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Equity Dispute Leaves Guoson Project in Limbo

05-20 00:00 《财经》杂志 《财经》杂志

  By staff intern reporter Li Enshu

  Sitting on the northwest corner of Beijing’s Dongzhimen, Asia’s largest transportation hub, the desolate Guoson shopping center project offers direct access to the capital airport, and for a time basked in the aura as the “gate of the capital city.” But after changing developers several times since 1994, an equity dispute has left the project in limbo, making it Beijing's most famous unfinished property.

  Behind the equity dispute are of billions of yuan in interests as well as two massive loans from Shenzhen Development Bank and Agricultural Bank of China.

  Beijing Urban Construction Investment and Development Co., Ltd. and Hainan Jinghao Asset Limited (Hainan Jinghao) registered in Haikou City, Hainan Province, jointly established Beijing Chengjian Donghua Real Estate Development Co., Ltd. (CJDH) in March 2000 with a registered capital of 100 million yuan to develop the Dongzhimen project. The estimated costs for relocation and demolition for the project were nearly 1.2 billion yuan.

  “This was a big project worth over a billion yuan. No one was really doing planning and development; everyone involved just wanted to flip the land to turn a profit," said an insider who participated in development of the project.

  In 2000, Hong Kong Kangshi Investment Co., Ltd. (Kangshi Investment), together with CJDH, jointly incorporated Beijing Donghua Plaza Properties Limited (Donghua Properties). Kangshi Investment would be required to pay CJDH 1.33 billion yuan in relocation, demolition and project compensation fees.

  However, after paying 750 million yuan, Kangshi Investment was unable to pay the remaining balance, which led to the introduction of Beijing Aptech Beida Jade Bird Information Technology Co., Ltd (APTECH) and Huayuan Property Co., Ltd. (Huayuan), and a string of lawsuits involving the five companies. The serial litigation culminated in late Aug. 2004 with a dramatic ending - APTECH acquired a 90 percent stake in CJDH and took on overall operation of the Dongzhimen project.

  APTECH then began to raise capital to invest in the project. Donghua Properties, which was now under its control, took three loans from Agricultural Bank of China (ABC) worth a total of 2 billion yuan.

  On Feb. 17, 2007, APTECH signed an agreement with Singaporean company Guoco Group Limited (Guoco Group), whereby Guoco Group would acquire the Dongzhimen project for 5.8 billion yuan.

  Under the agreement, APTECH would transfer all its shares in CJDH to Hainan Jinghao. Then, after Guoco Group paid US$400 million (about 3 billion yuan) in three deposit installments, it would gain a 100 percent stake in Hainan Jinghao through its subsidiary GuocoLand (China) Limited (GuocoLand China), and thereby gain full control of CJDH, including CJDH’s official seal, contract seal and all related company documents.

  Hainan Jinghao completed its business registration change in March 2007. However, GuocoLand China did not pay APTECH the remaining 2.58 billion yuan, which involved loans with Shenzhen Development Bank and Agricultural Bank of China, as scheduled. This triggered a rift in cooperation and later became a focal point for the dispute between the two parties.

  APTECH sent a letter to the Trade and Industry Bureau of Hainan Province on Feb. 14, 2008, requesting the reinstatement of the Hainan Jinghao’s original ownership structure. On Feb. 18, 2008, the Trade and Industry Bureau of Hainan Province revoked Hainan Jinghao’s previous change of business registration and restored to the company to its state prior to March 2007, on the grounds that GuocoLand China failed to pay the consideration in the transfer of shares. GuocoLand China denied this.

  The equity in Hainan Jinghao (i.e., the 90 percent stake in the Dongzhimen project) was thus returned to APTECH. GuocoLand China fought back with a series of administrative and civil litigation.

  This also led to today's situation: although APTECH is the de facto equity holder, GuocoLand China still possesses CJDH’s company seal and other important company documents. In other words, GuocoLand China holds effective control over the Dongzhimen project.

  With Beijing real estate prices soaring, the value of the Dongzhimen project skyrocketed from the initial one billion yuan or so to 5.8 billion in 2007 when GuocoLand China and APTECH signed their agreement; today, the project could be worth up to tens of billions of yuan. However, it is still uncertain which party will ultimately get control over it.

  Full article in Chinese:http://magazine.caijing.com.cn/2014-05-19/114190226.html

  

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