Its not just Guangzhou. The cruel and real side of the real estate market is unfolding. As of July 24, more than 250 small and medium-sized Housing enterprises and regional housing enterprises have declared bankruptcy or been forced to liquidate. Some large and medium-sized Housing enterprises have also encountered financial crisis, such as Taihe, New Town Holdings, Overseas Chinese Town, and so on.
Bankrupt real estate enterprises are in existence every year. Whats the difference this year? From the sales rankings of real estate enterprises, the market concentration has been greatly increased in the past three years. Industry mergers and acquisitions have been integrated into deep water areas, even between large real estate enterprises.
From the perspective of the industry environment, this years land and capital, the two core elements of the real estate market, are more difficult to obtain. Small and medium-sized Housing enterprises have been strangled by the throat of fate, there is no room to play, waiting for them, most of them are bankruptcy, extinction or annexation fate; some large and medium-sized Housing enterprises with radical style in the past will also be able to do so. Get into liquidity dilemma.
Many Housing enterprises believe that the scale and operation capacity of hundreds of billions of dollars is the threshold for future housing enterprises to survive.
The Difficult Survival of Housing Enterprises
On July 23, a notice of Yuetai shares revealed helplessness. Shares of the company continued to fall more than 20% on July 19, 22 and 23, which is an abnormal fluctuation.
The announcement admitted that, as one of the projects sold to Shimao, the company was negotiating with minority shareholders of Huainan project in Anhui Province to withdraw their shares. At present, no agreement has been reached and the transaction with Shimao has not been completed. Therefore, the companys current liquidity difficulties have not been completely alleviated.
Guangzhou local real estate company Yuetai shares is an old-brand real estate company. In October 2018, many subsidiaries of Yuetai shares broke out the problem of overdue debts, involving many lawsuits and arbitration. Some bank accounts, equity claims and project properties were frozen or sealed up.
As of December 31, 2018, the overdue borrowing of Yuetai shares was 2.952 billion yuan, and the overdue interest payable was 246 million yuan.
In order to alleviate the liquidity shortage, on June 9 this year, Guangdong-Thailand shares signed an agreement with Shimao Real Estate to transfer five projects with a total consideration of 6.397 billion yuan.
However, according to the latest announcement, many shareholders and creditors rights disputes are involved in the subordinate company, and the sale of the project is not smooth.
Yuetai shares are only one of the real estate companies with tight capital chain this year. As of July 24, more than 270 real estate enterprises across the country had applied for bankruptcy or been forced to liquidate, according to the peoples court announcement network.
For example, on April 24, the Kunming Intermediate Peoples Court news shows that Yunnan Auchen Real Estate Development Co., Ltd. and its subsidiary Kunming Xiangti Rose Co., Ltd. will be bankrupt and reorganized. Auchen Real Estate, with a total assets of more than 18 billion yuan, has been awarded the title of Top 100 Real Estate Enterprises in China for seven consecutive years.
Small size, high debt and unlisted are common characteristics of small and medium-sized housing enterprises, so they are more vulnerable to market fluctuations. Aoshan Group, which ranks 123 in the Craigslist China ranking, has a net debt ratio of 283% and a net debt ratio of 350% for Yincheng International, which is only 3.99 billion yuan.
However, this year, not only small and medium-sized Housing enterprises are facing crisis, and the drama of large-scale housing enterprises breaking their arms to survive is also constantly playing out.
On July 23, just more than 20 days after the Black Swan Incident which happened to the actual controllers, Xincheng Holdings made an emergency announcement to sell about 40 projects for cash. On July 24, the company also announced that it planned to transfer some of the project companys equity and related creditorsrights, with a total transaction value not exceeding 15 billion yuan.
Earlier, Taihe has sold 10 projects to finance 11.2 billion bailouts; OCT, a state-owned enterprise with a large net debt ratio, has sold seven projects; Sunshine City has sold two high-quality assets in April, recovering about 6 billion yuan.
Huang Lichong, co-founder of the Co-ordinated Strategic Management Group, believes that this year is a thunderstorm year for real estate enterprises. As real estate has been rising for a long time, the current policies such as purchase restriction, loan restriction and price restriction have made it impossible to cash in houses, and the liquidity of real estate has dried up.
