Financially-troubled mainland conglomerate HNA continued its ongoing series of property disposals on Wednesday as it announced an agreement to sell its Central Hotel Square project in Guangzhou to China Vanke for approximately RMB 1.035 billion ($150 million) in cash, subject to a final review. The deal also includes Vanke assuming an existing mortgage on the property and taking on shareholder loans of RMB 574 million.
The deal would give Vanke rights to HNA Central Hotel Square, a mixed-use complex located in Guangzhou’s suburban Baiyun district, where according to information from the city government, HNA has invested at least RMB 980 million in the project since first acquiring the 23,000 square metre site in 2009.
The disposal of the project, which is expected to yield a total of 177,000 square metres of finished space, is HNA Infrastructure Group’s second project disposal in Guangdong province within the last month, after the Shanghai-listed unit of HNA Group sold its Shenzhen Haihang City commercial complex to local investor Tianji Wealth Group during October.
The purchase also marked the second time within five weeks that China Vanke has agreed to buy a project from HNA after the Shenzhen-based developer signed a deal to purchase the Beijing HNA Plaza office building for RMB 1.29 billion. That disposal of HNA’s former Beijing headquarters was ultimately rejected by the Hainan-based company’s shareholders last month.
Selling a Landmark Commercial Project
HNA Central Hotel Square is a 177,000 square metre (1,905,212 square foot) development that includes grade A office space, a five-star hotel, serviced apartments, and a 20,000 square metre retail centre. The project is HNA’s biggest development in the northern district of Guangzhou, which is also home to the city’s international airport.
The project, which is now partially completed, was named as a key project by the Guangzhou municipal government in 2015, in recognition of its offering the only grade A office tower in its vicinity.
According to local real estate brokerage listings, offices in the 35-storey first phase of HNA Central Hotel Square, which was completed in December 2017, lease for an average of RMB 126.33 per square metre per month — 30 percent higher than the neighbourhood average of RMB 97.61 per square metre per month.
The second phase of the project, which consists of a five-star Marriott International Hotel and retail space inside a 20-storey tower, started construction last year and has yet to be completed.
Vanke Takes on Mortgage, Shareholder Loans
The agreement between HNA Infrastructure Investment Group and Vanke subsidiary Beijing Piaohouyunde Investment Management Company specifies that the buyer would pay the HNA unit RMB 1.035 billion in cash for the project, as well as taking on responsibility for RMB 574 million in shareholder loans, bringing Vanke’s total payment for the landmark project to a total of around RMB 1.6 billion.
According to HNA, the disposal would bring it a net profit of RMB 234 million. At the same time, the mortgage on the project, RMB 634 million of which has yet to be paid off, will be transferred to China Vanke as part of the transaction.
HNA Sells Off Real Estate to Pay Down Debts
HNA Group has been hurriedly selling off mature real estate assets and unfinished projects since the beginning of this year as it struggles to pay off debts which stood at $96 billion at the end of June.
Last month, HNA Infrastructure Group sold its only property in Shenzhen to local investment company Tianji Wealth Group. The commercial complex, Shenzhen Haihang City, includes retail, office, and residential components, and was sold for RMB 1.39 billion.
Earlier last month, the Hainan-based conglomerate put a list of 82 properties on the market that said to worth a total of $11 billion, including nine overseas properties, such as the Reuters headquarters building in London and a resort in Tahiti.In August this year, the Hainan-based company sold the site of its original headquarters, Wang Hai Technology Plaza in Haikou, to Tianjin-based developer Sunac China for RMB 981 million.