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Reporter of China Business Network: Chen Li Editor of China Business Network: Wei Wenyi

Entering the second half of the year, new changes have occurred in real estate companies' financing.

On August 13, CRIC released data showing that in July this year, the total financing of 65 typical real estate companies was 52.346 billion yuan, a month-on-month increase of 63.8%, and the monthly financing scale hit a new high since 2024. In terms of financing structure, in July, real estate companies raised 50.026 billion yuan in domestic debt financing, a month-on-month increase of 56.6% and a year-on-year increase of 12%; overseas debt financing was 2.32 billion yuan, a year-on-year decrease of 67.9%.

However, overall, real estate financing has remained sluggish this year. In the first seven months of this year, 65 typical real estate companies raised a total of 267.847 billion yuan, a year-on-year decrease of 32%. CRIC analysis pointed out that real estate sales have not yet fully recovered, so there may still be debt defaults by real estate companies in the future, and liquidity issues still need the industry's attention.

Liu Shui, director of corporate research at China Index Academy, also told the Daily Economic News reporter: "Since there has been no significant improvement in the current real estate market, financial institutions and others still have weak expectations for the industry."

The total financing amount of 65 real estate enterprises hit a new high this year

Although the total financing amount of 65 typical real estate companies reached 52.346 billion yuan in July, an increase of 63.8% month-on-month, and the monthly financing scale reached a new high since 2024, it was still a year-on-year decrease of 9%.

The reporter noticed that among the 65 typical real estate companies that raised funds in July, Vanke alone received 32.666 billion yuan in bank loans, accounting for more than 60%. In total, in the first seven months of this year, the financing amount of the 65 typical real estate companies was still shrinking, with a total financing amount of 267.847 billion yuan, a year-on-year decrease of 32%.

On July 18, Vanke announced that in order to meet operational needs, its subsidiaries Shenzhen Jiuzhou Real Estate Development Co., Ltd. and Chongqing Xipan Real Estate Co., Ltd. respectively mortgaged the land they held to banks and raised a total of 14.728 billion yuan in financing from banks, with a term of 4 years.

On July 11, Vanke also obtained another loan, namely Vanke and its holding subsidiary Vanke Logistics Development Co., Ltd. applied to the bank for a total of 2.741 billion yuan in loans. These loans were secured through equity pledge and asset pledge.

However, it should be pointed out that not all bank loans obtained by Vanke are new loans. Most of them are replacements of existing loans, and are mainly concentrated at the project level. There are basically no new public credit bonds and overseas bonds.

In addition, real estate developers such as Yuexiu Real Estate and Poly Property also issued bonds for financing in July.

Among them, Yuexiu Real Estate is the company with the largest bond issuance scale. In July alone, it completed the issuance of one offshore green priority note worth 1.69 billion yuan and two corporate bonds worth a total of 1.5 billion yuan, totaling 3.19 billion yuan.

On July 12, Yuexiu Real Estate successfully issued the first corporate bond in 2024. The issuance scale of Type 1 is 500 million yuan, the face rate is 2.25%, the issuance period is 5 years, and the subscription multiple is 6.36 times; the issuance scale of Type 2 is 1 billion yuan, the face rate is 2.75%, the issuance period is 10 years, and the subscription multiple is 1.29 times.

It is worth mentioning that on August 8, Yuexiu Real Estate disclosed that its wholly-owned subsidiary Guangzhou Urban Construction Development Co., Ltd. has obtained approval from the National Association of Financial Market Institutional Investors to issue targeted debt financing instruments in the Chinese interbank market, with an issuance scale of no more than 3 billion yuan. "The issuance of this targeted debt financing instrument will provide the company with an additional source of funds to meet the company's operational needs and support its long-term development strategy."

According to CRIC data, 65 typical real estate companies issued bonds worth 15.05 billion yuan in July, down 2.9% from the previous month and 55.6% from the previous year. The average financing cost was 2.85%, down 0.41% from the previous month and 0.67% from the previous year. "Since the companies that issue bonds domestically are mainly state-owned enterprises such as Shoukai, BBMG, and Poly Real Estate, the domestic financing cost remains at a relatively low level."

In terms of additional issuance, CCCC Real Estate completed an additional issuance of 51.6647 million shares on July 10, raising a total of 444 million yuan, with a net amount of 438 million yuan after deducting issuance expenses. In addition, Rongsheng Development's additional issuance plan is still under internal evaluation, and Xiamen International Trade responded to the Shanghai Stock Exchange's inquiry on the company's additional issuance plan on August 6.

