By Clare Jim

HONG KONG, (Reuters) – After many years of growth in Hong Kong, cash-strapped Chinese property developers have begun to reduce their footprint in this most valuable market. This allows financial centers around the globe to acquire some of their properties at distressing prices.

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 trying to get rid of more Hong Kong property 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 ($121.83million) in 2018. 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$177 million.

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 continue their dominant position in the Chinese-controlled territory.

One-time wealthy Chinese developers had moved to Hong Kong aggressively, outbidding cross-border counterparts for prime spots in the city.

These developers now face an unprecedented cash crunch as Beijing attempts to decrease leverage in the sector.

Some builders are forced to sell their properties to pay short-term debts.

TREND REVERSAL

Reeves Yan from CBRE, head of capital market in Hong Kong said that “it’s a reverse 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 next few months.

Kaisa, who missed coupons payments totalling $88.4 millions due earlier in the month, sold a residential parcel of Kai Tak where Hong Kong’s former airport used to be, to nearby peers Far East Consortium, and New World Development Wednesday for a consideration HK$7.9billion according to a stock exchange filing.

Reuters reports that it recently sold another Tuen Mun parcel to Francis Choi, a local investor in Hong Kong for HK$3.78billion. Kaisa made a profit of around HK$1.3billion cash, after it repaid the loan.

Kaisa refused to comment.

Evergrande has more than $300 billion of liabilities and it transferred unsold units to VMS Group in a Hong Kong residential development. A separate source informed Reuters.

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 firm participated in a land sale worth HK$7.3billion, which was jointly invested with four Hong Kong colleagues.

According to CBRE data, this is a significant decrease from the HK$39billion spent in 2017 and a new record of HK$58billion for 2017.

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.