According to the monitoring of China Index Research Institute, as of April 8, the financing amount of real estate M & a through various channels totaled 225.12 billion yuan, and diversified market subjects such as financial institutions and asset management companies entered the market one after another to participate in asset disposal.
As one of the supporting policies to resolve the risks of the real estate market, the real estate enterprise M & a loan is being promoted rapidly. According to the statistics of red weekly, in the first quarter of this year, at least 16 real estate enterprises obtained M & A financing in the form of issuing corporate bonds and applying for loans from financial institutions. The main force of financing has gradually expanded from central enterprises and state-owned enterprises to high-quality private real estate enterprises, including country garden, Midea real estate, Xuhui holding and New Hope Liuhe Co.Ltd(000876) real estate. Four private real estate enterprises have obtained M & A loans of more than 70 billion yuan.
However, the expansion of the scope of M & A loans of real estate enterprises has not brought the project “M & a tide”. The head real estate enterprises are still cautious, and most of the projects are projects that have been contacted before. In this regard, insiders told red weekly that “security” is an important factor for buyers to consider in this round of M & A. at present, the mainstream of real estate enterprises is to shrink the investment scale. This is not good news for real estate enterprises in the “ICU”.
M & a loan expansion
increase in the number of private real estate enterprises
After debt reduction and deleveraging achieved remarkable results, the real estate M & a loan opened a window for the financing of high-quality real estate enterprises in the form of excluding the “three red lines” at the beginning of the year. According to the monitoring data of China Index Research Institute, as of April 8, the financing amount of real estate M & a through various channels totaled 225.12 billion yuan, an increase of nearly 100 billion yuan compared with a month ago.
According to the statistics of red weekly, among the more than 16 real estate enterprises that obtained M & A financing in the first quarter of this year, Midea real estate, country garden and China Resources Land ranked among the top three with M & A financing lines of 37 billion yuan, 35 billion yuan and 20 billion yuan respectively. In addition, Minmetals real estate, Ryan real estate, Poly Developments And Holdings Group Co.Ltd(600048) , Poly Real Estate Group, Midea real estate, Beijing Capital Development Co.Ltd(600376) , Xuhui holding group, New Hope Liuhe Co.Ltd(000876) real estate and other eight real estate enterprises have obtained more than 5 billion yuan of M & A financing.
This shows that M & A financing loans have expanded from state-owned enterprises and central enterprises to leading private real estate enterprises such as country garden, Midea real estate, Xuhui holdings and New Hope Liuhe Co.Ltd(000876) real estate.
“Banks and other financial institutions also have their own risk control and evaluation system in the process of capital investment.” Tian Jing, vice president of Yihan think tank, told red weekly that at present, the real estate enterprises invested in M & a funds by banks are divided into two categories. One is the central enterprises and state-owned enterprises with reliable security. These real estate enterprises did not vigorously increase leverage in the early stage, so the risk in deleveraging regulation is also small; The other is several private real estate enterprises, which have good security or have the group behind them.
According to red weekly, the typical characteristics of the above-mentioned private real estate enterprises are stable business operation and relatively safe finance. At present, the above-mentioned private real estate enterprises belong to the 100 billion scale camp, and last year’s sales maintained positive growth. Among them, country garden continued its position as the “largest real estate enterprise in scale” with full-scale sales of 758.8 billion yuan. Xuhui holdings, Midea real estate and New Hope Liuhe Co.Ltd(000876) real estate successively realized full-scale sales of 247.2 billion yuan, 137 billion yuan and 105.9 billion yuan, with a year-on-year increase of 7.03%, 8.66% and 2.73%.
In addition, by the end of 2021, Xuhui holdings and New Hope Liuhe Co.Ltd(000876) real estate were in the “green” of the “three red lines”. Although Midea real estate and country garden are in the “yellow file”, the cash short debt ratio and net debt ratio have improved significantly, and they are planned to turn green before the middle of 2022 and 2023 respectively.
