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Lai Sun Development has agreed to divest its 50% interest in a prime office tower in Hong Kong's Central district for HKD 3.5 billion (USD 450 million), securing net proceeds of HKD 2.4 billion. The disposal is intended to strengthen liquidity as the developer confronts refinancing challenges, a subdued commercial property market and substantial bond repayments due next year.
Lai Sun Development has agreed to sell its 50% stake in an office tower located in Hong Kong's Central financial district for HKD 3.5 billion, according to a filing issued on Tuesday. The developer, which has been facing tightening liquidity conditions, said the transaction would provide net proceeds of around HKD 2.4 billion that are expected to support cash flow at a time of heightened financial stress. Advertisement
The interest being sold comprises 12 of the tower's 27 floors in addition to several parking spaces. The buyer, Jasmine Investment Development IV Limited, is incorporated in the British Virgin Islands. Lai Sun did not disclose any further details about the purchaser. The remaining 50% interest in value terms is held by CCB International, the investment banking division of China Construction Bank.
The filing stated that the agreed price reflected a 6.7% discount to the property's July valuation, attributing the reduction to prevailing macroeconomic conditions and market sentiment. Lai Sun expects to record a HKD 261 million accounting loss on the sale; however, this will not result in a cash outflow in the company's financial statements.
Lai Sun and its parent, Lai Sun Garment, remarked that the deal would substantially improve their overall financial position. Following completion of the transaction-scheduled for January'and after the successful refinancing of a syndicated loan in September, both companies anticipate shifting from a position of net current liabilities to net current assets.
The developer has been grappling with a challenging operating environment amid declining property sales, weak prospects for a recovery in the commercial real estate sector, and reduced access to funding. Its auditor recently highlighted uncertainty regarding the developer's ability to remain a going concern after Lai Sun reported a HKD 2.9 billion net loss for the financial year ended in July, with current liabilities exceeding current assets by HKD 4.5 billion.
The company also faces significant debt obligations, including USD 524 million in bond repayments due next year, the largest repayment requirement among Hong Kong developers that are under financial strain.
Source - Reuters
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