He further pointed out that liquidity was loose and tight in the near future. The loosening is due to the increase of the national money supply, and the tightening is due to the lack of private capital. Because of policy problems, it is difficult for housing enterprises to obtain bank funds, and when private capital is relatively exhausted, Housing enterprises will explode more.
Over the past 30 years, Chinas vast real estate market has nurtured tens of thousands of real estate companies, of which about one or two hundred are located nationwide, and the industry is extremely dispersed.
Over the past three years, the merger and reorganization of the real estate industry has been initiated. The real estate enterprises represented by Rongchuang have expanded rapidly through mergers and acquisitions to achieve geometric growth in scale. The leading old-brand real estate enterprises such as Vanke and Poly have risen steadily, along with Hengda and Biguiyuan, which are three or four lines of deep layout, are standing at the top of the real estate club.
A large number of small and medium-sized Housing enterprises are trapped in survival dilemma. Three years ago, the owner of a local small housing enterprise in Guangzhou told reporters that hundreds of billions of dollars were necessary to survive, but this is very difficult. Small and medium-sized Housing enterprises do not have an advantage in financing and holding land.
This years real estate financing environment is even less friendly to small and medium-sized housing enterprises. Since May, real estate trusts and overseas bond issuance have been tightening continuously, and such high-cost financing channels have almost been closed.
Zhu Jin, an analyst at Oriental Securities, said that medium-sized Housing enterprises have a large-scale expansion demand, strong driving force for land acquisition, and relatively lack of self-financing, which has been greatly impacted by the consolidation of trust financing; small-scale Housing enterprises have been difficult to access trust financing resources and have little impact, but they are vulnerable to market fluctuations.
Shen Jiajie, an analyst at Qunyi Securities (Hong Kong), said that the financing capacity of the current real estate market is divided. With the tightening of financing channels, the leading real estate enterprises have more obvious financial advantages than those with weak credit qualifications.
Data from the Central Plains Real Estate Research Center show that the cost of US dollar bonds has risen rapidly since July. The average interest rate of US dollar financing in July is as high as 8%, up to 15%. High interest rate financing is for small and medium-sized housing enterprises.
The $300 million preferred note issued by Jiazhao on July 17 had an interest rate of 10.875%, while a dollar note issued by Taihe in July had a higher interest rate of 15%.
With the tightening of real estate financial policy, small and medium-sized Housing enterprises are facing difficulties in financing both at home and abroad, and IPO has become a life-saving straw. Since this year, Deutsche Credit China, Yincheng International, Riverside Services and Zhongliang Holdings have been listed successively.
However, with more monks and fewer porridges, it is difficult to get an IPO ticket. Most housing companies are still waiting in line on the Hong Kong Stock Exchange, including Huijing Holdings, Helenberg, Aoshan Holdings, Xinli Holdings and Wanchuang International.
In the acquisition of land, another major resource for the survival of housing enterprises, small and medium-sized Housing enterprises have long lost their vitality. Ding Zuyu, CEO of Yiju China, pointed out that this years land market is basically the home of state-owned enterprises, state-owned enterprises and super-large housing enterprises.
According to the statistics of economic reports in the 21st century, more than 75 billion Chinese and foreign real estate companies have acquired land this year, and more than 80 billion Chinese real estate companies have acquired land through financing and mergers and acquisitions.
Local state-owned enterprises are not allowed to give in too much. In the first half of this year, the land expenditure of Yuexiu Real Estate reached 33.686 billion yuan, which doubled to 15.9 billion yuan last year, and also exceeded the amount of land holding plan previously formulated by the company.
Small and medium-sized Housing enterprises have almost disappeared in the land market. In Shenzhen Tupai on June 24, a small Fujian housing enterprise originally planned to form a consortium with Shenzhen local large housing enterprises to take land, but eventually aborted.
Under the constraints of both capital and land, the head housing enterprises will merge small and medium-sized Housing enterprises to accelerate the industry concentration.
Kerui data show that in the first half of 2019, the concentration of TOP 3 property rights and interests reached 10.5%, up 0.8 percentage points from the same period last year; the concentration of TOP 4-10, TOP 11-20, TOP 21-30 echelon property rights and interests also increased by a certain extent compared with last year, and the competitive advantage of large-scale housing enterprises was further deepened.
Source: Responsible Editor of 21st Century Economic Report: Zhong Qiming_NF5619