Hong Kong firms scoop up properties from Chinese developers in

By Clare Jim

HONG KONG (Reuters) – After years of expansion in Hong Kong, cash-strapped Chinese developers are reducing their presence in one of the world’s most expensive property markets, allowing firms in the financial hub to scoop up some of their assets at distressed prices.

Developers including China Evergrande Group and Kaisa Group Holdings Ltd, struggling under billions of dollars in debt, have sold some assets in recent months to Hong Kong developers to help ease liquidity stress back home.

There’s more to come – Aoyuan Group, which this week extended the redemption date of onshore asset-backed securities, is trying to offload more Hong Kong properties to raise capital, two sources with knowledge of the matter said.

Aoyuan is planning to sell a redeveloped office building in Kwai Chung in eastern Hong Kong, and the bidders will likely be local investors or family offices, said the sources, declining to be named as the information is confidential.

The deal is expected to be sold at less than what Aoyuan paid for it, the sources added. Aoyuan bought the building for HK$950 million ($121.83 million) in 2018, and property agents estimate its current valuation at less than HK$800 million.

This will follow a deal in mid-November, when Aoyuan sold some assets in a residential development in the Mid-Levels to a Hong Kong investor at a loss of HK$177 million.

Aoyuan could not be reached for comment via its officially-listed email and calls to the company went unanswered.

The trend will help Hong Kong property tycoons to further boost their dominance in the Chinese-controlled territory.

Once deep-pocketed Chinese developers had moved aggressively into Hong Kong, outbidding their cross-border rivals for prime sites in the city as they searched for investment opportunities outside the mainland.

But now those developers are facing an unprecedented cash crunch due to regulatory curbs as Beijing tries to reduce leverage in the sector, causing some to miss bond and wealth management product payments.

Some builders have resorted to selling their assets to meet near-term repayment obligations.

TREND REVERSAL

“It’s a reversal of the trend,” said Reeves Yan, CBRE head of capital markets in Hong Kong. “Chinese developers with liquidity crunch are now selling, and it is expected that there will be more selling in the next few months (in Hong Kong).”

Kaisa, which missed coupon payments totalling $88.4 million due earlier this month, sold a residential land parcel in Kai Tak, where Hong Kong’s old airport was situated, to local peers Far East Consortium and New World Development on Wednesday for a consideration of HK$7.9 billion, a stock exchange filing said.

It recently sold another parcel in Tuen Mun in northern Hong Kong…