Sale of Exclusive-Evergrande head office in Hong Kong for $ 1.7 billion fails as buyer pulls out – sources

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By Julie Zhu, Kane Wu and Clare Jim

HONG KONG (Reuters) – Chinese state-owned company Yuexiu Property withdrew from a proposed $ 1.7 billion deal to buy China Evergrande Group’s headquarters in Hong Kong amid concerns over the developer’s dire financial situation, two sources said.

The failure of talks to sell the historic building is another setback for cash-strapped Evergrande, who scrambles to sell off some assets to pay off creditors knocking on its doors. With more than $ 300 billion in liabilities, it has already missed three rounds of interest payments on its international bonds.

Yuexiu, based in Guangzhou, in the south of the country, was on the verge of reaching a deal in August to acquire the 26-story China Evergrande Center in the Wan Chai district of Hong Kong, which serves as the local headquarters of Evergrande, have indicated the sources.

The deal fell through, however, after Yuexiu’s board of directors opposed the move, fearing that Evergrande’s unresolved debt could create potential complications in closing the deal smoothly, they said. declared.

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

Evergrande, which saw its 8.75% June 2025 bond drop more than 6% to 18.625 cents on Friday, did not respond to a request for comment. Yuexiu neither.

The individuals declined to be identified due to confidentiality constraints.

Evergrande purchased the harborfront building, which is located in Hong Kong’s shopping and nightlife district and covers an area of ​​345,000 square feet, from its local counterpart Chinese Estates Holdings for $ 12.5 billion. HK ($ 1.61 billion) in 2015.

The deal set a record for a single commercial building transaction in the Asian financial hub with the highest price per square foot at the time. It also made the property Evergrande’s most important asset in the city.

Evergrande funded the bulk of the deal with securitized products worth over HK $ 10 billion, one of the sources said, meaning he would only recover limited cash from the sale of the building.

EVERGRANDE PERSPECTIVES

Yuexiu’s board of directors, which focuses on real estate developments in the Greater Bay Area of ​​China and has a presence in Hong Kong, expressed concern over the certainty of the deal at a time when the future of ‘Evergrande is uncertain, one of the sources said.

Yuexiu also received advice from the southern city of Guangzhou municipal government to suspend the purchase at the end of August, the person said.

A separate source familiar with the matter said the deal was halted at the end of August because the Guangzhou government first wanted to examine Evergrande’s overall financial situation in order to better understand the use of the proceeds from its asset disposals. .

The Guangzhou government did not respond to a request for comment.

Separately, Evergrande is in final talks to sell a 51% stake in its property management arm Evergrande Property Services to its national counterpart Hopson Development, in a deal that could bring in around HK $ 20 billion, said. two of the sources.

One said the two sides were finalizing the details, including the buyer’s financing.

Asked about the deal, Hopson said any comment will have to wait until an announcement is made.

The Hopson deal would be Evergrande’s biggest asset sale to date if it goes through. The struggling developer’s other business interests include a water bottling company and an electric vehicle manufacturer.

It is also set to sell its Guangzhou FC football stadium and surrounding residential projects to Guangzhou City Construction Investment Group, Reuters reported last month.

($ 1 = 7.7784 Hong Kong dollars)

(Reporting by Julie Zhu, Kane Wu and Clare Jim; Editing by Sumeet Chatterjee, Muralikumar Anantharaman and Jason Neely)


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