China-backed purchaser goals to fund $5.2 billion HK skyscraper deal principally through debt-sources

HONG KONG (Reuters) – The China-backed purchaser of a Hong Kong skyscraper from billionaire Li Ka-shing for a document $5.2 billion is looking for to borrow as a lot as 90 % to fund the deal, in response to a time period sheet seen by Reuters and other people with information of the matter.

Hong Kong tycoon Li Ka-shing attends a information convention in Hong Kong, China March 22, 2017. REUTERS/Bobby Yip

The unusually excessive leverage degree displays a rising urge for food from new mainland China patrons who’re prepared to pay a excessive value to get into the Hong Kong property market, at a time when many conventional native gamers are promoting and investing abroad.

Hong Kong enterprise tycoon Li’s CK Asset Holdings (1113.HK) mentioned final month it was promoting “The Heart”, a 73-storey workplace tower, to C.H.M.T. Peaceable Improvement Asia Property, on the planet’s largest single property sale which might herald a HK$14.5 billion ($1.86 billion) achieve.

Beijing-based China Vitality Reserve and Chemical compounds Group Properties Ltd owns 55 % of C.H.M.T. Peaceable Improvement, whereas the rest is held by just a few Hong Kong traders.

The client of “The Heart” is seeking to increase round 40 % of the $5.2 billion in one-year mezzanine financing by providing to pay eight % curiosity, the time period sheet confirmed. The rest of as much as 50 % will probably be raised within the type of a senior mortgage, mentioned 4 individuals, three of whom had been bankers concerned within the deal.

“It’s an indication that there’s loads of new entrants within the Hong Kong market from the mainland, and the patrons are names individuals aren’t so conversant in,” mentioned Stuart Jackson, chief govt officer of InfraRed NF Advisers Restricted, an Asian actual property funding supervisor.

“(On the similar time) it appears to be a development that Hong Kong gamers are promoting and investing abroad…the extent of substitute capital from the mainland has been greater than ample to compensate, so for now costs proceed to go up.”

C.H.M.T. Peaceable Improvement couldn’t be instantly reached for remark.


Most property patrons in Hong Kong borrow about 40-50 % of the deal worth to finance their acquisitions, in response to business consultants, and the usage of mezzanine loans just isn’t frequent.

Mezzanine loans command a lot larger rates of interest than different kinds of loans as a result of they require minimal collateral. Property associated mezzanine loans carry curiosity of between 6 % and 10 % in Hong Kong.

As a result of banks in Hong Kong are restricted from lending greater than 50 % of the transaction worth, the mezzanine financing will possible be supplied by fund homes. The consortium has till March to finalize the mezzanine financing, in response to the C.H.M.T time period sheet.

C.H.M.T. has already paid a 10 % deposit. Because of the excessive coupon and the low funding yield in Hong Kong, mezzanine loans are normally used as bridge financing. Native media has reported that C.H.M.T. Peaceable Improvement is planning to flip the funding by promoting off a part of the constructing.

Banking sources mentioned any plan to dump part of the constructing, nevertheless, might make some banks hesitant about becoming a member of the senior mortgage portion, because it might doubtlessly complicate reimbursement obligations.

The newest deal additional expands Chinese language traders’ footprint within the Asian monetary hub’s prime workplace district, the place half of all new leasing house has been snapped up by mainland Chinese language corporations – lots of them funded through debt raised in Hong Kong.

Chinese language conglomerate HNA Group mentioned final month it had repaid a part of a HK$three.5 billion ($448 million) mortgage, whereas acquiring lenders’ consent to increase the rest’s maturity, linked to the group’s first land buy in Hong Kong.

($1 = 7.8075 Hong Kong )

Reporting by Clare Jim and Yan Jiang of LPC; Enhancing by Sumeet Chatterjee and Muralikumar Anantharaman

Our Requirements:The Thomson Reuters Trust Principles.

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