Analysis: China's property woes put prestige global projects in play

Greenland Hong Kong Holdings

01/11/2021 01:00

(Repeats Oct. 31 story without change)
    By Marc Jones and Tommy Wilkes
    LONDON, Oct 31 (Reuters) - China's property sector woes
could spell trouble for prestige mega-projects in London, New
York, Sydney and other top cities as the developers behind them
scramble for cash.
    While China Evergrande Group's  3333.HK  struggles have
dominated the crisis, the risk to multi-trillion dollar global
property markets stems from some of its rivals that have spent
the last decade competing to build ever taller and grander
skyscrapers.
    Shanghai-based Greenland Holdings  0337.HK , which breaches
as many of China's debt "red lines" as Evergrande, has just
built Sydney's https://www.greenlandaustralia.com.au/en/greenland-centre
 tallest residential tower, has plans to do the same in London https://spirelondon.com
 and has billions of dollars worth of projects in Brooklyn, Los
Angeles, Paris and Toronto.
    The developer says it remains committed to its flagship
builds including its long-delayed, 235 metre-high Spire London
tower, but it put part of another major London site on the
market earlier in the year and other firms are hoisting for sale
signs too.
    Evergrande and Kaisa Group  1638.HK , which was the first
Chinese property firm to default back in 2015, are both trying
to sell Hong Kong buildings to drum up desperately-needed cash.
 urn:newsml:reuters.com:*:nL1N2RP0FH, while Oceanwide Holdings  0715.HK  has just had
what was supposed to be San Francisco's tallest tower seized by
disgruntled creditors  urn:newsml:reuters.com:*:nL1N2RO0BY. 
    "I suspect, as with anything, if you're running into
liquidity issues you start to look to sell your investment
properties," said Omotunde Lawal, head of emerging-markets
corporate debt at asset manager Barings, which holds some
Chinese property firms' bonds. 
    As many Chinese firms overpaid for prime overseas sites in
the scramble to secure them, the question is who will buy them,
Lawal added. "Probably they are unlikely to get cost, so I think
it depends on just how desperate they get."
    
    SIZABLE ASSET SALES
    Guangzhou R&F Properties  2777.HK  is another major firm in
focus after it required an emergency cash injection this month.
It has two giant unfinished developments in London, including
one with a dozen skyscrapers next to the Thames https://www.thamescity.com,
 as well as numerous builds in Australia, Canada and the United
States. 
    An R&F spokesperson in London said it remained "fully
committed" to all its British projects. 
    But with nearly $8 billion of debt to repay in the next 12
months, only $2 billion of freely available cash and sales down
nearly 30% year-on-year last month, major credit rating agencies
say it will need to cash in some chips. 
    "R&F's capacity to handle its near-term debt maturities will
hinge on the execution of sizable asset sales," S&P said,
predicting that buildings, hotels and various stakes in projects
could all be sold. Fitch meanwhile estimates R&F has 836 billion
yuan ($130 billion) of assets that could potentially be sold.  
    R&F, Greenland, Evergrande and Kaisa have all declined to
comment further on their finances. Oceanwide said last week it
was "actively discussing" the situation with its San Francisco
project with the creditors involved.
   
    SPENDING SPREE
    Chinese developers went on a major international spending
spree between 2013 and 2018, but the splurge has slowed abruptly
since as Beijing has moved to curb firms' excessive debts.
    After pouring more than 28 billion pounds into London
projects in 2018, they have spent 1.5 billion pounds in the
first half of 2021, the lowest amount since 2012, data from Real
Capital Analytics shows.
    Figures from estate agents Knight Frank paint a similar
picture in Australia, New York and other top north American
cities, where Greenland, R&F and others big firms including
Country Garden  2007.HK , Poly Property  0119.HK  and China
Vanke  000002.SZ  also spent tens of billions of dollars a year.
    Stephanie Hyde, UK chief executive of real estate firm Jones
Lang LaSalle, which markets for R&F in London and another firm
called Xinyuan which has just narrowly avoided default
 urn:newsml:reuters.com:*:nL8N2R433Z, told Reuters she wasn't aware of any Chinese firms
looking to sell-up due to strains back in China.
    If they did decide to sell though, they were likely to find
buyers relatively quickly she added, due to the flood of
international investment money current circling global property
markets like London where prices are now at a record high.
 urn:newsml:reuters.com:*:nL8N2RB4OV    
    Chris Gore, a central London principal at real estate firm
Avison Young, said he wasn't aware of any sudden selling plans
either, but that the pressure would grow on Chinese firms if the
crisis at home continued.
    "If they needed to sell and could sell for a profit, then I
think they would just sell," Gore said. "There wouldn't be a
problem if a few wanted to sell, but if they all suddenly wanted
to exit at the same time, they couldn't."        

($1 = 0.7263 pounds)
($1 = 6.4050 Chinese yuan renminbi)

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Chinese property stocks come crashing down    https://tmsnrt.rs/3Cwknfh
Monthly Land Sales in Mainland China (billions of yuan)    https://tmsnrt.rs/3uGApQv
China’s most indebted property companies    https://tmsnrt.rs/3u2Onfv
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Additional reporting by Clare Jim in Hong Kong; Editing by
David Evans)
 ((marc.jones@thomsonreuters.com; +44 (0)20 7513 4042; Reuters
Messaging: marc.jones.thomsonreuters.com@reuters.net  Twitter
@marcjonesrtrs))