China Vanke has sold a Shenzhen land plot for USD 309.18 million, over 27% less than its 2017 purchase price, to raise funds amid short-term liquidity pressure due to China's real estate sector crisis. The plot was bought by Vanke's largest shareholder, state-owned Shenzhen Metro, and Baishuoyinghai. This sale, reflecting shareholder support, aims to free up capital from non-core assets. Vanke plans to boost cash flow with bank financing and asset disposals worth over 30 billion yuan. Recently, Vanke secured a 20 billion yuan syndicated loan led by the Industrial and Commercial Bank of China. Fitch Ratings downgraded Vanke's ratings to 'BB-' with a negative outlook due to weaker-than-expected sales.
China Vanke, a major real estate developer, has taken significant steps to address its liquidity issues by auctioning a land plot in Shenzhen for 2.24 billion yuan (USD 309.18 million). This transaction reflects a substantial loss for the company, as the plot was originally purchased in late 2017 for 3.1 billion yuan, marking a decrease of over 27% in value. The sale is part of Vanke's broader strategy to raise funds amid a cash crunch in China's crisis-hit real estate sector.
The land was sold to Vanke's largest shareholder, state-owned Shenzhen Metro, and Shenzhen-based Baishuoyinghai, who jointly acquired the plot at the reserve price. This was the only bid received for the asset, as indicated in a filing uploaded to a Shenzhen trading centre after the mainland stock market had closed. Vanke's decision to sell at a loss highlights the severe financial pressures facing the company and many others in China's real estate market.
In a statement to Reuters, Vanke emphasised that the transaction demonstrates support from its largest shareholder through market-based and legitimate means. The company indicated that the sale would enable it to free up capital tied up in non-core business assets, thereby enhancing its liquidity position. This move is part of Vanke's broader plan to improve cash flow through a combination of bank financing and asset disposals, targeting to generate over 30 billion yuan this year.
Vanke's efforts to strengthen its financial standing include securing a substantial syndicated loan facility. Last week, the company announced it had received a 20 billion yuan loan from a consortium of banks led by the state-owned Industrial and Commercial Bank of China. This loan facility is expected to significantly aid Vanke in stabilising its finances and navigating the challenging economic environment.
Despite these measures, Vanke's financial outlook remains cautious. Fitch Ratings recently downgraded the company's long-term foreign- and local-currency issuer default ratings from 'BB+' to 'BB-', with a negative outlook. The downgrade reflects a weaker-than-expected sales performance so far this year, underscoring the ongoing difficulties faced by the company and the broader sector.
The situation with China Vanke is a representation of the wider issues plaguing China's real estate market, which has been hit hard by a liquidity crisis affecting many developers. The combination of declining property values, tightening credit conditions, and sluggish sales has created a challenging environment for these companies. Vanke's asset sale and strategic financial manoeuvres highlight the lengths to which developers are going to stay afloat and manage their debt obligations.
In summary, China Vanke's sale of the Shenzhen land plot, coupled with its efforts to secure additional financing, represents a critical part of its strategy to mitigate liquidity pressures. The support from its largest shareholder and the securing of significant loan facilities are crucial steps in its bid to stabilise and navigate the ongoing real estate crisis. However, the company's downgraded credit rating and ongoing challenges in sales performance indicate that significant hurdles remain in its path to recovery.
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