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R&F Properties turns to Hong Kong tycoon in distressed sale of London asset to trim part of US$42 billion in liabilities

In Business
February 07, 2024
Guangzhou R&F Properties, a defaulted Chinese developer, is banking on Hong Kong tycoon Cheung Chung Kiu in a distressed sale of its asset in London, the latest attempt to help trim US$42 billion of liabilities and survive a three-year slump in China’s housing market.

The developer has agreed to sell its UK asset known as the Nine Elms development, a prized mixed-use residential and commercial project in central London, for a token sum of HK$1 plus debt, it said in an exchange filing. The buyer, London One Limited, which is solely owned by Cheung, will assume at least US$800 million of the loan related to the transaction.

Cheung is the chairman and controlling shareholder of Hong Kong-listed property group CC Land Holdings. R&F had in April 2022 sold its 50 per cent share in Thames City at Nine Elms, formerly New Covent Garden Market, to Cheung for HK$2.66 billion (US$340 million).

“In recent years, the group has expedited its plan to sell development and investment properties in both China and overseas,” R&F said in its exchange filing. Nonetheless, certain loans have become “increasingly difficult to repay”, justifying the need to sell the London project, it added.

Cheung Chung Kiu, chairman of CC Land Holdings, is personally buying the UK asset from R&F. Photo: Weibo

R&F expects to sell more assets to help reduce more than 300 billion yuan (US$42 billion) of total liabilities it carried at the end of June 2023. Bank borrowings and bonds made up more than 45 per cent of them. The developer has missed payments on more than 34 billion yuan of debt, according to its latest financial report to shareholders.

CC Land confirmed in an email to the Post that Cheung is the buyer of the UK asset in his personal capacity. Cheung was reported in 2020 to have bought a 45-room mansion in Knightsbridge for £210 million (US$265 million), a record price for a country house in the UK capital.

London One Limited, Cheung’s special-purpose vehicle, is buying R&F’s unit known as Easy Tactic, which owns the UK asset and has three outstanding dollar-denominated bonds worth US$5.7 billion, due in July 2025, July 2027 and July 2028. He is planning to ask bondholders to swap them into new bonds with no maturity dates.

Construction of office, retail and residential developments in the Nine Elms district in London in June 2022. Photo: Bloomberg

R&F’s project is a £1.34 billion development slated for completion in April 2024, according to its filing. Upon completion, it will comprise two towers offering 437 private residential units and 57 affordable housing units, along with a hotel in one of the towers.

In 2021, the Wandsworth Borough Council described the transformation of Nine Elms from “dirty and unloved industrial wasteland into London’s fastest growing and most vibrant residential and business district”, adding that it would be “the biggest urban renewal success story this century”.

The regeneration of the area would build 20,000 new homes and create 25,000 permanent jobs. An estimated 33,000 residents were also expected to live in the district by the end of the decade, the statement added. In total, it would have 3.2 million square feet of office space, 2.3 million sq ft of retail premises and 1,600 hotel rooms.

The sale injected some urgency into R&F’s survival plan, as China’s home prices continue to slide into the new year and developers struggle for fresh liquidity long after the crippling “three red lines” policy in August 2020. The asset sale comes weeks after China Evergrande Group was ordered to liquidate in the biggest corporate failure in Hong Kong.

Founded in 1994, R&F is among major Chinese developers that have ventured beyond the mainland, many funded by excessive borrowings. The developer rolled out a global strategy in 2013 and has operations stretching from Malaysia to Cambodia, South Korea and Australia.

Additional reporting by Yulu Ao and Daniel Ren

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