Chinese Estates Might Trim Stake in Evergrande if Price Is Right

Hong Kong-focused property developer Chinese Estates said it will trim its 5% stake in another real-estate firm China Evergrande Group if the selling price is acceptably high.

Chinese Estates said Monday it may sell some Evergrande shares if they reach “a satisfactory and attractive level” after announcing unrealized gains of HK$1.2 billion ($153 million) during the first six months of this year as Evergrande shares grew in value during the period.

Hong Kong-traded shares of Evergrande, which is preparing for a Chinese mainland listing, tripled in the first half of the year.

Chinese Estates was a cornerstone investor when Evergrande listed on the Hong Kong Stock Exchange in 2009, and has also bought dollar bonds issued by Evergrande.

Chinese Estates held over 579 million shares in Evergrande by June 30, representing approximately 5% of Evergrande’s outstanding shares.

Joseph Lau, who owns 74.99% of Chinese Estates according to a filing at the end of 2016, is known for his close friendship with Evergrande Chairman Hui Ka Yan.

Not all of Chinese Estates’ investments related to Evergrande have been profitable. In May 2016, Chinese Estates paid HK$7 billion for 580 million shares in Hong Kong-listed Shengjing Bank. Evergrande owned more than a third of Shengjing’s outstanding shares before it disposed of them in early May. In the first half of the year, Chinese Estates sold 577 million shares of Shengjing Bank for a much-lower valuation of HK$2.12 billion.

Chinese Estates first-half revenues were HK$673 million, down 65.4% year-on-year, due to lower property sales, rental income, and building management fee income, the company also said Monday. Earnings per share were down 12.6% year-on-year by June 30.

Contact reporter Liu Xiao (liuxiao@caixin.com)