China Housing Acquires 25% Interest in Puhua Joint Venture from Prax Capital
XI'AN, China, May 11 /PRNewswire-Asia-FirstCall/ -- China Housing & Land Development, Inc., ("China Housing" or the "Company,"Nasdaq: CHLN) today announced that, through its subsidiary, it has entered into an amendment to an agreement with Prax Capital to redeem the 40% interest of Prax Capital in Success Hill Investments Limited, a joint venture that holds 62.5% of the equity interest in the project company (the "Puhua Project Company") that operates the development of 79 acres within China Housing's Baqiao project located in Xi'an (the "Puhua Project"). Upon the completion of the transaction, the Puhua Project Company will become China Housing's 100% owned subsidiary.
Under the original terms of the agreement dated November 5, 2008, the Company and Prax Capital entered into a conditional joint venture agreement to develop 79 acres within China Housing's Baqiao project located in Xi'an. Prax Capital invested $29.3 million in Success Hill Investments Limited for a 25% interest in the Puhua Project Company with various distribution rights. According to the Company's financial estimates for the Puhua Project, total revenue is expected to be $700 million through 2014.
Under the new terms announced today, Success Hill Investments Limited redeemed all of its shares held by Prax Capital and the Puhua Project Company became a wholly owned subsidiary of the Company. Prax Capital will be paid RMB576 million including principal (US$84 million) over a three year period with RMB200 million (US$29 million) due at the end of 2010, RMB200 million (US$29 million) due at the end of 2011 and RMB 176 million (US$26 million) due at the end of 2012, which is mortgaged by shares of Success Hill Investments Limited.
Mr. Xiaohong Feng, Chief Executive Officer of China Housing said, "This agreement allows us greater control of the Puhua Project and can contribute more significantly to our revenue and earnings stream over the long term. The restructuring will allow us to capitalize on the interest payment to Prax and consequently reduce our tax liability in the future. Based on our internal projections we estimate that this will save us approximately $10.5 million in income tax over a five year period. The opening of the Riverside Park along with other amenities in place provide us with comfort that the net income from the Puhua Project will exceed our original projections. After this restructuring, 100% of the net income from this project will be attributable to our common share holders, instead of 75% under the original agreement. With a lower tax base and full ownership of the Puhua Project, we are expecting to add another $36.7 million to our net income through 2014. While this amendment to Puhua's ownership structure will result in an approximately $13 to S15 million one-time, non-cash charge which will be incurred in the first quarter of 2010, we believe this will benefit our business over the long term."
Mr. Pingji Lu, Chairman of China Housing added, "In spite of recent national government guidelines established to curb speculation in China's real estate market particularly in Tier 1 cities, we believe the outlook for Xi'an remains encouraging. The Xi'an government has issued new policies on the local real estate market supporting housing purchases by first time home buyers and first time upgraders, who are our target customers. Apartment unit transaction volume and average selling prices in Xi'an have held steady through April, with a 58% increase in volume and a 31.6% increase in price over the same period last year, and a 27.4% increase in volume and an 8.1% increase in price over the previous month. We believe that the Puhua Project will be a strong contributor to our overall performance in the coming months and years ahead."
About Prax Capital
Prax Capital was recognized in August 2008 by China Venture as one of the top 3 private equity firms, alongside Goldman Sachs and The Carlyle Group. In 2007 it was ranked among the top 5 private equity firms in China by Top Capital. Mr. Jeff Yao, Managing Director and Co-Founder of Prax Capital, was included in the Forbes 2007 & 2008 list of China's Best Venture Capitalists. The firm was established in 2003 as an independent private equity firm dedicated to investing in China and currently has approximately US$300 million of assets under management. This joint venture is the firm's 11th investment in China.
About China Housing & Land Development, Inc.
Based in Xi'an, the capital city of China's Shaanxi province, China Housing & Land Development, Inc., is a leading developer of residential and commercial properties in northwest China. China Housing has been engaged in land acquisition, development, and management, including the sales of residential and commercial real estate properties through its wholly-owned subsidiary in China, since 1992.
China Housing & Land Development is the first and only Chinese real estate development company traded on NASDAQ. The Company's news releases, project information, photographs, and more are available on the internet at http://www.chldinc.com .
Safe Harbor Statement
This news release may contain forward-looking information about China Housing & Land Development, Inc. which is covered under the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that are not historical facts. These statements can be identified by the use of forward-looking terminology such as believe, expect, may, will, should, project, plan, seek, intend, or anticipate or the negative thereof or comparable terminology, and include discussions of strategy, and statements about industry trends and China Housing & Land Development's future performance, operations, and products.
Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. Actual performance results may vary significantly from expectations and projections. Further information regarding this and other risk factors are contained in China Housing's public filings with the U.S. Securities and Exchange Commission. All information provided in this news release and in any attachments are as of the date of the release, and the companies do not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under law.
For more information, please contact:
China Housing contacts
Mr. Cangsang Huang
Chief Financial Officer
Tel: +86-29-8258-2648 in Xi'an
Email: [email protected]
Ms. Jing Lu
Chief Operating Officer, Board Secretary, and Investor Relations Officer
Tel: +86-29-8258-2639 in Xi'an
Email: [email protected]
Mr. Shuai Luo
Investor Relations
Tel: +86-29-8258-2632 in Xi'an
Email: [email protected]
Mr. Bill Zima, ICR
Tel: +1-203-682-8200 in United States
Email: [email protected]
Ms. Annie Chen, ICR
Tel: +86-10-6599-7966 in Beijing
Email: [email protected]
SOURCE China Housing & Land Development, Inc.
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