Hong Kong office towers put on the block amid loan-payment conflict between owners
- Gaw Capital and Hengli investments bought the buildings, known as Cityplaza Three and Four, for US$1.9 billion in 2019
The owners of two grade-A office buildings on Hong Kong Island, known as Cityplaza Three and Four, are putting the towers up for sale amid a financing disagreement, five years after buying the assets for HK$15 billion (US$1.9 billion) at a market peak.
Hong Kong-based firms Gaw Capital and Hengli Investments have appointed Savills and JLL to sell 12 and 14 Tai Koo Wan Road in Eastern district. Gaw, a private equity firm, currently owns a 65 per cent stake in the properties, while real estate investment firm Hengli holds the remaining 35 per cent.
The adverse conditions have hit a HK$10.3 billion loan that Gaw and Hengli took out, backed by the Taikoo office buildings. With rental income insufficient to cover the interest payments, the two companies have had to inject equity into the borrowing entity of the loan, based on their respective stakes, to cover the shortfall, according to people familiar with the matter. However, Hengli has not paid its part since late last year amid liquidity issues and tight rental income, the people said.
The sale will indicate a market price that could force Hengli to sell its stake and allow Gaw Capital to take more ownership of the properties, according to one of the people.
The two office towers have a total gross floor area of 788,095 sq ft. The tender closing date is September 20 and the buildings will be offered at a discount to the acquisition price, according to a sales brochure seen by the Post.
