While in talks to sell over $3 billion of overseas assets in the United States and Europe, debt-ridden HNA Group has offloaded another project in China for $456 million as the Hainan-based conglomerate struggles to climb out of a $100 billion debt hole.
HNA Investment Group is selling a subsidiary that holds the rights to develop a mixed-use project in Pudong’s Qiantan area to Fusheng Group for RMB 2.9 billion ($456 million), a filing to the Shenzhen Stock Exchange shows.
The Shanghai deal comes after HNA sold more than $1.1 billion in China real estate assets during March as part of a drive to reduce its debt liabilities after suffering borrowing costs of RMB 32.1 billion in 2017.
Selling a Pudong Asset to Pay Global Debts
HNA’s latest asset sale is of a 61,869 square metre (665,952 square foot) mixed-use project currently under construction near the Oriental Sports Center in Pudong’s Qiantan area. HNA Investment Group, then known as Yeland Group purchased the 11,557 square metre (124,399 square foot) Qiantan plot 40-01 in 2013 for RMB 1.67 billion. A local government document shows that the project comprises a pair of 20-storey residential blocks and a 24-storey office building.
HNA expects to be able to inject RMB 400 million into its battered balance sheet from the asset disposal. The Hainan company released its annual report for 2017 on Wednesday which showed that its total liabilities rose to RMB 736.5 billion by December 31st, up by 22 percent from the previous year. The company’s debt to asset ratio in the period increased by 0.35 percent to 59.78 percent.
The Hainan-based group has been said to be marketing a set of nine mainland properties including office buildings and hotels in Beijing and Shanghai since earlier this year. The assets, which are estimated to be worth around $2.2 billion, include the 26-storey Shanghai HNA Tower on Lujiazui’s Puming Road, and the Renaissance Shanghai Pudong Hotel.
Fuzhou-Based Developer Becomes HNA’s New Friend
The latest beneficiary of HNA’s string of asset disposals, is Fuzhou-founded developer Fusheng Group. The company, which created a Hong Kong-listed affiliate, Fullsun International in January via a reverse merger, made its maiden investment in Hong Kong last month by acquiring a residential project in Ho Man Tin for HK$920 million ($117 million). That deal was soon followed by the purchase of five floors in Enterprise Square Three in Kowloon Bay for HK$1.3 billion ($169 million) a week later.
In addition to its Hong Kong ventures, Fusheng has property businesses in ten cities across China, including Changsha, Shenzhen, Tianjin and Zhengzhou in Henan. Since 2015, the group has acquired over 70 projects with a combined land area of 16.8 million square metres in cities like Shenzhen, Guangzhou and Wuhan, according to local media reports.
Fusheng’s latest pickup from HNA is in Shanghai’s Qiantan Area, an international business centre under development by the municipal government. Master-planned by international architectural firm Benoy, the new commercial district is envisioned to include four million square metres of new space, of which half would be allocated to offices and commercial buildings, 40 percent to high-end residential projects and the remainder to public facilities.
HNA Offloading Overseas Assets
Having already raised over $13 billion from asset sales over the past four months, cash-starved HNA Group was recently reported to be in talks to sell over $3 billion of overseas assets.
The Hainan-based conglomerate is said to be close to selling Manhattan office tower 245 Park Avenue, which HNA bought for $2.21 billion last year, to New York’s SL Green Realty. Across the Atlantic, HNA Group was reportedly in exclusive talks to sell Amsterdam-based TIP Trailer Services to infrastructure investor I Squared Capital for over €1 billion ($1.21 billion).
Just two weeks ago, and just after the stock had lost around 25 percent of its value in the past year, HNA offloaded a two percent stake in Deutsche Bank valued at over $570 million. The disposal came despite earlier assertions that the Hainan-based airline company had no plans to offload more shares in the German bank.
HNA Group also raised almost $9 billion cash by selling stakes in Hilton Worldwide and two of its spinoffs in the past month.