Hong Kong firms scoop up properties from Chinese developers in distress -Breaking
By Clare Jim
HONG KONG (Reuters] -After many years of development in Hong Kong and other countries, Chinese developers find themselves in financial trouble. Firms in Hong Kong are now able to purchase some of their properties at distressed rates, allowing them to exit one of the most expensive real estate markets in the world.
To ease the liquidity pressure back home, developers including China Evergrande Group Holdings Ltd and Kaisa Group Holdings Ltd have sold assets to Hong Kong developers in recent months.
More to come: Aoyuan Group has extended the redemption dates for offshore asset-backed securities this week. Two sources who are familiar with the matter stated that Aoyuan Group is working to get more Hong Kong property offloaded to increase capital.
Aoyuan plans to sell an office building that was redeveloped in Kwai Chung, eastern Hong Kong. The bidders are likely to be family offices or local investors, according to sources.
According to sources, Aoyuan is likely to sell the deal for less than it cost. The building was purchased by Aoyuan for HK$950million ($121.83 million). Property agents have estimated its value at less than HK$800million.
It follows a Mid-November deal where Aoyuan sold assets in a Mid-Levels development to a Hong Kong buyer for HK$177m.
Aoyuan was unable to be reached via the email address listed on its website. Calls to the company were not returned.
It will enable Hong Kong property moguls to increase their control in China-controlled territories.
One-time wealthy Chinese developers once moved to Hong Kong aggressively, outbidding cross-border counterparts for prime spots in the city.
Now, however, developers face an unprecedented cash crunch because of Beijing’s regulatory restrictions. Beijing is trying to lower leverage in this sector. This has caused some to miss their wealth management and bond payments.
To meet their short-term obligations, some builders sell off assets.
Reeves Yan of CBRE’s capital markets Hong Kong, stated that it was a “reversal” of the trend. Chinese developers are selling because of liquidity constraints. It’s expected there will be even more sales in Hong Kong over the coming months.
Kaisa missed $88.4 Million in coupon payments earlier this month. Kai Tak’s residential land was sold to New World Development and Far East Consortium on Wednesday, for a consideration totaling HK$7.9 Billion, according to a filing with the stock exchange.
Reuters has reported that the company recently sold another Tuen Mun property in north Hong Kong to Francis Choi for HK$3.78 Billion. After repaying its loans, Kaisa was able to sell the parcel for HK$1.3billion.
Kaisa refused to comment.
Evergrande is currently facing more than 300 billion dollars in debts and has sold units in a residential project to VMS Group (a Hong Kong financial institution), a source said.
Evergrande has not responded to my request for comment.
Taking only into account government land sales, and not private land transactions between developers, so far, one Chinese property company was part of a land purchase valued at HK$7.3 billion. This land purchase was jointly made with four Hong Kong colleagues.
This is compared to HK$39 trillion spent in 2017 and a record HK$58.4 billion for 2017, data compiled CBRE.
Sector observers stated that some of the more financially successful Chinese developers remain active on the market.
China Overseas Land, a state-owned Chinese land company, was not among the 16 bidders at the October residential land auction.
“The state-owned developers are still cash-rich, but the property market will be led more by Hong Kong investors going forward,” said Tom Ko, Cushman & Wakefield (NYSE:)’s Hong Kong capital markets executive director.