(Bloomberg) -- Hong Kong Metropolitan University has signed an agreement to buy a distressed commercial property in the city that China Mobile Hong Kong had sought to purchase, according to people familiar with the matter.
HKMU, formerly known as the Open University of Hong Kong, offered more than HK$2.6 billion ($334 million) for Cheung Kei Center, according to the people. HKMU signed the deal for the building, which was once owned by struggling tycoon Chen Hongtian, on Monday and aims to complete the transaction by the end of the year, one of the people said.
The deal comes after China Mobile made an offer with a price range as high as about HK$3 billion subject to certain conditions, the person said. But the telecom unit’s bid involved payment installments, making HKMU’s offer of a lump-sum cash payment more attractive, the person added.
High interest rates and a weakening economy in China have spurred fire sales on some Hong Kong properties. At least HK$2.1 trillion has been erased from commercial and residential real estate values in the city since 2019, according to an analysis by Bloomberg Intelligence in June. HKMU’s offer for Cheung Kei Center, which comprises an office building, retail and parking spaces, is less than 40% of its 2022 value of about HK$7 billion, according to a sales document.
HKMU, which offers 800 full-time and part-time courses, according to its website, plans to potentially use the building for some of its executive programs, the people said. The university has snapped up hotels in recent years to use as student dormitories, including a hotel in Hong Kong’s Hung Hom area and Hotel Ease, which it bought from the family of the late property mogul Tang Shing Bor.
Chen Hongtian founded Cheung Kei Group by combining businesses he owned in Hong Kong and Shenzhen in 1990 when the country was pushing for market-economy reforms. The company pivoted to real estate development and financial investments after achieving success in textiles. Cheung Kei Group once owned 10 office towers and hotels globally, including Cheung Kei Center, according to the group’s website.
The properties in Hong Kong were pledged to a group of banks to secure a loan of as much as HK$4.6 billion in 2019, according to land records. Those banks include two Chinese lenders and a local group led by Hang Seng Bank Ltd., Bloomberg News reported earlier.
Cheung Kei Group said in a statement in May 2023 that the loan had defaulted in March of that year. Hang Seng Bank seized the property at that time, and appointed PricewaterhouseCoopers LLP as the receiver. The tower was then put on the market in May that year.
HKMU on Tuesday said that it has been exploring ways to provide students and staff with more spaces, including for executive training programs, while declining to comment further. China Mobile Hong Kong didn’t immediately respond to a request for comment, while PwC declined to comment.
Hong Kong Economic Times reported the sale earlier.
Due to liquidity issues, Chen has lost some properties in both Hong Kong and London to creditors, according to data compiled by Bloomberg. According to a writ in April, he and his family also faced more than $200 million loan repayments to banks.
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