China’s embattled HNA Group is continuing its series of asset disposals as the conglomerate’s aviation and tourism arm agreed to sell a Beijing office complex to China Vanke for RMB 1.29 billion ($190 million).
A notice filed with the Shanghai stock exchange over the weekend by Hainan Airlines, the primary air carrier of the transportation-based group, documented the company’s disposal of Beijing HNA Plaza, a 39,000 square metre (420,000 square foot) development at 2 North East Third Ring Road in Chaoyang district. The filing said that the sale would generate net income of RMB 557 million for the airline.
The sale is HNA’s third disposal of a mainland asset for $45 million or more in the last 45 days, a period in which the group also defaulted on a pair of debt obligations as it struggles for liquidity.
Selling a Beijing Office Building at Half-Price
At RMB 1.29 billion, HNA disposed of the two building complex at RMB 39,000 per square metre, a price well below comparable transactions in the area.
Commenting in local business publication Jiemian, an analyst from Cushman & Wakefield noted that similar office buildings on Beijing’s third ring road near HNA Plaza have an average asking price of RMB 80,000 per square meter, and that available stock was hard to come by. The below market deal for the 2009-vintage property led to speculation that Vanke may be taking over some debt liabilities associated with the asset, in addition to its equity payment.
An asset valuation document referenced in the transaction filing showed that at the end of August, the special purpose vehicle which held Beijing HNA Plaza was valued at RMB 1.29 billion.
Mainland Asset Disposals Continue
Bloomberg reported in March that HNA Group was planning to sell a total of nine properties in Shanghai and Beijing, including Shanghai HNA Tower, Shanghai Yangtze International Enterprise Plaza and Renaissance Shanghai Pudong Hotel, for a combined book value of about RMB 14 billion ($2.2 billion).
In August, the struggling aviation-to-financial services group disposed of the site of its original headquarters, Wang Hai Technology Plaza (望海科技科技广场), in Haikou to Tianjin-based developer Sunac China for RMB 981 million.
In the same month, the group also agreed to sell hotel company Radisson Holdings to Chinese hospitality giant Jin Jiang International Holding for an estimated $2 billion.
The Empire Strikes Out
The transactions signaled some of the latest moves in the unravelling of a global empire built on leverage-fueled deal making.
The indebted group already defaulted on a RMB300 million principal of a loan on September 10. It also missed a payment in August on a 270-day, RMB 1 billion bond issued by HNA subsidiary Haikou Meilan International Airport. That same month, HNA deferred payments on P2P products, worrying retail investors who lent the firm money through 11 different platforms.
As debt payments come due and regulatory scrutiny mounts, HNA has been rapidly scaling back its operations and accelerated an asset-selling streak that reached more than $17 billion in the first six months of this year. Earlier this month, HNA broke the lease agreement on its unused eight-floor office space in Hong Kong’s Three Exchange Square in a bid to trim HK$12 million in rent from its wall of liabilities.
The divestitures represented a course reversal after years of aggressive expansion in which HNA snapped up more than $50 billion of global assets in aviation, tourism, real estate and other sectors.
Bond Sale Fail
The once-high flying company has sought to ease capital pressures by borrowing on the bond market. Hainan Airlines this month issued two batches of bonds worth RMB1.3 billion and another unit, Bohai Capital Holding Co., sold two bond issues since June. But buyers subscribed for less than 60 percent of the offerings, reflecting lukewarm investor sentiment, according to Caixin Global.