HK property developer CK Asset eyes Avolon, overseas assets in revenue push

* Says gearing level too low, can be higher

* Eyes overseas assets that enhance income stream

* Says open to bid for HNA stake in Avolon if put up for sale

HONG KONG, April 3 (Reuters) - Hong Kong property developer CK Asset Holdings is open to bidding for debt-laden HNA Group’s stake in Irish aircraft lessor Avolon Holdings if it were put up for sale and is eyeing other overseas deals as it pushes for stable revenue sources.

Among assets abroad, it is looking at office towers, utility assets and infrastructure that can be a recurring and long-term source of income, said Gerald Ma, general manager of CK Asset corporate business development department.

CK Asset’s effort to transform into an integrated enterprise that deals in multiple businesses come as housing prices in Hong Kong have surged by a whopping 200 percent over the past decade, 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 property markets in the city and mainland China, it will likely be more conservative with its bidding prices, Ma told a small group of reporters.

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

Last year, it acquired an office tower in London - which is leased to investment bank UBS on a 17-year contract - for $1.3 billion, after disposing of a Hong Kong skyscraper in a record $5.2 billion deal.

“Compare the risk and return of these assets to those in Hong Kong: 300 square feet sold for over HK$10 million, how sustainable is that?” Ma asked.


Ma added that CK Asset was 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.

HNA, its unit Bohai Capital that holds the stake in Avolon, and Avolon were not immediately available for comment.

If HNA sells its stake in Avolon, CK Asset “will bid for it like others do”, Ma said.

“We have a lot of room for spending,” he added, referring 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,” he said.

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.

CK Asset, valued at around $33 billion, reported a better-than-expected 33.2 percent rise in 2018 profit to HK$40.12 billion ($5.11 billion).

Recurring businesses accounted for more than half its 2018 profit, versus 42 percent in 2017, showing its efforts to offset the uncertain property outlook were paying off.

Among CK Asset’s recent offshore investments are Australian electricity and gas distributor DUET, Canadian heating and cooling systems provider Reliance Home Comfort, and German metering and energy management group ista - all in 2017. (Reporting by Clare Jim and Donny Kwok; Editing by Himani Sarkar)