HNA Group is in talks to sell its fourth and final plot of development land at Hong Kong’s former Kai Tak airport, according to a company filing to the Hong Kong Stock Exchange, as the distressed mainland conglomerate attempts to bail out its balance sheet.
The notice by Hong Kong International Construction Investment Management Group Co, Ltd (HKICIM), a Hong Kong-listed subsidiary of Hainan-based HNA Group, confirms recent media reports that the company intends to dispose of the 9,842 square metre (102,063 square foot) site in Kowloon, the last remaining piece of a 36,865 square meter megasite that HNA bought in a series of record deals in 2016 and 2017.
Now, less than two years after acquiring its last prized piece of Kowloon East property, HKICIM has revealed that it is in discussions with a potential purchaser, although the company clarified that it has yet to reach a legally binding sale and purchase agreement with the prospective buyer, as HNA Group seeks to reduce debts which last year reached as much as $100 billion.
The group’s asking price for the Kai Tak asset had not yet been made available as the time of publication.
A Kowloon Empire That Was Never to Be
Should HNA follow through on the potential sale of Kai Tak Area 1L Site 2, the disposal would mark the company’s final retreat from Hong Kong’s residential market after the parent company of China’s Hainan Airlines shocked market analysts and local competitors with series of bold land purchases beginning in November 2016.
HNA beat out 15 other bids to win this fourth plot of development land in the Kai Tak area for HK$7.44 billion ($960 million) in March 2017. That acquisition brought the group’s four month land shopping bill in Kai Tak to HK$27.2 billion, giving the company a total of 36,865 square meters of land.
The company’s bids at the time were said to far exceed what its competitors were willing to pay and at a rate per square foot of buildable area amounted to nearly double the amount paid in earlier land sales in the location.
At the time HNA planned to combine its set of plots into a single mega project. “All four sites will be combined under one development project for the purpose of constructing a world-class integrated residential complex,” HNA said in a statement at the time of acquisition.
Selling Trophies to Pay the Bills
But, the mainland group’s dreams were dashed less than one year after the last site acquisition, when in February 2018 HNA sold two of the four adjacent parcels to Henderson Land for HK$16 billion, less than fifteen months after buying the residential plots for a record HK$14.2 billion.
In March, HNA grabbed another lifeline from Wheelock & Company when it offloaded a third site to the Hong Kong developer for HK$6.36 billion ($811 million). The 7,318 square meter Kai Tak Area 1L Site 1 had been awarded to HNA in early 2017 for HK$5.53 billion ($682 million).
Should it be successful in selling this fourth plot, HKICIM would have no remaining land reserves to be developed in Hong Kong.
Last month, the HNA Group reportedly took a big loss on properties it owned in Hong Kong’s Causeway Bay district, selling them off for HK$260 million — HK$70 million less than what it had paid for the assets a year earlier.
Worldwide Sell-Off Continues
HNA’s sell off of its property assets is a reversal of the Hainan-based group’s $40 billion spending spree which saw it acquire technology, transportation and real estate around the world before running into a wall of excess leverage and government opposition in 2017.
The group is reportedly targeting the sale of properties worth as much as $11 billion by the end of 2019 after one of its subsidiaries defaulted on payment of the RMB 300 million principal on a trust loan due on September 10th. HNA’s debt was listed at $95 billion at the end of June last year, according to a report by Reuters.
HNA is under pressure from Chinese regulators to get rid of assets not related to its airlines business. A company spokesperson told the Wall Street Journal previously, “We are committed to streamlining our strategy to focus on our core aviation, tourism and logistics businesses, improve our operations and strengthen our balance sheet.”