China’s HNA Real Estate Takes Real Estate Out of Its Name

HNA Real Estate Holdings has been having a close-out sale of some of its biggest assets this year, but now the property division of China’s best-known, and most-indebted, aviation conglomerate is going a step further by taking the words real estate out of its name.

In a press conference on Tuesday in its hometown of Haikou, the Hainan-based group announced that the property subsidiary of HNA Infrastructure Investment Group would now be known as HNA Airport Development, putting a name on the company that makes official its retreat from the property investment business.

The reformed entity now says that its business focus has shifted back to developing airport facilities and infrastructure construction from being a general property developer.

The new focus for HNA comes after the group sold nearly RMB 4 billion ($580 million) in real estate assets in the last month and following news last month that it had put 82 properties worth an estimated $11 billion on the market, in an effort to reduce its debt load and comply with a government drive to reduce leverage.

HNA Gets Industrial About Its Real Estate

According to Tan Yuping, chairman of newly christened HNA Airport Development, the name change demonstrates the transformation of the HNA affiliate from being an all-purpose developer to an industrial real estate specialist.

“The transition from traditional real estate to industrial real estate is the direction that the company has been operating in recent years,” Tan said at the press conference. “Essentially, the airport industry is our main business,” he noted, adding that change in direction fits into the larger picture of Hainan province becoming a free trade zone.

The press conference was held half of a month after Shanghai-listed HNA Infrastructure published an announcement which mentioned that its wholly owned real estate subsidiary had submitted an application requesting the name change.

Defining a New Mission

Part of the name change included revising the company’s business license, which following mainland China procedures, defines in specific terms the entity’s scope of business as including airport investment, airport operations management, ground transportation services, and construction of other airports-related projects. However, the revised document also still retains permissions to engage in broader property industry activities in the “real estate development and management, real estate sales” fields.

Along with the new name and the new paperwork, the former HNA Real Estate Holdings has adopted a new mission.

According to Tan, HNA Airport Development plans on investing in eight large projects within the the next three to five years, including developing three airport-based industrial parks and five transport-based towns in the mainland Chinese provinces of Hainan, Sichuan, Hubei, Tianjin, Zhejiang and Shaanxi.

Selling RMB 300 Billion in Assets

HNA Group chairman Chen Feng said in an interview with local media Caijin last Wednesday that HNA has sold nearly RMB 300 billion in assets since the beginning of this year, adding that the company plans to sell more assets in the near future.

“Our principle is – to divest non-core business and to withdraw from unhealthy industries. We will focus on the main business of air transport and get rid of non-core business resolutely,” said Chen.

HNA’s debts reached RMB 600 billion by June of this year. Now Tan says that it is reviewing its current property portfolio and would retain assets that are in line with its new business scope, while non-core properties would be sold off or moved into joint ventures with partners.

Selling those properties or finding partners could prove more challenging in the future, however, as HNA has already sold many of its most marketable assets, according to Brock Silvers, founder of Shanghai-based private equity firm Kaiyuan Capital and a veteran of China’s real estate investment world.

“In 2019 many large-scale obligations will come due, and HNA likely has no choice but to continue asset sales,” Silvers told Mingtiandi. “In general, the easier monetization has already been done, but the company still needs to reduce debt.”

HNA Following the Wanda Way

The decision by the founder of mainland China’s first privately owned airline to trim back HNA’s operations and focus on its core business, follows a path similar to the track that Wang Jianlin’s Dalian Wanda Group has been on for the past year and a half.

After running afoul of government regulators for debts that reached RMB 420.5 billion by this July, Wanda has sold interests in businesses outside of its domestic commercial property interests, including selling a $600 million stake in its AMC Theatre chain during September and selling off its tourism management business to Sunac China for RMB 6.28 billion during October.

Wanda, which in the last year has sold off its real estate holdings in Australia and the UK, and most of its US assets, has been exiting what it calls non-core business, after both Wanda and HNA were targeted in a government deleveraging drive starting in mid-2017.

Like Wanda, which pursued entertainment and hotel ventures worldwide, before suddenly being prodded to return to its mall development roots, HNA’s Chen Feng had expanded beyond his company’s core aviation business in recent years to invest billions in technology, real estate and infrastructure worldwide, before the government convinced him of the virtue of focusing on his core business.

HNA also followed Wanda’s lead in changing its name. In March of this year, Wang Jianlin announced that Wanda’s largest announced unit, Wanda Commercial Properties Co was changing its name to Wanda Commercial Management Group, as it planned to transform itself from a property developer that financed its own projects, into a development service provider and multi-channel retail operator.