China Aoyuan Selling Stake in Property Management Unit for $32M

China Aoyuan Group has agreed to sell a 29.9 percent stake in its property management unit for HK$256 million ($32.6 million), as the Guangzhou-based developer continues to unload assets after defaulting on $1.09 billion in offshore debt last year.

Aoyuan will sell 217.1 million shares of Aoyuan Healthy Life Group to BVI-incorporated Best Discovery International, according to a Thursday filing with the Hong Kong stock exchange. Best Discovery International is controlled by state-owned Guangzhou Nanyue Fund Group.

Upon completion of the transaction, Aoyuan will see its interest in Aoyuan Healthy Life decrease from 54.58 percent to 24.68 percent and it will cease to be the controlling shareholder of the property management unit.

Aoyuan expects to realise a HK$44.8 million loss from the disposal, with the net proceeds to be applied towards reducing the group’s indebtedness, chairman Guo Zi Wen said in the filing.

Fire Sale Goes On

Aoyuan’s announcement follows the divestment earlier this month of the group’s 60 percent stake in 14 parcels of development land in Guangdong’s Zhuhai to a state-controlled firm for RMB 584.4 million ($86.2 million).

Last June, the Chinese builder struck a deal to sell 49 percent of the issued share capital of Aoyuan Property Group Australia — a developer with six projects Down Under — to a family trust of Adrian Liaw, a director of certain project companies within APGA, for a nominal consideration of two Australian dollars.

Sydney-based Liaw — who also serves as president of Aoyuan’s international development division — paid A$105 million ($72.5 million) to the parent group for the settlement of shareholder’s loans owed by APGA.

Aoyuan retained a 51 percent non-controlling stake in the Australian entity, which has since been rebranded as Novm.

Novm’s projects include The Lennox, a 425-unit residential complex in the Sydney suburb of Parramatta that was completed in 2021, and Ashbourne Moss Vale, a 124 hectare (306 acre) master-planned community in Sydney’s Southern Highlands.

Daunting Debt Pile

Aoyuan announced in January of last year that it would not make payments on four sets of offshore notes totalling $1.09 billion coming due that month and in June 2023 and June 2024. The group’s outstanding offshore debt also includes a $350 million bond maturing in 2027.

In December 2021, Hong Kong hedge fund Nine Masts Capital joined Citibank in taking legal action to recoup more than $131 million owed to them by Aoyuan.

A month earlier, Aoyuan had agreed to sell off a redevelopment project in Hong Kong’s Mid-Levels to raise cash, anticipating an estimated loss of HK$176.6 million ($22.5 million) on the disposal.