"Overall, the progress of private placements by most listed real estate companies in the country is still relatively slow. For example, the share issuance plans of Poly Developments and Dacheng Real Estate, which have been approved for registration by the exchange, have not been completed yet. At the same time, many real estate companies have announced the termination of private placements," CRIC analysis pointed out.

Financial institutions and others still have weak expectations for the industry

Although domestic financing for real estate companies improved in July, overseas financing remains not optimistic.

According to CRIC data, in July, 65 typical real estate companies raised only 2.32 billion yuan in overseas debt financing, a year-on-year decrease of 67.9%. According to statistics from China Index Academy, in the first seven months of this year, the scale of overseas debt issuance by real estate companies was only 6.7 billion yuan, a year-on-year decrease of 39.5%. In terms of a single month, real estate companies did not issue new bonds in May, and only a few high-quality companies were able to issue overseas bonds in the remaining months. For example, Yuexiu Real Estate, Swire Properties and Sun Hung Kai Properties successfully issued overseas bonds in July.

"Since there has been no significant improvement in the current real estate market, financial institutions and others still have weak expectations for the industry. At the same time, the more financing a real estate company raises, the more debt it has, and the greater the pressure on debt repayment in the future. Some companies focus on stable operations and will take the initiative to reduce their debt scale and moderately reduce financing," Liu Shui told the reporter from the China Business Network.

It is worth noting that since August, there has been a positive trend in overseas debt issuance by real estate companies, and some private real estate companies that have been in trouble have even successfully issued US dollar bonds.

According to China Real Estate News, Longfor and KWG Group commissioned JPMorgan Chase as the exclusive underwriter to arrange refinancing for the loan of the luxury residential project in Mid-Levels, Hong Kong. The loan was completed on August 10, with a total of US$1.05 billion raised. The loan will be used to support the loan repayment and development and operation of the project.

"Combined with previous market news, this dollar bond is a private placement bond, which will be used to replace previous loans and support the subsequent work of the Kaiyue project. The capital cost may be relatively high. However, the project is currently selling well and the cash flow stability is relatively strong." Liu Shui said that in the short term, as the sales market is still in the process of bottoming out and recovering, the risks of overseas debt have not yet been cleared, and the issuance of overseas bonds will still be open to a few high-quality real estate companies. It will take some time for the overall recovery of the real estate companies' overseas financing market.

In addition, in terms of debt defaults, according to Orient Securities' monitoring, three new domestic debt extension bonds were added in July, involving a bond balance of 4.19 billion yuan. The entities involved were Xiamen Zhongjun, Xuhui Group and Contemporary Energy Saving Real Estate. Among them, Xiamen Zhongjun had its first domestic debt extension.

According to CRIC data, 19 real estate company bonds matured in July, and after deducting the part that has been redeemed in advance, the amount is about 26.7 billion yuan, a decrease of 42% month-on-month. In August, 26 real estate company bonds will mature, and after deducting the part that has been redeemed in advance, the amount is about 40.2 billion yuan, an increase of 51% month-on-month.

It is worth noting that in the first half of this year, the amount of bonds due by real estate companies reached 279.9 billion yuan, while the amount of bonds issued was only 96.1 billion yuan. It is clear that the newly issued bonds cannot cover the old bonds due. Moreover, affected by the debt extension of real estate companies in recent years, according to CRIC's monitoring, the amount of bonds due by real estate companies in 2025 will exceed 500 billion yuan, a year-on-year increase of 7% compared with 2024.

"Overall, as real estate companies' financing remains relatively sluggish recently and real estate sales have not yet fully recovered, some real estate companies may still default on their debts in the future, and liquidity issues still require the industry's attention." CRIC analysis pointed out that different real estate companies may face different "endgames."

Especially for distressed real estate enterprises, although there is a financing coordination mechanism, when banks apply for loan mortgages and pledges, most distressed real estate enterprises have few targets for mortgage loans, and it is still difficult to obtain bank loans under the market mechanism. "For such enterprises, it is recommended that relevant departments increase the intensity and speed of liquidation, and use market-based means to allow distressed enterprises to achieve debt restructuring or bankruptcy liquidation as soon as possible. Reshaping value through debt restructuring is an effective way to solve the current industry credit problem." CRIC analysis believes.

For real estate companies that can still operate normally, CRIC believes that the top priority is to grasp the policies and do a good job in debt continuation, such as through credit enhancement support policies, with the help of credit protection tools, joint and several liability guarantees and other credit enhancement methods to achieve "borrowing new to repay old". It is also possible to revitalize operating properties through the issuance of ABS, REITs and other methods, and actively try to use operating property loans to repay existing loans and open market bonds.

Daily Economic News