Price Reduction, Selling Items And Capital Shortage, Housing Enterprises Sounded "Debt Alarm"

In October 21st, a photo of chairman of the board in tears at the internal meeting spread on the Internet, uncovering the iceberg of the capital chain of Sanfeng Hongye of the top 100 housing companies.

The main character of the photo is Chen Jianming, chairman of Sansheng Hongye. In the new Hurun rich list published in early 2019, Chen Jianming ranked 398th in 10 billion yuan. But the company's financial position is not optimistic, as of June 30, 2019, Sansheng Hongye's interest bearing liabilities reached 26 billion 950 million yuan, more than 25 billion yuan of net assets.

Sansheng Hongye started in Zhoushan, Zhejiang. The project was mainly concentrated in the Yangtze River Delta region. The company put forward the goal of "three billion billion" in early 2018, and did not hesitate to expand its debt. According to the caliber of Shanghai Yi Ju Research Institute, Sansheng Hongye achieved sales of 18 billion 700 million yuan last year, ranking 114th in the country.

In the real estate industry, it is not uncommon for a large scale to bear high liabilities, but the operation of Sansheng Hongye is not optimistic. Wind data show that in the first half of this year, Sansheng Hongkong has only 3 billion 622 million revenue, operating cash flow of -31.89 billion, cash flow from investment activities to -3.9 billion, and cash flow from fund-raising activities to 2 billion 567 million.

As an internal financing tool, Sansheng Hongye issued a financial product of 12 months and a yield of 12.5% to its internal employees in 2017, but it has not been paid yet. In October 21st, some employees of Sansheng Hongye Shanghai and Zhoushan went to the company headquarters to say "blocking the door", and finally forced chairman Chen Jianming to show up.

Sansheng Hongye financial products "exploding thunder" is an extreme case this year when real estate enterprises are faced with operational pressure. Recently, a project in Hengda, Ji'nan, caused owners to "protect their rights" because of the price reduction; the Greenland Hunan company was exposed to forcing the staff to buy a house.

Since the second half of 2016, the current round of property market regulation has lasted for 36 months, and the length, intensity and scope are unprecedented. Among them, strict control over financing channels is a major feature of the property market regulation this year. At the same time, from 2019 to 2021, housing enterprises will usher in the peak of debt repayment. Although systemic risk has not yet appeared, insiders believe that a series of small signs will soon usher in the "darkest moment".

"Thirty-six measures" for finding money

Issuing financial products within the company is one of the financing means of housing companies. Recently, in order to obtain funds, enterprises have made great efforts.

As far as conventional financing means are concerned, issuing overseas bonds has become the most important channel at this stage. According to the statistics of CSCI, from January to September 2019, the issuance scale of overseas bonds of real estate enterprises was 48.3 billion yuan, which exceeded the level of the whole year in 2018, with a year-on-year growth of 26.98%, a new record in the same period.

Under the environment of domestic financing constraints, the cost of overseas financing has also risen. In September this year, the interest rate of overseas bonds issued by housing enterprises reached 7.89%, an increase of 149bp. Among them, the highest interest rate for sunshine city, coupon rate of 12.5%.

Part of the housing prices in this period to seize the market, hoping to catch the capital of the "last train". In late October, Tianbao Group and Xinli holdings have passed the hearing of HKEx and are expected to visit the capital market in the near future. The two housing businesses are mainly located in Hebei and Jiangxi, and the net profit is still less than 1 billion yuan, which belongs to typical local small housing enterprises.

The three Sunda group, which originated in Anhui and the dragonland estate in Changzhou, also submitted the listing application to the HKEx in October. The two companies also belong to small housing companies outside the 100 strong camp.

In October 22nd, Oct disclosed on the Beijing property exchange that it would transfer the "two phase of Su River Bay" with a total base price of 4 billion 712 million yuan, the predecessor of the project was the "land king" acquired by the company in 2016 by 6 billion 900 million. This is the second item listed by the company since October. Since 2019, overseas Chinese town has sold 13 item company shares.

Recently, SOHO China has also heard the news that 11 of its shared office items, SOHO3Q, will be packaged and sold. Prior to September, Taihe also continued to sell its projects. Listing, issuing bonds, transferring projects, housing enterprises to obtain funds through various channels, all because of the current financing environment is extremely intense. From May, regulators began to strictly control the financing channels of Housing enterprises. After a series of policies, private equity, trust and other channels have been greatly reduced, and bank loans are also significantly restricted.

"This year is the most stressful time in the last three years, because this year's regulation policy has the strictest restrictions on financing channels." A large housing company in Beijing said to the twenty-first Century economic report.

Insist on "cash as king"

The "most intense" mentioned by the foregoing people is also the cause of poor sales. This year, the market regulation is still severe, credit policy is relatively tight, and the market has entered the downlink period. Although some cities are directly or indirectly deregulation, the overall market situation is not ideal.

In mid October, the Hunan division of the Greenland Group was exposed to the news of compulsory internal staff buying and was finally confirmed. The company requires internal staff (including probationary employees) to purchase a set of green Hunan property before the end of the month.

