K Wah partners China Vanke to help with mainland push
Developer sells 50 per cent stake in Guangzhou project for 320 million yuan
K Wah International Holdings has sold half of a development project in Guangzhou to China Vanke for 320.6 million yuan, hoping that the Shenzhen-listed partner will help it expand in China.
The Hong Kong-listed mid-tier developer yesterday said China Vanke would pay the 50 per cent interest in Hui Cheng Real Estate Development in cash. Hui Cheng owns three sites at Hua Dou District in Guangzhou with a total site area of 637,346 square metres.
'[The proceeds] will be used to develop the sites,' said K Wah executive director William Lo Chi-chung. 'As China Vanke is a well-known developer on the mainland, the partnership will increase our visibility on the mainland and diversify risk.'
K Wah acquired the sites two years ago for an undisclosed amount. It is still in talks with the government over the details of the development including plot ratio which determines the size of floor area it can build.
Hui Cheng's current total net asset value is 176.26 million yuan and this will be lifted to 490 million yuan after the stake sale to China Vanke. K Wah will book a 75 million yuan gain from the deal.
K Wah has not made any land purchases in Hong Kong since last year and expanded its operations in the mainland property market instead. It signed a joint-venture agreement with Shanghai Baosteel, Mitsubishi and Tokyo Land to expand its China business last year. The joint venture owned the Yangpu District project in Shanghai, which provides a total floor area of about 300,000 sq metres.
Mr Lo said K Wah's Hong Kong business will be smaller than its mainland operations in the next two years.
K Wah said it had sold about 500 units of the first phase of its luxury residential project, Shanghai Westwood which generated 570 million yuan. It expects to generate up to five billion yuan from the sale of the 4,000 units at the three phases.
Chairman Lui Che-woo said: 'We will continue to look for development opportunities here. We will not give up on the Hong Kong property market.'
The shares fell 1.12 per cent to close at $2.20 yesterday.