Just over a month after Hainan government officials took over HNA Group, a report by Colliers International has revealed that the cash-strapped conglomerate has completed the disposal of the Shanghai HNA Tower for RMB 3.6 billion ($510 million).
The property consultant’s latest quarterly report on Shanghai confirmed reports from January that the parent company of China’s Hainan Airlines sold the 26-storey commercial building near Pudong’s Lujiazui area to bad asset bank China Cinda Asset Management.
The unveiling of the price paid by China Cinda comes six weeks after Hainan provincial official Gu Gang was installed as the executive chairman of HNA Group as state authorities stepped in to speed up the troubled investment group’s asset disposals.
Selling Off a Waterfront Trophy
Located at 898 Puming Road, the 87,395 square metre (940,711 square foot) building near the site of the city’s 2010 Expo was originally developed by HNA and opened in 2014.
Previous reports indicated that HNA was selling its remaining holdings in the building along the banks of the Huangpu River after selling off the lower floors of the tower on a strata title basis.
China Cinda is said to be buying the 5,895 square metre retail podium and floors 12-20 of the office tower, which amount to 34,500 square metres of gross floor area. HNA had paid RMB 1.82 billion to purchase the 20,800 square metre site in September 2009 — displaying its aggressive approach to asset acquisition by paying 66 percent above the land sale reserve price for the plot.
Asking rents in the property average between RMB 10 and RMB 12 per square metre per month, according to online property listings, while Shanghai HNA Tower is said to have generated rental revenue of around RMB 140 million during 2018.
With the most recent media reports of the sale indicating an occupancy level of 70 percent, the building has some 55 tenants including Korean companies Samsung and Hyundai Heavy Industries.
In 2018 HNA had included the Pudong asset in a set of nine mainland properties it put up for sale in a race to raise funds and pay off debts.
Firefighting as Losses Mount
HNA has ramped up its sales of assets in recent months, including a number of property disposals, after the company’s global acquisition spreed drove its debt pile to RMB 600 billion in 2018.
With over RMB 500 billion in debt still needing to be serviced, the conglomerate angered investors in its bonds just three days ago when it called a last-minute meeting on Tuesday to inform investors that it had reached an agreement with key bondholders to delay repayment of $163 million in notes.
The conglomerate is said to have given bondholders just 30 minutes notice of the meeting to discuss a one-year moratorium on the securities.
In a public statement posted on the company’s WeChat account today, HNA’s new executive chairman, Gu Gang, castigated his own staff for the bungled meeting.
“HNA is facing a life-and-death moment,” said Gu, the chairman of provincial investment institution Hainan Development Holdings who took the controls at HNA when founder Chen Feng struggled to sell off assets in a timely manner. “All staff throughout the company should be constantly careful with all kinds of details.”
Offloading Assets to Service Debt
The disposal continues HNA’s long march of divestments, which includes selling off a number of overseas assets at a loss.
Last November, the company sold its last property in the UK for £100 million ($129 million) to Hong Kong-based investment firm Sun Hung Kai & Co and Australia’s Macquarie Group, in a transaction priced 24 percent less than what the mainland group had paid to acquire the office building on London’s Canary Wharf in 2016.
That deal followed the HNA’s disposal that same month of a set of US golf courses, with the company also parting with those properties on the western coast of the US for 24 percent less than what it had paid to acquire them in 2016.