CK Asset aims higher on plane leasing

Business | Reuters and staff reporter 4 Apr 2019

Hong Kong property developer CK Asset (1113) would be willing to bid for debt-laden HNA Group's stake in Irish aircraft lessor Avolon if it were put up for sale.

CK Asset already operates its own aircraft leasing business, and it is also eyeing other overseas deals as it pushes for stable revenue sources.

It is looking at office towers, utility assets and infrastructure that can provide recurring and long-term sources of income, said Gerald Ma, general manager of CK Asset's corporate business development department.

The efforts by CK Asset to transform into an integrated enterprise with multiple businesses comes as housing prices in Hong Kong have surged by a 200 percent over the past 10 years, making it one of the world's least affordable property markets.

While Hong Kong's No 2 property developer by market value will continue to invest in the sector in the SAR and the mainland, it will likely be more conservative with its bidding prices, Ma also said yesterday in providing a limited media briefing.

The company is exploring asset purchases in London, Ma said, going on to reveal it had bid for an office tower and an elderly care home but that the bids were unsuccessful.

But last year it acquired an office tower in London that is leased to investment bank UBS on a 17-year contract for US$1.3 billion (HK$10.1 billion) after disposing of a Hong Kong skyscraper in a record US$5.2 billion deal.

"Compare the risk and return of these assets to those in Hong Kong," Ma remarked. "Three hundred square feet sold for over HK$10 million. How sustainable is that?"

Ma added that CK Asset is also open to bulking up its aircraft leasing business - which accounts for 5 percent of its total revenue - by picking up HNA's majority stake in Avolon.

HNA sold a 30-percent stake in Avolon to Japanese financial services group Orix Corp last year. Orix had said in August that only 30 percent in Avolon was available for purchase.

If HNA does sell its stake in Avolon, Ma said, CK Asset "will bid for it like others do."

He added: "We have a lot of room for spending" - a reference to CK Asset's low debt-to-equity ratio of around 3 percent. "It can be higher ... we need to look harder at how to spend that money."

The outlook for the aircraft leasing market is promising due to growing demand from budget airlines and the fact that 2,000 to 4,000 planes will need to retire globally by 2024, Ma added.

Shares of CK Asset rose 0.35 percent to HK$72.2.

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