Source: Bloomberg
Author: Lorretta Chen, Pearl Li
Private equity institutions are surrounding real estate developers in difficulties in Hong Kong, and the latter will have a record of US $ 23.4 billion (S $ 31.3 billion) bank loans in a record expire.
The potential funding gap is attracting a series of participants, including family financial management rooms, private equity companies and asset management institutions. They are willing to provide high -risk and high -yield loans with asset mortgage.
"Some family offices and asset management companies are establishing this new business line, just like a private equity fund," said Jasmine Chiu, a real estate financial business lawyer in Hong Kong."They all seek to increase the portfolio of private equity credit."
Hong Kong's downturn market environment supports this opportunity. At the time of the rise in financing costs, revenue from office buildings and retail facade decline.Although the real estate industry in Hong Kong is not as serious as the mainland market, residential sales have dropped sharply and the vacancy rate has soared.And many developers have carried out business in the two places, and the decline in valuation in mainland China has also produced an overflow effect.
The details of private equity loans are usually confidential, but some recent transactions have shown returns and demand.The Yajule Group borrowed up to HK $ 894 million (S $ 154 million) latter loan with a interest rate of 20%.Earlier this year, Country Garden Affiliated Company obtained a loan of HK $ 900 million from the investment company Flow Capital (HK) LTD..
Chiu said that some of her private equity customers involved in commercial real estate have transformed into private creditors.
More non -bank financing will enable developers to quickly provide funds for new projects when the cash flow is exhausted, or reinstatement of loans, but higher interest rates will exacerbate the debt dilemma of the industry.Even the largest developers in Hong Kong, such as the development of New World, sought to reduce borrowing after vigorous expansion.
