HNA Surrendering Four Floors in HK’s Exchange Square as Cost Cuts Continue

HNA Group is reportedly shedding nearly half of its office footprint in Hong Kong’s Three Exchange Square, just 15 months after the troubled Chinese conglomerate leased eight floors in the downtown tower.

The mainland firm is said to be seeking tenants to take over four floors of its space in the 33-storey office tower, according to an account in the Hong Kong Economic Times citing people familiar with the matter. HNA took up 88,000 square feet (8,175 square metres) of space in the iconic Central district office complex in February 2017.

The news comes as cash-strapped HNA scales back its operations in Hong Kong and unloads a series of corporate and real estate assets in a bid to trim debt.

Hongkong Land Seeking Replacement Tenants

HNA Group is said to have asked the landlord of the grade A office building, Hongkong Land, to look for new tenants to take up the 40,000 square foot space. The Hainan-based company is paying in excess of HK$12 million ($1.5 million) per month for its total lease, or HK$140 per square foot, the report says. The building’s average asking rents at present are around HK$180 per square foot.

HNA’s Hong Kong headquarters are located in the adjacent Two IFC skyscraper in Central, where it occupies two floors. In October 2016, the group leased another 15,776 square feet of office space on the 37th floor of the tower for a monthly rent of HK$2.76 million, augmenting its existing 8,952 square feet space on the 58th floor.

The news account indicates that HNA’s office downsizing comes as the firm’s real estate business operations in Hong Kong shrink. HNA in February and March sold off three prized land parcels in the city’s Kai Tak area for a total of HK$22.36 billion ($2.8 billion). The conglomerate chaired by billionaire Chen Feng had planned to develop the sites into high-end residential projects when it snapped them up in late 2016 and early 2017.

HNA might give up more floors in the Three Exchange Square tower if it finds ready takers for the prime office space, according to the report. The eight floors were previously occupied by BNP Paribas as its back office before the French bank moved to Swire’s Lincoln House in Taikoo Place when its lease expired in early 2018.

HNA Group and Hongkong Land did not respond to Mingtiandi’s enquiries for comment by the time of publication.

Lease Cutback Follows Asset Sales

The office retreat in Hong Kong comes as the mainland conglomerate continues an asset-selling streak that has already totalled over $14.5 billion this year. HNA is struggling to pay off a pile of debt estimated at $100 billion, which it built up in the course of an acquisition spree from 2015 to 2017.

HNA was reported to be selling off a controlling stake in its Manhattan office tower at 245 Park Avenue to real estate investment trust SL Green Realty for an undisclosed amount this week.

The sale followed the Chinese company’s sale of the Minneapolis City Center mall and an adjacent office building for $320 million. In the same week, HNA disposed of its stake in Spain’s NH Hotel Group to Thailand’s Minor International for $726 million.

The pair of transactions came a week after the Hainan-based company was reported to be offloading the office tower 123 Mission Street in San Francisco to New York-based real estate investment firm Northwood Investors for $290 million.