Kaisa executive’s ‘distressed’ villa for sale at discount

House in Pok Fu Lam offered by receivers for up to 26 per cent off HK$350 million purchase price

The Hong Kong villa of a Kaisa Group Holdings executive has been offered for sale at a discount by receivers, joining a growing group of mainland developers that are selling assets at distressed prices amid a debt crunch and a stagnation in the nation’s property market.

House 17 of Bel-Air Rise in Pok Fu Lam, the third phase of the Residence Bel-Air luxury property project on the southwestern corner of Hong Kong Island, was put up for sale this week by a group of receivers, according to CBRE. The receivers include Cosimo Borrelli and Tai Shaw Hoong of New Yorkheadquartered Kroll.

The two-storey villa, spread over 3,953 sq ft, is valued at between HK$260 million and HK$280 million, or a discount of up to 26 per cent on its HK$350 million purchase price in 2017.

Kaisa’s vice-chairman and chief executive Mai Fan held the villa through Million Link Development, which previously listed the executive as a director. Million Link was taken over by the receivers appointed in December.

Shenzhen-based Kaisa is struggling to raise cash as it faces US$11.4 billion in outstanding bonds and US$200 million in perpetual notes due in 2026, according to Bloomberg data. A property slump is dampening the developer’s ability to sell homes, forcing it to dispose of assets to raise capital.

The developer’s founder and chairman Kwok Ying-shing put 18 property projects in Shenzhen worth 81.8 billion yuan (HK$95 billion) on the auction block late last year to raise cash.

Kaisa sold the 38th floor of the Center office tower in Hong Kong in December to offset part of its debt, according to an exchange filing by China Shandong Hi-Speed Financial Group, which bought the space.

A month earlier, it sold a project at the former Kai Tak airport site for HK$1.9 billion in cash and HK$6 billion in assumed debt, a steep discount on its HK$9.8 billion valuation in June.

“If [a property] becomes foreclosed, it means [the owner] definitely cannot repay banks or financial institutions,” said Andy Lau, a sales director at Midland Shops.

“This is the third year with such an economy and situation, so some companies will see problems with their capital.”

With restrictions on gatherings being relaxed, property inspections were expected to return to normal, said Reeves Yan, executive director and head of capital markets at CBRE Hong Kong.

“In the past year, despite the pandemic, the extremely low supply of luxury housing and the flood of funds around the world have led to a lot of capital flowing into the luxury housing market”, thus maintaining the robustness of the segment, he said.

More properties were being offered in distressed sales of late, Yan said.

An office building at 28 Austin Avenue near Hung Hom was put on the market by creditors for an indicative price of HK$200 million, Lau of Midland said.

The original owner, a mainland investor, bought it via a company for HK$212 million in 2012. The property has been mortgaged repeatedly over the past few years.

“This is often the case. If some property appreciates, owners borrow money from financial institutions to buy other things,” Lau said.