Hopson JV Sells Beijing Office Tower for $553M, Books 9% Loss

A joint venture invested by Hopson Development and mainland asset manager, BMI Funds Ltd, has agreed to sell a Beijing office tower for RMB 3.67 billion ($552.6 million), according to an announcement by the Hong Kong-listed mainland developer.

Hopson, which holds a 45 percent stake in the JV, will write down a RMB 297 million ($44.7 million) loss through the RMB 1.84 billion ($277 million) sale of its interest, but decided that now is an opportune time to dispose of its share in the 20-storey, grade A tower in view of slackening demand in the Beijing office market, among other factors.

The 78,000 square metre property, known as the Hopson International Building, is the north building of the Beijing Oriental Culture and Art Center, located at 9 North Chaoyang Road. The JV is receiving the equivalent of RMB 47,051 per square metre for the complex located about 600 metres north of the Chaoyangmen metro station in the city’s core Dongcheng district.

Hopson Blames the Market for Its Haircut

Under the terms of the deal, which was announced on September 27, Hopson will dispose of two subsidiaries that collectively own a 45 percent stake in the project company. BMI Funds, which is a branch of Hong Kong-based financial services provider BM Intelligence group, will also be disposing of its 45 percent stake in the same transaction.

The remaining 10 percent in the JV is held by Beijing Dongfangwenhua Assets Operation Company. The purchaser of the property is identified only as the British Virgin Island-incorporated firm Golden Harmony Investments Limited.

Hopson, which developed the property in 2006, will take an unaudited loss of over RMB 297 million through the sale, based on the valuation of the property as of June 30, according to the statement. Hopson decided to release a supplemental announcement on the same day that clarifies its rationale for the sale, which represents a nine percent haircut on the previous value of its share in the project.

“The valuation only assumed there was a willing buyer of the Target Property in the open market,” Hopson states. The company’s directors also foresee a slump in demand for office space in Beijing due to the launch of the Xiongan New Area development zone in Hebei province in April, which is expected to draw state-owned enterprises and other corporate users out of Beijing.

Hopson also mentions that “the current leases over the Target Property [will expire] in the next few years,” without providing further specifics.

Beijing-Based Developer Keeps a Low Profile

Chaired by billionaire Zhu Mengyi, a former government bureaucrat who was ranked as the second-richest person in China back in 2005, Beijing-based Hopson develops residential and commercial properties across the country.

The group posted contracted sales of RMB 5.82 billion during the eight months through August. The largest proportion of the group’s revenues, 45 percent, came from North China in 2016, according to Hopson’s annual report.

Zhu was in the news earlier this year, when Dalian Wanda Group sold a Nanchang mall to a group of buyers who were said to be relatives of the property baron in July.