By YANG Bingke

Troubled Hong Kong real-estate developer Shimao Group, has been forced to act to ease some of its growing financial pressure.

Jones Lang LaSalle (JLL) has been commissioned to dispose of two of the group’s hotels - the Sheraton Hong Kong Tung Chung and Four Points by Sheraton Tung Chung. Priced at HK$6.5 billion (56 billion yuan, US$8.2 billion), the Sheraton Tung Chung is the biggest hotel in the Shimao portfolio. Close to the international airport and with over 1,200 rooms, it is the second-largest hotel in Hong Kong. 

Founded by Hui Wing Mau in 2001, Shanghai-based Shimao develops large-scale residential projects and hotels across China. Shimao owns Shanghai Shimao International Plaza, one of the tallest skyscrapers in Shanghai.

China’s real estate sector has been lurching from fire to fire since 2020 when Beijing acted against reckless borrowing by developers to curb runaway housing prices. Shimao missed payment on a $1-billion-dollar note at the end of June last year, its first default on a public bond after months of floundering. Shimao was the first major Chinese developer to begin negotiations with creditors, with three of the top five bond issuers – Evergrande, Kaisa and Sunac - having already defaulted on dollar bonds.

Shimao is only the sixth largest issuer but was among the biggest dollar payment failures of the year in China. Among the numerous developers to default last year, Shimao is restructuring US$11.8 billion of offshore debt. The company has been trying to reach “amicable resolutions” with creditors on its failure to make principal payments.

A person close to Shimao said all assets are up for grabs as long sales will help the company to overcome its debt problem.  In June 2021, Shimao faced 460 billion yuan of debt. Since then, the company has sold multiple assets but only managed to raise around 14 billion yuan.

JLL head of Hong Kong capital markets, Oscar Chan, said the hotel's occupancy rate has recovered since the city lifted travel restrictions. Chan is optimistic that interest rates have peaked and believes that Shimao can expect a much higher price than it would have last year when it defaulted on its debt.

Shimao bought the site in 2014 for HK$1.8 billion.