HNA Group

Debt-laden conglomerate HNA sells space in Shanghai tower to Singapore’s CapitaLand for US$400 million

  • Property giant CapitaLand forms joint venture for acquisition in Shanghai’s central business district
  • HNA is expected to be more flexible in deal making
PUBLISHED : Monday, 07 January, 2019, 7:02pm
UPDATED : Monday, 07 January, 2019, 10:50pm

The Chinese debt-laden aviation-to-finance conglomerate HNA Group has sold 70 per cent of space in a Shanghai office building to Singapore property giant CapitaLand for 2.75 billion yuan (US$400.5 million), CapitaLand said on Monday.

After the transaction, the latest divestment move by HNA, CapitaLand and a joint venture partner will own levels 8 to 19 and 21 to 32 of the 34-storey Pufa Tower – a total gross floor area of 41,773 square meters – as well as 61 car parks with property title. The tower, which also has three basement car parking levels, was acquired by a subsidiary of the HNA Group in late 2009. According to a report by local media Oriental Morning Post, the 1.5 billion yuan deal also included debt worth 721 million yuan.

How do Shanghai and Beijing defy China’s property slowdown?

The Singapore property giant has formed a 50:50 joint venture with a third party for the acquisition, it said. The acquired office space will be added to an asset pool backing a value-add fund that CapitaLand is setting up to invest in commercial real estate in key gateway cities in Asia.

The deal marks CapitaLand’s first office property acquisition in Lujiazui, Shanghai’s central business district.

HNA faces soaring debts and a crackdown by Beijing on companies that have aggressively used loans to fund deals. The conglomerate has been selling assets since last year, including real estate acquisitions, company equity and – recently – even its airline and aircraft.

It disposed off about 300 billion yuan worth of assets in 2018, and the company was starting “to see the twilight”, Chen Feng, its chairman, said late in December. Over the past two years, he has also said the company was “too hasty” in trying to set up a world-class aviation conglomerate for China, and that growth had been “too rough due to lack of experience”.

HNA is probably only one third of the way to divestment
Brock Silvers, managing director, Kaiyuan Capital

Analysts, however, continue to remain cautious about HNA’s future. Brock Silvers, managing director of Shanghai investment advisory firm Kaiyuan Capital, said: “Obviously, Chen has recognised the problem … but it would be overly optimistic to expect the problems are soon to be resolved.

“HNA is probably only one third of the way to divestment … and compared with the past, the group will become more flexible in making deals, regarding the price level, the structure of deals, because they have some tough decisions to make now.”

Foreign buyers increase share of China commercial property deals, spend US$3 billion in three weeks

Overseas investors have completed several big deals in Shanghai over the past few months. Real estate private equity firm Gaw Capital Partners and its consortium partners announced on Monday that they had acquired four Grade A office buildings at Shanghai MixC, in Minhang district, from China Resources Capital Management. The price was not revealed, but sources said Gaw had paid more than 40,000 yuan per square metre, or about 2.5 billion yuan, for the project which comprises a total saleable gross floor area of 60,807 square metres.

The Blackstone Group bought an office and retail complex in Shanghai in late December for about US$1.25 billion.

Additional reporting by Linda Lew