Kaisa Marketing Hong Kong Headquarters Floor for $64M After 43% Drop in Value

Defaulted Chinese developer Kaisa Group Holdings is marketing an office floor which serves as its headquarters in Hong Kong, with the strata-titled asset having lost nearly half its value since the company purchased the space over five years ago.

Shenzhen-based Kaisa is seeking just under HK$500 million ($64.3 million) for the 30th floor of The Center office tower in Hong Kong’s Central district, according to market sources who spoke with Mingtiandi. That asking price is 43 percent lower than the HK$884 million the builder reportedly paid to purchase the asset in 2019, with agency marketing materials showing off the floor’s traditional Chinese dining room and hand-carved, hardwood furniture.

The sale effort comes as HKEX-listed Kaisa is seeking to ease liquidity pressure amid its debt restructuring plan, after having defaulted on its offshore bonds in 2021. Kaisa, which is facing a winding-up petition in Hong Kong, had not responded to Mingtiandi inquiries by the time of publication.

“In the future, we will take active initiatives to mitigate operating risks, return to the right track of healthy development, adhere to the business strategy of profit and cash flow as the core, and actively explore a new model of light-asset, high quality and sustainable development,” Kaisa said in its latest interim report released late September.

Plummeting Valuations

Kaisa is asking at least HK$20,000 per square foot for the roughly 24,900 square foot (2,313 square metre) floor, the sources said, with the developer having pledged the asset to local financial firm Kingston Finance Ltd in 2023 as collateral for a loan, according to Hong Kong’s Land Registry. The company is said to have asked brokers to market the asset quietly without having engaged a consultant to act as sole agent.

Kaisa purchased the floor from local businessman Lo Man-Tuen at the same time that it also picked up the 38th floor in the 73-storey skyscraper from Hong Kong tycoon David “King of Cassettes” Chan Ping-chi for a reported HK$1.08 billion. The developer sold that floor for HK$186.4 million just over two years later to mainland investment firm Shandong Hi-Speed Financial Group to settle an outstanding loan.

Situated at 99 Queen’s Road Central where Central blends into the Sheung Wan area at the western edge of the city’s commercial core, The Center in late 2017 came under the control of a consortium of mainland and Hong Kong investors which teamed up to acquire 75 percent of the space in the tower from tycoon Li Ka-Shing’s CK Asset, in what was Hong Kong’s largest transaction of a single property asset that year.

With plans to flip the tower piecemeal to eager buyers in what was then a raging market for strata commercial assets in Hong Kong, the consortium, which included Chan, Shimao Group chairman Xu Rongmao, Hong Kong’s late “Minibus King” Ma Ah-muk and Hong Kong businesswoman Pollyanna Chu along with other investors, paid HK$40.2 billion ($5.2 billion) for the property and financed the purchase with bonds yielding as much as 15.25 percent.

Kaisa was among buyers who purchased space from the consortium, having reportedly paid HK$35,500 per square foot for the 30th floor and HK$42,000 per square foot for the 38th floor.

Those valuations began falling by late 2019, when social unrest triggered a slump in Hong Kong’s commercial property market that worsened through the pandemic. With capital values for grade A offices in Hong Kong having plummeted 41.6 percent from their 2019 peaks through 30 June, according to JLL, members of The Center’s investor consortium have taken haircuts to dispose of their holdings in the skyscraper.

In September, Chan sold the 66th floor to DBS for just under HK$26,000 per square foot, with the investor also said to have agreed to sell the 75th floor to the Singaporean lender. Those valuations compare to the HK$55,854 per square foot price achieved in the sale of the 79th floor of the building in 2017.

Last December, Chan sold the 67th floor for HK$27,811 per square foot, after selling the 25th floor for HK$27,022 per square foot in 2021. The tycoon also sold off his interests in levels 48 and 42 in 2020.

In July, entities linked to Kwok Ying Lan, chairwoman of bankrupt mainland developer Yuzhou Group, reportedly cut their asking price for the 21st floor by 14 percent from when they first put the asset on the market last November.

Shimao’s Xu sold the 63rd floor in May for just under HK$28,000 per square foot and is said to still be seeking buyers for the 31st and 32nd floors. In 2021, “Minibus King” Ma sold the 20th floor to relatives of former Hong Kong chief executive Tung Chee-Hwa for around 24 percent less than he had paid to acquire the asset four years earlier.

Restructuring and Wind-Up

Kaisa is marketing the floor after a key creditor group agreed in August to a restructuring plan for its offshore bonds, with the company set to seek a Hong Kong court’s approval to hold a broader creditor vote on the plan at a December hearing.

Last July, Singapore-based hedge fund Broad Peak Investment Pte Advisers Ltd filed a winding-up petition against the company in relation to non-payment of RMB 170 million of corporate bonds and accrued interest. A court hearing on the winding-up request has been adjourned to March 2025.

Kaisa had RMB 135 billion of borrowings as of 30 June and posted an attributable loss of RMB 9.1 billion in the first half of the year.