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

Construction site at the former Kai Tak airport area in Hong Kong.

Photographer: Anthony Kwan/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.

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.

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