HNA spent $45B over three years by tapping shadow banks

Chinese conglomerate bought 245 Park for $2.21B, is backing the Spiral in Hudson Yards

TRD New York /
Aug.August 25, 2017 09:50 AM

HNA Group is one of China’s biggest spenders, pouring $45 billion into global investments in just three years. To fund some of those deals, the conglomerate has turned to China’s shadow banking industry.

In addition to conventional financing, HNA has used a network of trusts, peer to peer loans and asset management products, according to an analysis of 100 investment documents and corporate filings by Bloomberg.

While not illegal, the financing is unusual and suggests it has been willing to take on expensive debt that would eat into profits. HNA’s return on equity fell to 1.7 percent last year from 3.6 percent in 2015, according to Orient Capital Research. “It’s questionable whether they’ll be profitable enough to repay the loans,” said founder Andrew Collier.

HNA made a splash in New York in March when it went into contract to buy a trophy office building at 245 Park Avenue for $2.21 billion (it closed on the deal in May).  It is also backing Tishman Speyer’s $3.2 billion Spiral project in Hudson Yards.

According to Bloomberg, the company pledged more than $10 billion in unlisted shares to non-bank lenders. It’s also paid interest rates that surpass China’s benchmark rates.

HNA said financing from non-bank lenders makes up a “small” portion of its funding. The company said its credit limit from Chinese banks increased by $15 billion this year. “We are confident in our ability to create value for our shareholders,” the company said.
According to Bloomberg, among the funding streams tapped by HNA is trust firms, which take money from retail or institutional investors and re-lend those funds. HNA entities have also sold 35 trust products since January 2016, up from 21 over the prior five years, according to data from Use Trust. By contrast, Dalian Wanda Group sold just 10 trust products during the same time and Fosun Group sold none.

HNA has also tapped peer to peer loans. For example, an HNA leasing unit is raising 45 million yuan on a P2P platform that’s offering investors an 8.8 percent return over 390 days — twice China’s benchmark for one-year loans.

The array of funding is worrisome, said Collier. “They’re way off the deep end,” he said. “Their needs for capital are so great that, at the end of the day, they are going to as many people as possible.” [Bloomberg]E.B. Solomont


Related Articles

arrow_forward_ios
Data on third quarter CRE investments suggests a nationwide improvement, but Manhattan has been slow to recover (iStock)

NY falls behind Dallas, LA in CRE investment as deals surge nationwide

NY falls behind Dallas, LA in CRE investment as deals surge nationwide
237 Park Avenue and Scott Rechler (Photos via Getty; RXR)

What tenants are paying at RXR and Walton Street Capital’s 237 Park Avenue

What tenants are paying at RXR and Walton Street Capital’s 237 Park Avenue
The National Multifamily Housing Council’s monthly payment tracker found that 90.6 percent of those households paid some rent by Oct. 20. (iStock)

Rent collections in market-rate apartments stagnate in October

Rent collections in market-rate apartments stagnate in October
Four New York Plaza (Photo via Hines)

Four New York Plaza office tower hits the market

Four New York Plaza office tower hits the market
Gov. Andrew Cuomo (Getty; iStock)

New York City lifts lockdown for some Covid hot spots

New York City lifts lockdown for some Covid hot spots
518 Broadway (Google Maps)

Four years vacant: Landlord offers dire outlook for Soho building

Four years vacant: Landlord offers dire outlook for Soho building
Sam Chang and TownePlace Suites by Marriott at 324 West 44th Street (Google Maps)

Hotelier Sam Chang’s businesses snagged millions in PPP loans

Hotelier Sam Chang’s businesses snagged millions in PPP loans
Vornado CEO Steven Roth with 1535 Broadway and 220 Central Park South (Getty, VNO, Google Maps)

Vornado sees $100M retail JV loss, $190M in 220 CPS gains

Vornado sees $100M retail JV loss, $190M in 220 CPS gains
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...