Five com­pa­nies to is­sue notes or bonds worth more than $2b

China Daily (Hong Kong) - - BUSINESS -

BEI­JING — Chi­nese real es­tate firms have turned to the over­seas mar­ket to seek fi­nanc­ing as tougher reg­u­la­tions have made it more dif­fi­cult for them to raise funds at home.

At least five prop­erty com­pa­nies have an­nounced moves to is­sue notes or bonds worth more than $2 bil­lion in to­tal in the over­seas mar­ket since the be­gin­ning of July, ac­cord­ing to lat­est statis­tics from t he Cen­taline Prop­erty Re­search Cen­ter.

They in­clude Green­town China and Long­for Prop­er­ties, both ma­jor prop­erty de­vel­op­ers in the coun­try.

Green­town China said last week it would is­sue se­nior per­pet­ual cap­i­tal se­cu­ri­ties for $450 mil­lion. The net pro­ceeds will be used to re­fi­nance ex­ist­ing debt and for gen­eral work­ing cap­i­tal pur­poses.

Long­for Prop­er­ties said early this month it would is­sue se­nior notes due in 2020 for $450 mil­lion and use the pro­ceeds for re­fi­nanc­ing only.

The moves came as do­mes­tic fi­nanc­ing by real es­tate de­vel­op­ers shrank, fol­low­ing tight­ened mar­ket reg­u­la­tion aimed at curb­ing as­set bub­bles and pre­vent­ing fi­nan­cial risks.

Prop­erty firms raised 177.2 bil­lion yuan ($26.1 bil­lion) through bond and note is­suance in the first half of this year, a 74-per­cent plunge year-on-year, ac­cord­ing to Cen­taline Prop­erty.

“Author­i­ties have strength­ened con­trol over var­i­ous sources of fund­ing for de­vel-

Ma­jor fi­nanc­ing chan­nels have been nar­rowed across the board.” Le Ji­adong, an­a­lyst at GF Se­cu­ri­ties

op­ers,” said Le Ji­adong, an­a­lyst at GF Se­cu­ri­ties. “Ma­jor fi­nanc­ing chan­nels have been nar­rowed across the board.”

Mean­while, the cool­ing hous­ing mar­ket means less con­tri­bu­tion from home sales to the com­pa­nies’ cash flow.

Prop­erty sales had surged over two years of pro-growth poli­cies be­fore Chi­nese author­i­ties moved to con­tain spec­u­la­tion in the se­cond half of last year.

Lo­cal gov­ern­ments have since raised down pay­ments, in­creased mort­gage rates and re­stricted pur­chases.

Of 70 large- and medi­um­sized cities sur­veyed in May, new home prices fell or rose more slowly month- on-month in 35 of them, up from 31 in April, ac­cord­ing to the Na­tional Bureau of Statis­tics.

An in­di­ca­tion of weaker sales, real es­tate loans ac­counted for 35 per­cent of all new loans ex­tended by Chi­nese banks in the first half, down from 44.9 per­cent in 2016, cen­tral bank data showed.

The fi­nan­cial stress on Chi­nese de­vel­op­ers is al­ready high. New in­ter­est­bear­ing debt bor­rowed by 107 listed prop­erty firms in the 2015-16 pe­riod reached 852 bil­lion yuan, more than the to­tal for the pre­vi­ous five years, ac­cord­ing to fi­nan­cial in­for­ma­tion pro- vider Wind Info.

“In the com­ing six to nine months, fund short­age could be­come a more and more se­ri­ous prob­lem for real es­tate com­pa­nies,” said Cen­taline Prop­erty an­a­lyst Zhang Dawei.

In this chang­ing land­scape, big­ger play­ers are ex­pected to gain mar­ket ad­van­tage over smaller ri­vals as they usu­ally have deeper pock­ets.

Lower fi­nan­cial costs will be­come an es­sen­tial part of prop­erty com­pa­nies’ com­pet­i­tive strength in the fu­ture, said Feng Lun, head of the China Real-Es­tate Crowd­fund­ing Al­liance.

CHEN JUNMIN / FOR CHINA DAILY

A man walks past Long­for Prop­er­ties’ high-end liv­ing com­mu­nity in Dalian, Liaon­ing prov­ince.

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