In addition to M & A financing loans, the above-mentioned private real estate enterprises have also made some progress in other financing channels. Take country garden as an example. Country garden is one of the first real estate enterprises to resume issuing bonds. It issued 1 billion yuan of corporate bonds in December last year. In January this year, it issued 520 million yuan of ABS (asset-backed securities) with a coupon rate of 5.3% and HK $3.9 billion of secured convertible bonds with a coupon rate of 4.95%. By March, the proposed issuance of 5 billion yuan of medium-term notes was also registered with Bank Of China Limited(601988) inter market dealers association.
It is worth mentioning that real estate enterprises, financial institutions and asset management companies are pouring into the field of real estate M & A loans, but the threshold for obtaining M & A loans is still high, and the number of real estate enterprises actually receiving loan support is limited. At present, the M & A loans of real estate enterprises mainly rely on banks, of which China Merchants Bank Co.Ltd(600036) support is the largest, and more than 50 billion yuan of M & a loan financing line has been provided.
Focus on the target of M & A
it is still difficult to revitalize the assets of real estate enterprises out of danger
While the financing side was supported, the real estate market-oriented collection and M & A activities increased in the first quarter. At present, many central and state-owned enterprises such as CNOOC real estate, Yuexiu real estate, Huafa Industrial Co.Ltd.Zhuhai(600325) etc. have taken over the projects of real estate enterprises in danger. For example, CNOOC real estate spent more than 3.6 billion yuan to obtain the controlling stake of the former total price “Diwang” Guangzhou Asian Games city project from two South China real estate enterprises; HUAFA group spent 1.2 billion yuan to acquire 40% equity of a leading real estate enterprise Kunming cultural tourism city phase II project Guangzhou Yuexiu Financial Holdings Group Co.Ltd(000987) invested 200 million yuan to acquire the project in Yubei District, Chongqing, etc.
According to the findings of red weekly, from the perspective of M & A targets of real estate enterprises, there are fewer transactions involving equity level in the current market, which are more manifested in two types of M & A. one type focuses on the property sector with strong cash flow attributes. For example, in January this year, China Resources Vientiane life purchased Yuzhou property and Zhongnan service at a price of 1.06 billion yuan and 2.26 billion yuan respectively; The other is the merger and acquisition of cooperative projects to improve the proportion of project equity.
Taking Midea real estate as an example, backed by Midea Group Co.Ltd(000333) and he Xiangjian family, this private real estate enterprise has played an important role in this year’s M & a market. Red weekly learned that since the end of last year, Midea real estate has reached 13 project transactions with its partners huaxiangnian, Zhengrong and Jinke, most of which have changed from initial joint development to 100% shareholding. In these transactions, Midea real estate recently acquired Zhengrong real estate project under debt pressure particularly frequently. On February 23 and 24 alone, Midea real estate acquired 50% equity of Changsha “Midea Zhengrong Riverside Garden” project, 51% equity of Wuxi “Zhengrong Midea Yunyue” and 51% equity of Tianjin “Hezhu Meijiang” project from this partner.
Further, among the above projects in which Midea real estate has transformed cooperation projects into 100% shareholding, most of them are located in the first and second tier cities or strong third tier cities, and the development prospect is relatively certain.
For the current focus of real estate enterprises on M & A of familiar projects, Tian Jing believes that it is difficult to fully assess the risks involved in M & A matters such as asset packages, and the previous cooperation projects at least mean that the buyers and sellers have a clear and transparent understanding of the equity and creditor’s rights. “At present, real estate enterprises are more cautious as a whole, and the M & A of cooperation projects is also for security reasons, in order to avoid more problems in cooperation projects.”
As for some insurance housing enterprises that sell the equity of cooperative projects, it can alleviate the cash flow crisis.
For example, for a group suffering from cash flow crisis, its shutdown projects Changsha Yuehu county and Guangzhou Haishi zhouyue have successively introduced national trust and Cinda capital, and the news of resumption of work has been reported in the first quarter of this year.
