From Dow Jones Newswires’ Yvonne Lee and Esther Fung:
Reuters
A man talks on his mobile phone as he walks past an advertising billboard outside the Greentown residential construction site in Hangzhou, Zhejiang province September 23, 2011.
Chinese property developer Greentown China Holdings has agreed to sell a stake in the company to Hong Kong-listed conglomerate Wharf (Holdings) Ltd., a person familiar with the situation said Friday.
The person, however, declined to comment on the size of the stake and the value of the deal.
The acquisition by Wharf comes after more than two years of policy tightening in China’s property market, which has hit financially-strapped developers such as Greentown China, driving better-funded real estate companies to pick up prized assets from weaker players.
The sale would likely improve Greentown’s cash position and bolster its prospects in the current tight environment, which had compelled the Hangzhou-based developer late last year to sell some of its property projects for cashflow purposes.
The luxury home developer sold 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.
Shares of Greentown, Wharf and Wharf’s parent Wheelock Co. were suspended from trading Friday morning. Hangzhou-based Greentown said at the time the suspension was due to an announcement which may involve the issue of securities but didn’t give further details.
Wharf, controlled by Hong Kong billionaire Peter Woo, operates property businesses in China and Hong Kong. Its businesses also include pay-television company i-Cable Communications Ltd., fixed-line telecommunications provider Wharf TT Ltd., and ports operator Modern Terminals Ltd.
Analysts are anticipating consolidation in the fragmented greater 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.
In particular, mainland China developers have struggled with Beijing’s efforts to control new home prices. Local and national tightening measures have included restrictions on mortgages and lending to developers, as well as limits on second-home purchases, leading to falling sales and prices in many cities.