Antai Asia filed a lawsuit in the High Court to recover the two commercial buildings in Jordan and Mong Kok
The Hong Kong real estate sector is once again struck by a debt crisis among wealthy families. Deng Yaosheng, the second-generation successor of the family of the late "shop king" Deng Chengbo, is being pursued by a financial company to mortgage his properties to recover a huge debt. Yesterday (3rd), Antai Asia Limited filed summonses in two cases to the High Court's Court of First Instance, requiring Deng Yaosheng and his affiliated companies to repay the overdue debts and hand over two commercial properties located on Nathan Road in Mong Kok and Tak Hing Street in Jordan. According to market estimates, the total value of the case is more than HK$230 million. This case not only exposes the liquidity crisis in the commercial property market after the epidemic, but also raises market doubts about the Deng family's asset management strategy.
Cracks appear in the inheritance of Deng's business empire
After the death of Deng Chengbo, the head of the Deng family, in May 2021, he left behind a huge property empire valued at more than HK$30 billion. His youngest son, Deng Yaosheng, as the designated successor, has frequently led asset restructuring in recent years. According to information from the Companies Registry, Deng Yaosheng, 43, currently serves as a director of more than 200 companies, mainly coordinating the layout of hotels, shops and elderly care industries through the "Senti Group". However, Hong Kong Exchange Credit and Zhenhai Investment, which were involved in the lawsuit, were not listed in the public structure of the group, indicating that the debt operation was suspected of off-balance sheet financing.
Full details of mortgaged property
The property involved in the first case is the entire 8th floor of Integrated Commercial Building, No. 704 Nathan Road, Mong Kok. The building is a mixed commercial and residential project with a history of more than 50 years. The 8th floor is currently planned for office use. According to the Land Registry, the floor area is approximately 8,600 square feet and was valued at approximately HK$110 million when mortgaged in May 2022. Based on the general mortgage ratio of commercial properties, the loan amount should be between HK$66 million and HK$88 million.
The mortgage target in this case is a whole-floor unit at Po Lai Building, No. 7-8 Tak Hing Street, Jordan. The building is adjacent to Jordan MTR Station and is a hot Grade B office building. According to the latest data from the Rating and Valuation Department, the average price per square foot of similar properties in the area is about HK$12,000. Based on a standard floor area of 5,500 square feet, the estimated value is approximately HK$66 million, and the estimated loan amount ranges from HK$39.6 million to HK$52.8 million.
The hidden secrets of loan terms
Court documents reveal key financing terms: Both loans were signed in May 2022, when commercial property valuations were at a low point after Hong Kong's fifth wave of the epidemic. The terms include a rare "dual recourse" design - exercising the right of foreclosure on the mortgaged property while retaining the right to claim the borrower's personal assets. Senior commercial lawyer Leung Ka-kui said: "Such clauses are common in high-risk loans, reflecting the finance company's doubts about the borrower's ability to repay."
What is more worthy of attention is the interest rate terms. It is reported that the financing adopts a floating interest rate structure of "H+5.5%". Calculated based on the one-month HIBOR (Hong Kong Interbank Offered Rate) of 3.08% in May 2022, the actual annual interest rate is as high as 8.58%, which is much higher than the commercial property loan interest rates of 4.5%-6% of mainstream banks at the time, indicating that this is a typical high-interest transitional loan.
How the Debt Snowball Rolls
Sources revealed that the debt involved in Deng Yaosheng's lawsuit this time originated from the M&A financing in 2021. At that time, Deng spent HK$980 million to acquire a serviced apartment in Tsim Sha Tsui under the name of "Zhenhai Investment", of which HK$350 million was raised through a short-term bridge loan. The original plan was to repay through property securitization by the end of 2022, but the violent interest rate hike in the United States caused the REITs market to freeze, and it was eventually forced to mortgage other assets to renew the loan.
Financial statements show that the current liabilities of "Sheng Yu Group" under Deng Yaosheng surged by 47% in the middle of 2023 compared with 2022, and the cash flow coverage ratio fell to the warning line of 0.8 times. Rating agency Fitch warned as early as October last year that the group had more than HK$1.5 billion of debt due in 2024 and liquidity pressure was continuing to deteriorate.
The multi-dimensional impact of legal battles
This lawsuit may trigger a chain reaction: according to Section 53 of the Conveyancing and Property Ordinance, if the court rules in favor of the finance company, the mortgaged property will enter into a public auction process. However, industry insiders pointed out that the current vacancy rate of commercial buildings is as high as 14.6%, and the two properties may need to be sold at a discount of 25%-30%, which may result in asset impairment losses.
Even more serious is the personal guarantee clause under Chapter 327 of the Companies Ordinance. If Deng Yaosheng is confirmed to have signed an unlimited guarantee in his personal name, his other assets including the Mid-Levels luxury residence, Grand Court, and an art collection worth over 100 million yuan may be frozen. This will seriously shake the market's confidence in the operations of Stan Group and may trigger collective claims by creditors.
Regulatory red lights quietly light up
Data from the Monetary Authority of Singapore showed that the bad debt ratio of non-bank lending institutions soared to 5.7% in the third quarter of 2023, a 12-year high. The protagonist of this incident, Antai Asia, is an alternative financing institution that has been actively expanding in recent years. Its parent company is rumored to have close equity ties with private equity funds in Southeast Asia. Chen Zhenying, a representative of the financial sector in the Legislative Council, questioned: "Some financial companies use complex offshore structures to circumvent the interest rate cap of the Money Lenders Ordinance. The regulatory authorities are urgently needed to intervene and investigate."
The historical echo of the wealthy family debt crisis
According to judicial records, the Deng family has been involved in 46 civil lawsuits in the past decade. In 2018, Deng Chengbo defaulted on a loan of HK$360 million and was subject to a charging order by DBS Bank. The second-generation successor’s involvement in a debt dispute again inevitably reminds people of the debt crisis model of Zhang Songqiao, the "Li Ka-shing of Chongqing" in 2016 - maintaining cash flow through multiple mortgages, which eventually led to cross-default.
Experts diagnose commercial real estate dilemma
JLL head of research Huang Guoxiang pointed out: "The rent of commercial buildings in the core area has fallen by 38% from the high level in 2019, and the phenomenon of valuation inversion is common. If the owners adopt high-leverage financing, they are very likely to fall into a negative asset status." He suggested that holders should accelerate business transformation, such as converting traditional office buildings into data centers or medical floors to improve cash flow coverage capabilities.
Deng Group's silence and market turmoil
Its main partner banks, HSBC and Bank of China (Hong Kong), have recently quietly tightened the approval standards for real estate-related loans, requiring borrowers to increase their margin ratio. The securities market reacted immediately, with many Hong Kong real estate stocks generally falling yesterday, among which Link REIT (0823.HK) fell 2.7%, reflecting the rising risk aversion among investors.
This judicial battle involving tens of billions of assets will not only test Deng Yaosheng's crisis management ability, but will also become a stress test for Hong Kong's commercial real estate financing model in the post-epidemic era. As the first High Court hearing date in June approaches, the game between creditors and the Deng family is bound to trigger more capital undercurrents.
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