Debt-saddled HNA Group sued for HK$8.3 million in costs relating to surrender of Hong Kong office space
- The debt is the costs allegedly incurred by HNA when it surrendered office space in Central to cut costs, according to two sources close to the matter
Embattled HNA Group is being sued by its office landlord in Hong Kong’s main business district over a debt of about HK$$8.3 million (US$1.06 million), according to a writ filed with the city’s High Court.
The unpaid money is the costs allegedly incurred by HNA when it surrendered five floors of office space at Three Exchange Square, in Central, as part of a cost-cutting exercise, two sources close to the matter said.
Mulberry Land, a wholly owned subsidiary of Hongkong Land, claims the debt-laden Chinese conglomerate owes two instalments – one worth HK$3.65 million which had been due on December 1, 2018 and another of HK$4.65 million due on January 1 this year, according to the writ.
HNA said in a statement on Wednesday that “the relevant money has been paid in full” and that the delay was due to a “liquidity problem”. The company did not elaborate.
Hongkong Land was unavailable for comment on Wednesday.
The group, whose interests span aviation to finance, gave up five of eight floors it rented at Three Exchange Square last year to cut its borrowing costs. The spaces were taken up by China Merchants Bank, according to property agents.
Costs incurred in finding replacement tenants must be borne by the “defaulting tenant”, the agents said. Such costs may include agency fees and legal fees, subject to the agreement between landlord and tenant.
Mainland Chinese companies have been under financial pressure recently, and their demand for office space has slowed, according to international property consultant Savills.
A downturn in business sentiment and the tightening of liquidity in China have prompted commercial landlords in Hong Kong to double or triple the money tenants must put down as a deposit.
To ease its crippling debt load, HNA Group has sold billions of dollars worth of assets in the last year or so. It was formerly one of China’s most prolific offshore asset buyers.
Its divestments continued this week with the sale of 70 per cent of its space in a Shanghai office building, Pufa Tower, for 2.75 billion yuan, and an office building at 850 Third Avenue in Manhattan for an undisclosed price.