In addition to Sony holdings, Sichuan Languang Development Co.Ltd(600466) , contemporary real estate, huaxiangnian, Yuzhou group, Zhengrong real estate and other difficult real estate enterprises are looking for asset sales. It is understood that Zhengrong real estate is expected to complete the asset revitalization disposal of about 3-4 billion in the first half of the year, and Longguang group is expected to sell more than 30 projects to recover about 15 billion yuan.
However, the desire of real estate enterprises to revitalize their assets as soon as possible may fail. Song Hongwei, research director of Tongce Research Institute, told red weekly, “from the practical point of view, generally, the whole asset package of M & A is not a single project. There are many contents in the asset package, and various relationships are more complex, such as pledge, capital contribution and even seizure. It involves the interests of local governments, creditors and debtors, so the overall promotion pace will be relatively slow.”
M & a loan “passive” growth
it’s hard to see a wave of mergers and acquisitions
According to incomplete statistics, the assets sold for sale in the market in the first quarter exceeded 100 billion yuan. Compared with a large number of asset packages on the shelves, wind data shows that the scale of M & A transactions in the real estate industry in the first quarter of this year was 33.7 billion yuan, indicating that the market supply is far greater than the demand.
“Red weekly” found that the current cash holding real estate enterprises are generally cautious in M & a performance. Among them, China Merchants Shekou Industrial Zone Holdings Co.Ltd(001979) , which was the first to issue M & a medium-term notes during the year, did not announce that it had joined AMC institutions to rescue a leading real estate enterprise in old reform in South China until April 5, but only signed a tripartite cooperation framework agreement. In the first quarter, only its China Resources Vientiane life invested 3.32 billion yuan to carry out two property sector mergers and acquisitions.
In the view of insiders, the key behind prudent acquisition lies in the price game. “At present, the relevant measures to encourage the M & A of real estate enterprises in danger are not mandatory, and real estate enterprises generally hold a wait-and-see attitude for safety reasons. In addition, this year, many cities have lowered the threshold of local auction, and the quality of land supply is also very good. Instead of acquiring projects with unclear creditor’s rights, the local auction market is more attractive.” Tian Jing said so.
Song Hongwei also said that at present, the acquirer wants to purchase assets with a high discount range, while for high-quality assets, the received house purchase enterprises still want to revitalize the project and save themselves. It is difficult to accept the conditions of large discount. Basically, this is the game.
It is worth mentioning that the current real estate development loans are still subject to the corresponding regulatory policies. It is also doomed that financial institutions and real estate enterprises tend to “accurate” acquisitions in terms of capital investment, rather than enclosure. “Although there is no clearly defined list of real estate enterprises or projects in danger at present, there are corresponding requirements for the approval of M & A loans, and the dispute over putting them into use will not be too great.” Song Hongwei explained.
Red weekly learned that at present, the M & A loans of real estate enterprises need to follow the principle of earmarking funds. For example, the M & A projects should complete more than 25% of the total investment in the development of projects under construction, and need to meet the “four three two” standard. In the process of transaction, the proportion of M & A loans should not be higher than 60%, so as to prevent enterprises from financing in disguise.
Song Hongwei predicted that the financing scale of real estate M & A will increase, but it is more passive growth for the problem projects of early cooperation. “For acquirers, although M & A loans are not included in the three red lines, it will also increase the debt repayment pressure of real estate enterprises. For example, there is a break in the capital chain of ‘green’ real estate enterprises. From the perspective of financial institutions, the amount of capital investment is also limited. Unless special additional capital support policies are issued, it is difficult to peak M & A.” He further added, “in the context of the downward environment, enterprises will shrink their investment scale, and M & A is still an expansion measure. Therefore, the target subjects of M & A are also concentrated in the core projects of core cities and will not be rolled out in a large area.”
