Shenzhen Investment will spend HK$657.5 million on a strategic stake in Hong Kong-listed developer Coastal Greenland as part of an effort to increase its focus on mainland property development. The Hong Kong-listed investment arm of the Shenzhen municipal government said it has agreed to buy 162 million Coastal Greenland shares and a US$40 million convertible bond from US hedge fund giant Citadel Equity Fund. The purchases combined could be equivalent to a 22.8 per cent stake in the developer. After the deal is completed, all three firms 'will explore a range of joint venture and project development collaborations', said Joe Zhang Huaqiao, SZ Investment's chief operating officer. As part of this, SZ Investment intends to invite Citadel to become a strategic equity investor in the company, Mr Zhang said. The deal propelled shares of SZ Investment up 3.9 per cent yesterday to closing price of HK$2.94. Coastal Greenland also jumped 4.4 per cent, ending at 94 HK cents. Although the acquisition price represents a 75 per cent premium to Costal Greenland's consolidated net asset value as of the end of March and 39 per cent above its share price based on the market capitalisation, SZ Investment insisted the deal is justifiable due to the developer's likely high returns. SZ Investment forecasts that Coastal Greenland's net profit for the year to March next year will rise to HK$400 million from HK$105 million this year, Mr Zhang said. Coastal Greenland has more than four million square metres of gross floor area in its land bank and properties under construction in 13 mainland cities. 'Coastal Greenland is just about to harvest the benefits of brand-building of its 15-year works in the mainland property development,' Mr Zhang said. SZ Investment intends to hold on to its stake for the long term, he said, noting it agreed to a one-year lock-up period for its new purchase. He said with the purchase he aims to replicate SZ Investment's success in toll-road operator Road King. Shares of Road King have more than doubled since the municipal firm acquired a 25 per cent stake in 2004 at HK$5.05 a share. The company is also looking to buy property developers in Shenzhen, Dongguan and Zhongshan, Mr Zhang said. With a land bank of 2.7 million square metes of gross floor area, SZ Investment plans to add 1.7 million square metres for the rest this year and at least one million square metres in each of next year and 2008.