Continuing an asset disposal plan that aims to sell off as much as $11 billion worth of real estate by the end of 2019, HNA Infrastructure Investment Group, an affiliate of the troubled mainland transportation conglomerate, this week announced that it is selling a Shenzhen property for RMB 1.39 billion ($200 million).
The disposal of the 143,300 square metre (1,542,468 square foot) Shenzhen Haihang City project was announced by HNA Infrastructure to the Shanghai Exchange in a statement which specified the buyer as Tianji Wealth Group, a local investment management firm.
Tianji Wealth Group had been reported in July as purchasing the project for RMB 1.6 billion, with the final sale price coming in at some RMB 215 million lower than had been reported three months ago. The Shenzhen-based firm had launched a RMB 1.6 billion private equity fund around the time of the Shenzhen Haihang City transaction first being reported, with the specific purpose of acquiring the asset.
The latest domestic disposal comes after HNA, which had debts listed at $96 billion at the end of June, put a list of 89 properties on the market in early October worth a total of $11 billion.
HNA Closing Out Real Estate Holdings
“Real estate is now a non-core business for HNA, and a luxury which the company can no longer afford. Confronted with such massive debt, and strongly advised by Beijing, HNA seems willing to divest all such non-core assets, and all offshore assets as well,” said Brock Silvers, Managing Director at China-based Kaiyuan Capital.
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. Shortly after the disposal in its hometown, HNA was agreed to sell a Beijing office complex to China Vanke for RMB 1.29 billion. However, the transaction was rejected by its shareholders last week.
Shenzhen Haihang City is a 143,300 square metre commercial complex located in northeastern Shenzhen’s Longgang District, and involves residential, office, retail, and serviced apartments in the four-phase project.
Local Wealth Manager Buys Multi-Phase Project
Tianji, a Shenzhen wealth management firm headed by former Ping An Bank executive Tang Wei along with fellow Ping An alum Han Deyou, in July launched an RMB 1.6 billion private equity fund set up to acquire HNA Infrastructure’s sole project in Shenzhen.
Tianji Wealth is buying the completed first phase of the Haihang City project, which is reported by mainland media to be valued at more than RMB 2 billion, as well as taking on future development of the three remaining phases.
The first phase of the two city-block project contains 344,300 square metres of residential space, a five-storey shopping mall, and 82,000 square metres of office space, which brings in average monthly rents of RMB 80 to RMB 88 per square metre, nearly 30 percent higher than the average office rental rates in the area.
The 70,000 square metre Wanghai International Plaza, which primarily hosts domestic apparel brands, and mid-market international labels such as Adidas and Nike, along with food and beverage outlets, was opened in January of this year.
The residential properties in the same project were completed in 2015. Prices for second-hand homes in the complex now average over RMB 37,000 per square metre according to data on Fang.com.
HNA Sells Off $20 Bil in Assets
HNA has been liquidating real estate assets at home and abroad since the beginning of this year, in a rush to pay down its $96 billion in debt.
The conglomerate has already sold or agreed to sell around $20 billion in assets across Sydney, New York, and Hong Kong since January, while it put more than 80 additional properties on the market earlier this month.
“HNA is rapidly reducing debt via asset sales, but all low-hanging fruit has now been harvested, and future asset sales may become increasingly difficult. But as the balance sheet still has not yet been sufficiently solidified, the process will continue,” said Silvers. The conglomerate in targeting to selling $11 billion assets by the end of the year.