Pacific Century Premium Developments Ltd., the real estate unit of billionaire Richard Li’s PCCW Ltd., agreed to sell a Beijing commercial and residential complex to Gaw Capital Partners for $928 million. Pacific Century shares tumbled.
The sale of Pacific Century Place to the Hong Kong-based fund manager will generate HK$2.65 billion ($341 million) of consolidated pretax profit, which the company will use to pay debt and fund projects in Japan, Thailand and Indonesia, according to a filing to Hong Kong’s stock exchange yesterday.
The supply of office properties for sale in Beijing is limited. In the five years through 2012, only 61 sales of office buildings and business parks worth at least $5 million were recorded in China’s capital, compared with 107 deals in Shanghai, Jones Lang LaSalle said in an August report.
“This is a rare opportunity to be able to acquire such a large cash flow asset in a prime and irreplaceable area in Beijing,” Kenneth Gaw, Gaw Capital’s president and co-founder, said in an e-mailed statement yesterday. “We believe this type of asset will continue to outperform.”
Shares of Pacific Century are set for their biggest decline in more than five months in Hong Kong. They dropped 11 percent to HK$5.93 as of 11:42 a.m. local time.
Gaw Capital said in November it bought the Waterside House in London for a group of South Korean investors, as interest in overseas property from Asia grows.
For Pacific Century, the sale lets the company realize its investment “at a reasonable price” to enhance its financial resources and let it explore investment opportunities worldwide, according to its statement.
Pacific Century will pay an $100 million breakup fee if the agreement is terminated.
The company is currently developing a resort project in Japan and luxury resort complexes in southern Thailand. It also plans to build a 40-story grade-A office building in Jakarta, according to the statement.
Pacific Century plans to use the proceeds from the sale to repay HK$1.5 billion of loans and redeem HK$2.42 billion of convertible notes that will mature in May.
PCCW unit PCCW-HKT Partners Ltd. holds the notes and may convert all or part of the debt into Pacific Century shares, according to the filing. PCCW may consider selling some of its Pacific Century shares to increase the company’s public float, while maintaining its majority stake, Pacific Century said.