Evergrande's US$1.7b HK headquarters sale flops as buyer withdraws: sources

[HONG KONG] Chinese state-owned Yuexiu Property has pulled out of a proposed US$1.7 billion deal to buy China Evergrande Group's Hong Kong headquarters building over worries about the developer's dire financial situation, two sources said.

The collapse of the talks for the landmark building's sale is another setback for cash-strapped Evergrande which has been scrambling to divest some assets to repay creditors knocking on its doors. With more than US$300 billion in liabilities, it has already missed three rounds of interest payments on its international bonds.

Yuexiu, based in the southern city of Guangzhou, was close to sealing a deal in August to acquire the 26-storey China Evergrande Centre in Hong Kong's Wan Chai district that serves as Evergrande's local headquarters, said the sources.

The deal, however, faltered after Yuexiu's board opposed the move over worries that Evergrande's unresolved indebtedness would create potential complications in completing the transaction smoothly, they said.

Once China's top-selling developer, Shenzhen-based Evergrande has in recent months sought to raise funds by offloading assets - from properties to stakes in subsidiaries - both in mainland China and in Hong Kong.

Evergrande and Yuexiu did not respond to requests for comment.

The people declined to be identified due to confidentiality constraints.

Evergrande bought the harbourside building, which is located in Hong Kong's commercial and night life district and covers an area of 345,000 square feet, from local peer Chinese Estates Holdings for US$1.61 billion in 2015.

That deal set a record for a single transaction of a commercial building in the Asian financial hub with the highest price per square foot at the time. It also made the property Evergrande's single largest asset in the city.

Evergrande has financed the bulk of the transaction with securitised products worth more than HK$10 billion (S$1.73 billion), said one of the sources, which means it would only recoup limited cash from the sale of the building.

REUTERS