As China’s biggest investors were warned off from overseas deals last year and a crackdown on outbound cash killed off cross-border real estate acquisition, Hong Kong still seemed a safe-haven for mainland money. But nothing changes faster in 2018 than mainland credit terms.
Beijing-based China Energy Reserve and Chemicals Group Properties, which led the $5.2 billion acquisition of the Center from Li Ka-shing’s CK Asset last November, has reportedly sold its stake in Hong Kong’s biggest real estate deal of 2017 to a pair of investors based in the city, according to a report today by Reuters.
The report comes just over two months after Reuters reported that China Energy Reserve and Chemicals Group Properties’s investor consortium, CHMT Peaceful Development, had been seeking to borrow as much as 90 percent of the Center’s purchase price, or around $4.7 billion.
In recent weeks and months some of China’s biggest investors, including Wang Jialin’s Dalian Wanda Group and HNA have been forced to sell off assets after Beijing cut-off cross-border capital flows more than one year ago. Last week China’s insurance regulator took over control of Anbang Insurance, one of the country’s biggest insurers, after the company teetered on insolvency following a string of overseas real estate purchases.
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No official statements have been made yet regarding the reported transaction. However, WeChat group chats and private messages among Hong Kong’s real estate investment community indicate to Mingtiandi that the chairman of Shanghai’s biggest developers and Hong Kong billionaire Pollyanna Chu are rescuing China Energy Reserve and Chemicals Group from the harsh credit realities of 2018.
Reuters reported that Shimao Property chairman Hui Wing Mau, who maintains a residence in the city and holds an Austrailian passport along with substantial overseas holdings, would be taking the largest stake, buying out 20 percent of CHMT Peaceful Development, after China Energy Reserve and Chemicals Group Properties had held 55 percent of the joint venture.
Chu’s stake in the joint venture remains unclear, and other investors are said to be involved, however, China Energy Reserve and Chemicals Group is said to have wholly exited the project. Inquiries by Mingtiandi to China Energy Reserve, Shimao and Chu’s Kingston Financial remained unanswered at the time this account was published.
The 45 percent stake not originally taken up by China Energy Reserve and Chemicals Group Properties is said to already be held by a group of Hong Kong businesspersons, including David Chan Ping-chi of the Acme Group, and Wing Li Group chairman Lo Man Tuen.
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News of China Energy Reserve’s rapid exit from the Queen’s Road office building deal comes just one week after China’s HNA Group pledged a nearly 41 percent stake in a company holding a pair of projects in Hong Kong’s Kai Tak area to PAG in return for an unspecified loan.
Earlier this month HNA sold the other two projects in its quartet of Kai Tak assets to Henderson Land for HK$16 billion ($2 billion), as the mainland conglomerate grapples with a cash crunch.
The setbacks for China Energy Reserve and HNA in Hong Kong represent a reversal after mainland companies were seen as dominating the city’s market for property assets as recently as the middle of last year. A 2016 study by CLSA, before China cracked down on capital outflows, found that mainland buyers snatched up 45 percent of new land sold in the first six months of that year.
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For Shimao boss Hui Wing Mau, the acquisition would be the latest in a series of international deals. Having made his fortune largely in Shanghai real estate projects, Hui has been active in Hong Kong, Australia and the UK in recent years.
In October 2014 Shimao acquired its first major Hong Kong project, winning a government tender for a hotel project near Hong Kong’s airport in Tung Chung for HK$1.83 billion. Just one month later the Shanghai-based developer joined with its chairman to jointly purchase a Sydney office tower for over A$390 million (then US$339 million).
Hui also joined with his Archstone Investment to buy a 51 percent stake in Australia’s Bindaree Beef last year for an estimate A$120 million. In 2015 Hui purchased the 303,000 square foot (28,150 square metre) Christ Church Court office building at 15 Newgate Street in London’s financial district from German real estate investment firm Deka Immobilien GmbH for an undisclosed sum.