Si-hang said yesterday the sale was purely a property transaction and that it was a good opportunity to take advantage of the buoyant state of the commercial property market in the territory. ''We bought the hotel for $600 million in 1987 and this sale gives us a substantial surplus - about 50 per cent of the book cost,'' he said. Kumagai will realise a surplus of about $690 million over the book cost. The proceeds will be used to provide the company with additional working capital and to reduce its borrowings. The company reported an after-tax profit of $13.44 million for the year ended September 30, which was up more than fourfold. Pre-tax profit was up by a similar margin to $16.15 million. Lippo subsidiary Hong Kong China has paid a deposit of $258 million, which represents 20 per cent of the sale price. Hong Kong China will pay the balance on completion of the agreement by April 30 next year. The Ambassador Hotel is a 17-storey building on a site area of about 12,000 sq ft and has a gross floor area of 166,600 sq ft. Its lobby shopping arcade has a lettable floor area of 4,500 sq ft which yields a monthly rental of about $1.94 million. King Tai's sole property asset consists of eight floors of Far East Mansion on Middle Road, Kowloon. Kumagai was a Japanese construction and property company incorporated in 1973 and listed in 1987. On March 8 this year, Kumagai Gumi of Japan sold 80 million shares in the group, reducing its stake from 29.3 per cent to 6.4 per cent. The shares were taken up by Kumagai (HK) deputy chairman Yu Ching-po and other investors. Mr Yu bought 20 million shares and lifted his stake from 13.6 per cent to 19.3 per cent. Following that, he became chairman of the group. The group, which has a market capitalisation of $4 billion, is involved in construction and infrastructure development in Hong Kong and China. It had an order book of contracts valued in excess of $10 billion at March 31, an increase of 230 per cent over December 30 last year. The significant increase in contract value is largely due to an infrastructure contract worth $4.8 billion awarded by the Hainan Yangpu Land Development Co. The group holds a 30 per cent stake in Hainan Yangpu Land Development, which was established to develop the Yangpu economic development zone on Hainan Island. Works on the zone include the construction of a 300-megawatt power station, which is expected to provide electricity for the zone from the middle of next year. Other contracts in China include property developments in Shenzhen, Haikou, Guangzhou and Zhuhai. In Guangzhou, the group has entered into a joint venture in the Tian He district to develop a 68-storey office building and a 40-storey residential block with a total floor area of about 300,000 sq metres. The group is also heavily involved in projects under the Port and Airport Development Strategy. Among them is the construction of Kap Shui Mun Bridge to connect Ma Wan island with north Lantau. The construction is part of the Lantau Fixed Crossing, a key project in the development of the new airport at Chek Lap Kok. Other major projects in which the group is involved are the $1.5 billion West Kowloon Reclamation and the West Kowloon Expressway, which is valued at $1.27 billion.