Fuxing China proposes 430.3m yuan sale of Xiamen headquarters

ZIPPER producer Fuxing China Group on Monday said it is looking to sell the bulk of its office building in China for about 430.3 million yuan (S$84.9 million) in cash.

The mainboard-listed company's wholly-owned subsidiary Xiamen Xinfuxing Industrial had entered into provisional sale and purchase agreements with independent third-party buyers for the proposed disposal.

Located in Siming district of Xiamen city, Fujian province, the investment property has 25 floors of offices across 34,263 square metres (sq m) as well as four basement levels comprising 318 carpark lots amounting to 17,653 sq m. Two of the office floors serve as Fuxing China's headquarters, while the rest are tenanted to a single tenant, according to the company's Oct 2, 2019 bourse filing.

Fuxing China plans to sell most of the space in the building, spanning a saleable area of about 30,523 sq m for office premises as well as 13,121 sq m comprising 252 carpark lots.

The market value of the entire building was 447.7 million yuan as at June 30, 2020, based on a report by Quanzhou Decheng Asset Appraisal, which Fuxing China had commissioned to undertake an independent valuation. This translates to a market value of almost 417.9 million yuan for the disposal property, Fuxing China said.

The proposed sale will give rise to a net loss on disposal of about 76.4 million yuan for the group.

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Fuxing China's board of directors noted that leasing demand is likely to weaken further amid the economic uncertainties from the coronavirus pandemic, depressing the real estate market and the prices of commercial office buildings in Xiamen city.

It also pointed out the 10.6 per cent increase in the number of commercial office buildings in the city last year, and that the amount of Grade A office space is expected to continue to rise in the next three to five years, according to a report by real estate service provider Savills. 

"As such, the group would like to dispose of the disposal property now at a consideration higher than the current market value in order to realise its current investment value and to avoid being exposed to potential declines in the market value of the disposal property in the next three years," the board said.

In addition, the proposed sale will allow the group to realise a substantial amount of cash, bolster its working capital, and reduce its gearing ratio, Fuxing China said.

This will enable the group to be "in a stronger financial position to face future economic challenges and headwinds arising from a more uncertain business environment post Covid-19", it added.

The deal is subject to conditions precedent including all relevant approvals being granted, including board and shareholders' approval.

The Fuxing China group in March 2011 acquired the land parcel occupied by the building from China's government via an open tender process, which gave the group the right to use the land for 50 years from April 27, 2011.

Shares of Fuxing China last traded on June 19 at S$0.61.