Troubled investors from mainland China continue to generate activity in Hong Kong’s real estate market, with a set of three office floors belonging an energy firm having recently sold in Wan Chai just over a year after the company’s chairman was detained in an investigation.
The 21st through 23rd floors of the Convention Plaza Office Tower, an office building neighbouring the Hong Kong Convention and Exhibition Centre, were sold for a total of HK$1.8 billion ($230 million), according to an account in the Hong Kong Economic Times.
The sale of the assets belonging to CEFC comes after cash-strapped HNA sold both office and residential assets in Hong Kong at losses within just over a month, and last week 44 executives of a Shenzhen investment firm, including the company’s chairman, were arrested for illegal fund raising one year after buying a North Point office building for HK$9.95 billion.
Booking a 29% Gain for the Bank
CEFC’s erstwhile trio of office floors are estimated to average 16,518 square feet (1,535 square metres) per floor, for a total of 49,554 square feet of total floor area. At the stated price, the buyer which market sources identified as local billionaire Edwin Leong’s investment firm Tai Hung Fai Enterprise, would be paying an average of HK$36,000 per square foot for the assets, which are said to be unoccupied at the time of the transaction.
The floors are said to have been on the market for some time, with the creditors of the Shanghai-based firm having booked around a 29 percent capital gain on the disposal. CEFC purchased the floors in September 2016 for HK$1.39 billion with the stated intent of using them for its own offices, however, the firm’s biggest creditor, state-run policy body, China Development Bank, is said to be overseeing the liquidation of its assets.
Given average rents in the building, the new owner’s investment offers an estimated rental yield of 2.5 percent according to the local press account. At the time of CEFC’s purchase, the acquisition was said to set a record for the highest price per unit area for a Hong office transaction.
CEFC Unwinding Continues
CEFC’s founders won’t have much chance of profiting from the company’s Wan Chai sale, however, with founder and chairman Ye Jianming believed to be in detention since March last year.
In May of 2018, CEFC, which had invested in real estate in mainland China, Hong Kong and eastern Europe alongside its energy business, defaulted on RMB 2.09 billion (then $327.3 million) in bonds and had assets in the Czech Republic seized over unpaid bills.
At the time that Ye’s detention was announced, CEFC was already said to be planning to sell 100 properties worldwide as Chinese regulators moved to unwind the ill-gotten empire.
Mainland Firms Selling Hong Kong Holdings
The CEFC sale was announced just days after it emerged that HNA Group, which has been battling for financial solvency for over 18 months, had sold a site holding a pair of historical homes on Hong Kong’s Victoria Peak at a 22 percent loss.
That HK$550 million sale by HNA came just after the parent company of Hainan Airlines had sold its Hong Kong-listed real estate subsidiary, Hong Kong International Construction Investment Management Group (HKICIM), to Blackstone for HK$7.02 billion ($894.8 million).
Like CEFC, China Development Bank is said to have taken control of the liquidation of HNA assets.
Late last week authorities in Shenzhen announced the arrest of Zhang Wei, chairman of asset manager Create China Capital, which last year acquired 18 King Wah Road, a 22-storey office building in Hong Kong’s North Point from Henderson Land for HK$9.95 billion.
Zhang, along with 43 of his executives, is being held on charges of running Create China like a Mafia gang. The future of 18 King Wah Road has not yet been publicly discussed.
Dorothy Ma provided additional research for this story.