Hong Kong's Red-Hot Property Holds Clue to HNA-Henderson Deal

(Bloomberg) -- Hong Kong’s red-hot property market helped China’s embattled HNA Group Co. when the company decided to offload $2 billion of land to repay debt.

Local developer Henderson Land Development Co. had splashed out in the past, paying a record for a car park building. This time, Henderson paid 12 percent more than HNA had shelled out for the land in 2016.

The deal reflects gains in property prices in the interim -- and the forecasts for further increases, said CIMB Securities Ltd. property analyst Raymond Cheng.

Hong Kong's Red-Hot Property Holds Clue to HNA-Henderson Deal

When Henderson starts marketing in two years, units at the site of the former Kai Tak airport could sell for HK$28,000 ($3580) per square foot, yielding a healthy 15 percent margin, according to Cheng. That compares with a typical 5 percent to 10 percent for developments on government land bought at tender, he said.

“This deal is actually quite reasonable for Henderson,” said the analyst, who has a buy rating on the stock.

©2018 Bloomberg L.P.

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