海航集团| HNA Sells Kai Tak Sites To Henderson For $2B

HNA boss Chen Feng might have been experiencing vise-like pressure around a pair of sensitive sites

China’s HNA Group has sold a pair of land parcels at Hong Kong’s former airport site in Kai Tak to Henderson Land for HK$16 billion ($2 billion), less than fifteen months after buying the residential plots for a record HK$14.2 billion.

Hong Kong International Construction Investment Management Group, a Hong Kong-listed subsidiary of the Hainan-based HNA Group, announced early on Tuesday it was selling Kai Tak Area 1L Site 3 and 1K Site 3, two of four adjacent plots that the firm acquired between November 2016 and March 2017, to Henderson Land Development, in a deal to be completed on Wednesday. The group purchased the sites for HK$5.4 billion ($690 million) and HK$8.8 billion ($1.1 billion) respectively in November and December of 2016.

With the sale to the top five Hong Kong developer coming just four days after the airline-turned conglomerate secured a $3.2 billion loan from state-owned China CITIC Bank, HNA has now raised over $5 billion in less than a week, as it seeks to climb out of a debt hole dug via a more than $40 billion global acquisition spree over the past two years.

Henderson Finds a Landing Spot in Kai Tak

Henderson boss Lee Shau-kee finally finds a landing spot in Kai Tak

The buyer of the sites, Hong Kong’s second richest man Lee Shau Kee’s Henderson Land has been trying to buy into the former airport site for more than a year. The developer participated in the bidding of the Kai Tak Area 1K Site 3 in November 2016, and in May, the co-developer of the city’s IFC project said it hoped to win a commercial site in Kai Tak after its record-breaking $3 billion Central car park buy that month. The Kai Tak commercial site, however, was awarded to Nan Fung Group for HK$24.6 billion ($3 billion).

The quick sale of the residential sites may come as a relief for HNA as the Chinese conglomerate searches for a path out of a credit crisis wrought through a combination of a Chinese government crackdown on credit and the company’s purchase of assets including a stake in America’s Hilton Hotel chain, and Germany’s Deutsche Bank over the past two years.

The conglomerate run by chairman Chen Feng was already looking to its Kai Tak land as a source of funding last month, when it was reported to be engaged in talks with Sun Hung Kai Properties for a loan against its Kai Tak projects.

Fortunately for HNA, a 15 percent rise in Hong Kong average home prices since the mainland firm bought its first Kai Tak site has helped it walk away with a gain over the original price it paid for the land. Henderson’s HK$16 billion offer represents a 12.7 percent premium over the HK$14.2 billion purchase price for the two Kai Tak sites in late 2016.

HNA Raises $5.3B in Struggle to Pay Bills

The deal for the residential plots at the former home of Hong Kong’s airport brings HNA’s total fundraising to more than $5.3 billion in the last three weeks, with the company said to be in talks to bring in more cash through further asset sales. After shocking the Hong Kong market with what were perceived as overly-aggressive bids for its Kai Tak plots, HNA last week reportedly missed a planned payment on a RMB 1.7 billion trust product issued by CITIC Trust, and there have been numerous reports of the company delaying or missing payments to creditors.

In addition to the sale to Henderson, state-owned China Citic Bank on Friday provided a RMB 20 billion ($3.2 billion) credit facility to support HNA’s drive for “strategic transformation.”  The conglomerate’s management reportedly revealed to its major creditors late last month that it needed to come up with at least RMB 15 billion ($2.4 billion) in fresh cash before the end of March.

CITIC Bank’s loan came just two weeks after HNA sold 1 York Street, an office tower in downtown Sydney it had purchased in 2011, to Blackstone Real Estate Partners (BREP) Asia fund for about A$200 million ($161 million). The deal came a few weeks after the company was reported to be approaching investors to sell a pair of office buildings that it had purchased on London’s Canary Wharf for around 366 million pounds ($496 million).

HNA Group is said to have previously told creditors that it would like to sell about RMB 100 billion in assets during the first part of this year, with the group’s chief executive Adam Tan saying at a conference in Beijing in November that the group was in talks to sell overseas assets to raise cash.