Financially-troubled HNA Group on Tuesday announced to the Shanghai Exchange that its shareholders have rejected a RMB 1.3 billion ($190 million) deal to sell a Beijing office tower to China Vanke, which the two companies had agreed to in late September.
The Hainan-based aviation and real estate giant reported to the exchange that its shareholders had not accepted the deal previously approved by HNA’s board of directors to sell Beijing HNA Plaza to China Vanke, saying that they are looking for a better deal which can earn more profit from the disposal.
After selling more than $20 billion in assets so far this year, the Tuesday announcement marked the first time that any of HNA’s recent sales were blocked by shareholders. While the details of HNA’s ownership remain unclear, entities believed to be controlled by chairman Chen Feng, along with the chairman himself, own over 52 percent of the conglomerate’s shares.
Chen and his relatives also control three seats on HNA’s 12 person board of directors.
Half-Price Deal Nixed by Shareholders
“The main reason for the failure of passing the deal was that the shareholders of the company considered that the plan submitted to this meeting is not the best solution,” said HNA in the Tuesday announcement, adding that, “shareholders hope the company can further consider the deal and submit a better transaction plan, which can bring greater benefits to the company and the shareholders.”
According to an announcement to the Shanghai Exchange on September 22nd, the transportation-based group had agreed to sell Beijing HNA Plaza, a 39,000 square metre (420,000 square foot) development at 2 North East Third Ring Road in Chaoyang district to China Vanke. Along with grade A office space, the two building complex houses the Beijing Marriott Hotel Northeast in the bustling Sanyuanqiao area.
The RMB 1.3 billion deal valued the 18-storey complex at RMB 39,000 per square metre, a price well below comparable transactions in the area, although some analysts at the time speculated that the transaction might involve China Vanke taking over unspecified debts related to the property. As HNA attempts to refinance financial liabilities that led the group to default on repayment of an RMB 300 million trust loan last month, it has borrowed against many of its fixed assets.
According to an analyst from Cushman & Wakefield, similar office buildings located near Beijing HNA Plaza have average asking prices of around RMB 80,000 per square metre.
HNA chairman Chen Feng, has expanded his control of the rapidly shrinking conglomerate in recent months, by naming more of his family to the company’s board after co-founder Wang Jian died in an accident in July. In August this year, Chen Feng’s son was promoted to deputy chief executive officer of the group, while his 30-something nephew was appointed as chief investment officer.
HNA Sales Top $20 Billion
As the mainland government declares war on leverage, one of the country’s most aggressive property buyers has suddenly become its most anxious seller, parting with around $20 billion in assets across Sydney, New York, and Hong Kong since January.
HNA was revealed last week as shopping a list of 89 available properties worth $11 billion to potential buyers, including the Reuters headquarters building in London and a set of three development projects in New York City.
According to Reuters, HNA listed debts of $95 billion in June, down by 10.7 percent from the end of 2017.