Hong Kong housing

HNA to tap ‘different kinds’ of funding to help pay for US$3.5bn Kai Tak project

The four Kai Tak sites expected to add 1,900 units to Hong Kong housing market

PUBLISHED : Monday, 16 October, 2017, 3:56pm
UPDATED : Monday, 16 October, 2017, 10:28pm

HNA Group, the Chinese conglomerate that spent a record HK$27.2 billion (US$3.5 billion) on four residential sites in Hong Kong, said it will seek “different kinds” of funding to pay for the development.

“We want to have different kinds of funding, including investment funds formed by listed arms as well as borrowing from financial institutions,” said Huang Qijun, a member of the HNA Group board of directors and chairman of the Hong Kong International Construction Investment Management Group (HKCIM).

Construction work at the four Kai Tak plots – formerly the site of Hong Kong’s airport and covering 2 million sq ft of living area – began on Monday.

The entire project will offer 1,900 residential units across seven high-rise apartment blocks, 12 low-rise apartments, and four villas. Pre-sales are expected to launch in the third quarter of 2019.

HNA bought the land in the period from the end of 2016 to the beginning of this year through two subsidiaries, HKCIM and Hisea International, with each holding two sites.

However, China’s heightened regulatory scrutiny of debt-fuelled overseas acquisitions has cast a shadow over HNA’s aggressive Hong Kong expansion. Media reports last month suggested that at least four banks stopped extending fresh funding to HNA’s construction activities.

Most recently, China’s insurance regulator barred a unit of the conglomerate, Bohai Life Insurance, from providing HNA with financing or capital.

China’s regulator bars HNA’s Bohai and four insurers from funding parents’ war chests

But Huang said on Monday that HNA has “sufficient funding” for the two Kai Tak sites owned by HKCIM – a Hong Kong-listed arm of HNA – as the unit had HK$2.7 billion cash on hand as of June 30 this year and had raised HK$9.25 billion through a rights issue earlier this year.

For the more expensive site bought by Hisea International for HK$8.8 billion, HKCIM said on Friday it had partnered with Hisea to form an investment fund worth HK$6.03 billion to develop the site, and that it had injected HK$728 million into the land.

HNA’s Kai Tak project receives US$93m capital injection from subsidiary

On the HK$3.5 billion in short-term bank loans used to fund Hisea’s land purchase, which are due soon, Huang said the company was discussing with banks about converting them into project development loans.

He added that there were several developers interested in developing the Kai Tak projects together with HNA, but declined to comment whether HNA was considering bringing in partners for the project.

Huang said HNA Group complies with market regulations and it hopes to create “a better Hong Kong with Hong Kong people”.

“We haven’t talked much in the past so that’s why the market raised concerns about us, but now we are being transparent, the market doubts should dissipate,” he said.