While much of Hong Kong rushed to clear their desks before the 1 October holiday, Goldin Financial Holdings boss Pan Sutong was busier than most, as the cash-strapped mainland tycoon announced on 30 September that his company had sold its Kowloon East headquarters for HK$14.3 billion ($1.8 billion).
Pan included the announcement that his firm had signed a provisional sale and purchase agreement to conditionally dispose of the Goldin Financial Global Centre on page 22 of his company’s 25-page annual financial results, specifying the buyer only as an independent third party.
Goldin says that it signed the deal on 29 September, one day after property consultancy Knight Frank, working for receivers appointed to take possession of the grade A office tower on behalf of the developer’s creditors, began a tender process aiming to sell the asset for at least HK$12 billion.
The notice of an after-the-closing-bell deal followed four days after Hong Kong’s High Court confirmed the receivers’ control of the company holding the 28-storey, Kohn Pederson Fox designed structure, according to court documents seen by Mingtiandi.
Record Sale of Someone Else’s Building
In its report, Goldin indicated that it had sold the entire issued share capital of Cheng Mei Holdings Limited and Goal Eagle Limited, along with debts associated with the two British Virgin Islands-registered firms to the unnamed third party. The company went on to state that Cheng Mei and Goal Eagle hold 100 percent of the issued share capital in Smart Edge Ltd, the private vehicle which holds the title to the Goldin Financial Global Centre.
However, in a judgement issued on 25 September, Hong Kong’s High Court affirmed three officers of corporate restructuring firm Borrelli Walsh as the only directors of Smart Edge. The Hong Kong-based had been appointed as receivers by Deutsche Bank affiliate DB Trustees (Hong Kong) Ltd after Goldin defaulted on HK$8 billion in debt used to refinance its development of the 852,433 square foot (79,153 square metre) property.
The court judgement came in response to a suit by Goldin and associated entities contesting the appointment of the receivers and their July seizure of the property.
That case is set to be determined on 29 October, however, in its report, Goldin acknowledged that the 25 September ruling entitles Borrelli Walsh directors Cosimo Borrelli and Simon Ma “to exercise rights and powers granted to them under the security documents in respect of the Notes unless and until they are lawfully removed from office by an order of the Court.” In the same section of the report, Goldin also indicated the court’s recognition of Borrelli Walsh representatives as the only directors of Smart Edge.
Tender Moving Ahead
Two sources familiar with the proceedings confirmed to Mingtiandi that Goldin’s lenders are in possession of the title deeds for the LEED Platinum office tower with the expression of interest stage of the tender process continuing apace. Prospective participants in that tender are required to submit their documents by 11 November.
Goldin did not offer further information regarding its reported sale, but stated that, “Further details relating to the aforesaid agreement and the transaction contemplated thereunder will be set out in the Company’s announcement to be published in due course.” Contacted by Mingtiandi, executives at Borrelli Walsh declined to comment.
Should Goldin have located a buyer willing to purchase the trophy property at the reported price, it would be achieving a rate of HK$16,423 per square foot, a figure which one experienced broker referred to as, “Off the charts.”
At the height of Hong Kong’s recent real estate boom, Wharf Properties in October 2017 sold 8 Bay East in Kowloon East to mainland developer LVGEM for just over HK$15,000 per square foot. Then in 2018, Mapletree Investments sold Mapletree Bay Point, another high-spec Kowloon East property, to PAG also for around HK$15,000 per square foot.
Since the sale of those two buildings, both of which offer location advantages over the Goldin Financial Global Centre, values for commercial properties in Hong Kong have been on the decline, with prices for grade A office assets in Kowloon East having fallen 2.7 percent since the beginning of 2020, according to Savills.
Office Tower Valued at HK$16.3B
Goldin’s surprise sale announcement was buried most of the way through a set of annual financials that noted little in the way of encouragement for shareholders, with the unaudited results showing a loss of HK$6.1 billion for the year ending 30 June, after the company reported a HK$6.3 billion profit for the previous 12 month period.
A big slice of that loss can be attributed to a change in fair value for Goldin’s investment properties, which consist of its headquarters, which fell by HK$2.2 billion during the period from HK$18.5 billion to HK$16.3 billion, according to the report.
The company’s real estate business as a whole suffered a loss of HK$4.9 billion during the financial year. Overall, Goldin had HK$589 million in revenue during the 12 month period, which was down from HK$604 million during the preceding year.
In a review of its business, the Goldin stated that, “The FY2020 was a challenging year for the Group. Business performance of all our core segments is under pressure due to the crippling effects of the social unrest and the coronavirus pandemic.”