Creditor Oaktree sells Evergrande’s ‘Versailles mansion’ plot in Hong Kong

Oaktree Capital has sold a vast plot of land seized from Evergrande in Hong Kong that was intended for the construction of a Versailles-inspired mansion, forcing the heavily indebted Chinese property developer to take a $770mn loss on one of its most significant assets.

Evergrande said receivers of the plot, codenamed “Project Castle” because the developer’s chair had intended to build his own mansion on the site, sold it for about $637mn to repay debts connected to the project, according to a Sunday filing to the Hong Kong stock exchange. The land was taken over by Oaktree in January.

The distressed debt investor had appointed a receiver to seize control of the of the 2.2mn sq ft plot after Evergrande defaulted on a loan against which it had security. A person familiar with the matter said Oaktree had recouped its investment plus interest.

The seizure by Oaktree, which has also taken control of an Evergrande plot called “Project Venice” near Shanghai, was one of the most high-profile plays made by offshore creditors to claim the developers’ assets.

Oaktree declined to comment. Evergrande did not immediately reply to a request for comment.

China’s property sector has struggled with a liquidity crisis over the past year, with a wave of real estate companies defaulting.

The Evergrande sale is one of the earliest indications of the losses Chinese property developers are exposed to as they rush to sell assets in order to meet their vast debts.

The real estate companies have often struggled to sell their assets, prolonging a crisis that began after many of them ran out of cash following tighter government restrictions on leverage in 2021.

Evergrande has around $300bn of liabilities, about $20bn of which are held by offshore bondholders. The developer did not provide a restructuring plan after missing a July deadline for one this year. Creditors have seized Evergrande’s assets as they push for repayments.

Last week, Evergrande chair Hui Ka Yan lost his luxury mansion in the exclusive Peak neighbourhood in Hong Kong after it was taken over by state-owned China Construction Bank (Asia).

Evergrande’s Hong Kong headquarters in Wan Chai was seized in September by lenders led by China Citic Bank International, the Hong Kong subsidiary of the state-owned bank. The building was pledged in exchange for a loan of HK$7.6bn (US$968mn) with restructuring company Alvarez & Marsal appointed as the receiver.

A source close to the sale told the Financial Times the building had gained interest from more than 30 prospective buyers, including Chinese state-owned enterprises, and was valued at around HK$8bn-9bn.

Additional reporting by Cheng Leng in Hong Kong