In the first half of 2019, the sale amount of green space for the real estate industry was 167 billion 700 million yuan, and only 33% of the 500 billion sales target was achieved.

By contrast, price reduction is a more common way. At the end of 8, Hengda launched the marketing strategy of "532 flats nationwide, 22% off for flash purchase", and the regional companies under the group were involved in marketing. Judging from the actual effect, Hengda eventually traded in price for 83 billion 100 million sales records in one month. In addition, the average selling price of gold and other housing enterprises in September also declined.

But also because of price cuts, in October, Hengda's "riverside left bank" project in Ji'nan encountered some owners' rights protection.

According to the tracking and monitoring of more than 50 key cities in the country by 58 Anju Real Estate Research Institute, more than 10 brands of Housing enterprises are now offering discounts, and the trend of price reduction in the fourth quarter is expected to be reflected in more cities and projects.

The housing companies said that there was a price reduction promotion behavior, which was considered by the housing companies in the four quarter, but also because enterprises began to realize that the "rescue market" was hopeless. The Political Bureau meeting held in July 30th clearly stated for the first time that "real estate should not be used as a short-term stimulus to the economy". The industry generally believes that this statement has once again laid the general keynote of the relaxation of market regulation and has suppressed the impulse of local governments to try to relax regulation and control.

According to the twenty-first Century economic report, strengthening sales and maintaining cash flow is the main strategy for housing enterprises this year. This idea is more clear in the second half year. Overall, enterprises attach importance to the "repayment rate", which is unprecedented. Large and medium-sized Housing enterprises usually have more than 80% of the rate of return.

In the 2019 China Daily of OCT, it is emphasized that it is the absolute principle to insist on "repayment" in the second half of the year, so as to speed up the transformation of projects. In addition to formulating flexible pricing and sales strategies, "decisive decisions are made for the products that are difficult to remove, and they are actively invigorated through asset securitization, equity transfer and asset disposal."

6 trillion and 100 billion debt ceiling

Is housing fund really tight?

From the financial statements, the sales volume of large and medium scale housing enterprises generally increased in the first three quarters of this year, and most enterprises completed the annual sales target more ideal. In the financing side, the advantages of large and medium-sized Housing enterprises are also more obvious, individual enterprises can even complete debt issuance at a cost of less than 4%.

But we can see from some details that the trend is not optimistic. Take OCT as an example. As of the first half of this year, the total liabilities of OCT were over 100 billion, of which short-term loans were 28 billion yuan, an increase of 130% over the end of last year. Over the same period, the net debt ratio of OCT was 106.22%, which was also higher than that at the beginning of the year.

"The increase in short-term debt is a common phenomenon in the industry in recent years. It also shows that the pressure of debt repayment is increasing." Yan Yuejin, director of think tank center of Shanghai Yi Ju Real Estate Research Institute, told the twenty-first Century economic report.

Hengda Research Institute report shows that the second half of 2018, housing prices gradually usher in the peak of debt repayment. As of the end of June 2018, in addition to private financing and loans from similar financial institutions, the balance of interest bearing interest of Housing enterprises was about 19 trillion and 200 billion yuan. From the scale of payment, it is 2 trillion and 900 billion yuan, 6 trillion and 100 billion yuan, 5 trillion and 900 billion yuan and 3 trillion and 400 billion yuan respectively in the second half of 2018 to 2021.

Billion Han think tank also believes that from 2019 to 2021 is the debt concentration repayment period of Housing enterprises.

The agency pointed out that from 2015 industry to the mid 2019 industry regulation, housing enterprises cash flow trend can be roughly divided into three stages: 2015-2016 years before the four quarter, the company debt liberalization, housing enterprises to expand the scale of financing, business cash inflow and outflow at the same time; 2016 four quarter to 2017, industry regulation, financing tightening, bond financing scale to freezing point, cash inflow contraction; 2018-2019 years, industry regulation and upgrading, financing channels continue to tighten, superimposed bonds maturity impact, cash inflow once again reduced.

Billion think tank said that as of the mid 2019, the first tier of cash accounted for a significant increase. By contrast, the net cash flow of the second echelon Housing enterprises has the largest change, and it should be alert to the risk of declining sales return rate. The net turnover of the third tier companies means that companies are facing a drop in cash payments.

The phenomenon of "overall tightening and echelon differentiation" reflects differences in the ability of Housing enterprises to resist risks, and their strategies are different in the market downturn. Yan Yuejin believes that large housing enterprises have more advantages in financing costs, stronger cross cyclical operation capacity, and less systematic risk. Medium sized housing enterprises will have to slow down the pace of expansion and strive to maintain the balance of funds; small housing enterprises have relatively narrow financing channels, and rely more on sales return, and the probability of capital chain crisis is higher.

"The most difficult time has not yet arrived, because in the first half of this year there was a financing window, and a group of enterprises took the opportunity to replenish the funds. If the financing channels continue to shrink, the risk of future capital may spread to the scale of tens of billions or even billions of medium-sized enterprises. The housing companies said.