Greentown to Sell Stakes in Property Assets to Sunac China for CNY3.4 Billion
06/22/2012| 06:48am US/Eastern
-- Greentown to sell CNY3.4 billion worth of stakes in real estate assets to Sunac
-- Greentown expects to record gain of CNY232.5 million from asset disposal
-- Greentown to use proceeds for loan repayment, working capital
-- The deal comes shortly after agreement to sell stake to Wharf for HK$5.1 billion
(Recasts first paragraph, adds details of transaction, comments from Greentown, Sunac executives, details of China's property tightening campaign throughout.)
By Shen Hong and Yvonne Lee
SHANGHAI--Debt-heavy Chinese property developer Greentown China Holdings (3900.HK) said Friday it has agreed to sell a total of CNY3.4 billion (US$535 million) worth of stakes in real estate assets to rival Sunac China Holdings Ltd. (1918.HK).
The deal came just two weeks after Hangzhou-based Greentown, a high-end developer, agreed to sell up to 33% of the company to minority shareholder Wharf (Holdings) Ltd. (0004.HK) for HK$5.1 billion.
Greentown's rush to raise cash reflects the growing financial distress plaguing many Chinese developers following more than two years of harsh property tightening measures that have hurt demand and dried up revenues.
In a statement to the Hong Kong stock exchange, Greentown said the transaction will be conducted via a joint venture newly established between the two companies.
Most of the assets to be sold are in southern Chinese cities including Shanghai, Suzhou, Wuxi and Changzhou, ranging from high-end apartments to a golf course project, according to the statement.
Greentown said it expects to record a gain of CNY232.5 million from the asset disposal, adding that the proceeds will be used to repay loans and for working capital.
At a joint press conference with Sunac executives in Shanghai Friday, Greentown's founder Song Weiping said the projects sold to Sunac hadn't proceeded smoothly due to Beijing's housing curbs.
Mr. Song said Greentown may seek more cooperation with its partners this year in case Beijing's property tightening campaign persists. He didn't specify which partners he was referring to.
Although financially strapped property developers in China, including Greentown, have sold prime real estate to raise funds in recent months, the earlier deal between Greentown and Wharf marks the first stake sale by one of China's large developers in the current tightened environment.
Late last year, the luxury home developer started selling assets in a few Chinese cities, including a stake in a prized plot of land near the Shanghai Bund, to raise capital after the government's tightening measures, especially limits on home purchases, dried up sales of high-end homes.
At the joint press conference with Greentown, Sunac's chairman Sun Hongbin said the Tianjin-based company will see an increase in its cash flow from last year due to expectations of stronger sales.
Mr. Sun said Sunac spent more than 9 billion yuan (US$1.42 billion) on land purchases last year and had around CNY3.8 billion worth of cash left on its balance sheet at the end of 2011.
Indeed, analysts said they are anticipating further consolidation in the fragmented mainland China property market as the sector is showing increasing signs of distress, given that the number of large deals that have been completed hasn't been as large as earlier projected.
Shares of Greentown China and Sunac China were suspended from trading Friday and will resume Monday.
Wynne Wang contributed to this article.
Write to Shen Hong at firstname.lastname@example.org