Cash-strapped HNA has grabbed another lifeline from a Hong Kong developer to help crawl its way out of debts estimated at $100 billion. In the latest attempt to bail out its balance sheet, the Hainan-based conglomerate agreed to sell one of its remaining pair of plots in Hong Kong’s former airport site in Kai Tak to Wheelock and Company for HK$6.36 billion ($811 million), according to a statement filed to Hong Kong Stock Exchange this morning.
The deal comes less than a month after HNA sold a pair of Kai Tak plots for HK$16 billion ($2 billion) to Wheelock rival Henderson Land Development, as the airline group struggles with the debt hangover from a two year $40 billion global buying binge.
Wheelock Gets Prized Kai Tak Condo Site
The site Kai Tak Area 1L Site1 (New Kowloon Inland Lot No. 6564) was awarded to HNA’s subsidiary Hong Kong International Construction Investment Management Group (HKICIM) early last year for HK$5.53 billion ($682 million). The 7,318 square metre site is currently being developed into a residential project, which is expected to have a gross floor area of approximately 39,517 square metres.
“The transaction offers an opportunity for the Group to expand its development property portfolio in Kai Tak area which at present comprises Oasis Kai Tak, and is therefore beneficial to the Group as a property developer,” Wheelock stated in the stock exchange filing. The terms of the deal are fair and reasonable, the company added.
According to the filing, the Hong Kong developer paid HK$500 million ($64 million) to HNA on 8th March 2018 to seal the deal. Thanks to the rapid escalation of Hong Kong’s land market, the transaction price of HK$6.36 billion is about 15 percent more than what HNA paid for the site in January of last year.
The increase in value of Hong Kong property also helped out HNA las month when it pledged a nearly 41 percent stake in HKICIM, which then held two Kai Tak projects, to PAG. It is reported that in return, PAG provided HNA with a loan for as much as HK$3 billion to help cover its bills.
Following this sale, HNA has one remaining at the former airport site, Kai Tak Area 1L Site 2, which it purchased for HK$7.44 billion in March 2017.
Local Giant Takes Over HK$6B Kai Tak Site
Founded in 1857, Wheelock and Company is headed by Hong Kong’s prominent Woo family, with Douglas Woo as the chairman. The group also holds 62 percent interest in Hong Kong developer Wharf, which owns shopping centres Harbour City in Tsim Sha Tsui and Times Square in Causeway Bay.
Wheelock is already a player in Kai Tak through its residential project Oasis Kai Tak, which attracted 1,500 prospective buyers on the first day of sales last September. The project is built on Kai Tak Area 1H Site 3, which was awarded to the developer in 2014 for HK$2.5 billion.
HNA Close-Out Sale Continues
HNA’s financial distress has become acute enough that it is threatening to put a stop to the transportation conglomerate’s core business of flying planes. Earlier this week, state-owned South China Bluesky Aviation Oil was reported to be planning to cease supplying fuel to Hainan Airlines unless HNA makes good on missed payments accumulated since October 2017. HNA Group is said to have racked up an estimated RMB 3 billion ($476 million) bill with China National Aviation Fuel Group, the parent company of South China Bluesky Aviation Oil.
The cash crunch has put HNA into close-out sale mode as it attempts to bridge a liquidity shortfall in the first quarter which it admits is at least RMB 15 billion ($2.4 billion). That budget gap may have helped trigger HNA’s decision this month to put up for sale its $1.4 billion stake in US hotel chain Park Hotels & Resorts Inc.
Apart from equity stakes, HNA has also disposed of real estate assets in return for cash including selling sold 1 York Street, an office tower in downtown Sydney it had bought in 2011, to Blackstone Real Estate Partners (BREP) Asia fund for about A$200 million ($161 million).
The company was reported to be approaching investors to sell two office buildings that it had purchased on London’s Canary Wharf for around £366 million ($496 million). Meanwhile, in the US, HNA was reportedly marketing commercial properties in New York, Chicago, San Francisco and Minneapolis valued at a combined $4 billion.