Some of the systemic risks in the Chinese economy have arguably eased since President Xi Jinping ordered a crackdown, late last year, on the excessive use of debt finance by some private companies.
Having recently raised $2 billion from the disposal of two sites at Hong Kong’s former Kai Tak airport site to Henderson Land, HNA has followed up by selling a third plot to Wheelock for $811 million, making a gross profit of 15% in a little over a year.
In a statement, Hong Kong-listed Wheelock said it paid HK$500 million ($63.8 million) in money for the purchase, with the rest due to be financed through internal capital and bank borrowings.
Wheelock said the transaction is expected to close on or before March 29. “I think it is a fair price,” Stewart Leung, vice-chairman of Wheelock said in an RTHK interview on Friday. “HNA reached out to us, and I think the location fits our strategy in Kai Tak.”
Wheelock first bought a land parcel in Kai Tak for HK$2.52 billion, or about HK$6,100/sqft, in 2014. With an appetite for a variety of overseas assets, HNA significantly jacked up the land price in Kai Tai to HK$13,500/sqft, or 120% higher than what Wheelock first paid just two years later, when it began purchasing land in Hong Kong.
Leung, a property veteran with 50 years of experience, said most people thought the price HNA paid in 2016 was outrageous at the time but that overall property prices in Hong Kong remained on an upward trajectory. “With limited supply by the government, land prices in Hong Kong can only go higher in the future,” he said.
In the latest deal, Wheelock paid about HK$14,900/sqft, enabling HNA to make a gross profit of HK$800 million after it purchased the land parcel for HK$5.52 billion in January 2017. The sale to Wheelock came after the Chinese conglomerate sold two plots of land in Kai Tak in February for almost $2 billion, easing the pressure on HNA to pay off debt.
CLEANING UP
Along with Wanda, Fosun, and Anbang, HNA has felt the heat following Xi’s crackdown as policymakers in Beijing work to stymie the country's ballooning debt and limit the potential for a credit crunch further ahead.
HNA is looking to repay Rmb65 billion ($10.24 billion) of bonds and loans this year and aims to raise Rmb100 billion from asset sales in just the first half of the year, a credit investor who was briefed on the matter told FinanceAsia last month. According to a prospectus for its $300 million bond sale in July last year, the group had Rmb530.2 billion ($80 billion) of outstanding debt at the end of June, up from Rmb441.4 billion in December 2016.
Mainland Chinese banks -- including policy and state-owned lenders -- have voiced concerns over HNA's ability to pay down debt, including some aircraft leasing payments. Adding to the ongoing liquidity problems, its aviation units were unable to pay about Rmb3 billion of oil bills on time in late February, according to local media reports. A spokewoman at HNA declined to comment on it financial health.
According to various media reports, HNA is looking to sell a slew of its overseas property assets, including two office buildings in London’s Canary Wharf district and the 245 Park Ave. skyscraper. In January, HNA sold a Sydney office to US private equity firm Blackstone for $159 million.
A person familiar with HNA’s thinking said the company is minded to keep the remaining sites for its own use, without providing further explanation. At the group level, HNA also owns Singapore-listed logistics firm CWT, which it bought for $1 billion acquisition last year.
“At this moment, the remaining one should be used for our own development,” the person said.
