Nowadays, many cities have begun the process of urban renewal in full swing, but will the pace of urban renewal be blocked when some real estate enterprises encounter liquidity pressure?
Recently, a document entitled “report on soliciting support for the withdrawal of old reform projects” flowed out, which has aroused widespread concern in the industry. This is a document submitted by Guangzhou times Holding Group Co., Ltd. to Guangzhou municipal government. The document shows that time China actively participates in the urban renewal of Guangzhou, has obtained the cooperative identity of 9 old village reconstruction projects, and has deposited a lot of funds. Recently, the superposition of various policies has affected the stability of enterprise cash flow. “In order to successfully overcome the current difficulties, I urge the municipal government to support enterprises to rescue and solve the difficulties.” The company’s appeal is to hope that the Guangzhou municipal government can support and coordinate it to get back the performance bond of three old village reconstruction projects in Conghua district and Zengcheng District, as well as the early-stage investment funds of five projects in Huangpu District, with a total amount of about 2.01 billion yuan. Time China said that the current situation in the real estate industry is grim and the company is facing unprecedented pressure. The return of the performance bond and early investment of the above projects will strongly support the company to overcome the current difficulties.
Time China responded that “in view of the recent amendments and changes to the urban renewal policies and plans of Guangzhou and its subordinate districts, our company actively communicates new promotion solutions with relevant government departments on individual project matters, which is a normal business behavior of enterprises.” The company stressed that urban renewal is one of its core businesses. At present, urban renewal projects across China are advancing steadily and orderly. According to the data, the 2021 performance announcement released by time China shows that the company recorded contract sales of 95.59 billion yuan in the whole year, a year-on-year decrease of 4.8%; The operating revenue reached 43.64 billion yuan, a year-on-year increase of 13.1%, and the urban renewal business contributed 4.4 billion yuan.
It can be seen that for some real estate enterprises with heavy positions in urban renewal projects, business conditions and policy changes are affecting their own choices. 2021 can be said to be a year of “ups and downs” in urban renewal. At the beginning of last year, the country began the upsurge of old reform, and real estate enterprises poured in one after another; In August, the Ministry of housing and urban rural development issued the notice on preventing large-scale demolition and construction in the implementation of urban renewal action (Exposure Draft), which clearly required that the implementation of urban renewal action should strictly control large-scale demolition, construction and relocation, and demolish urban villages and other urban contiguous old areas in a small scale and in a short time, resulting in the imbalance between supply and demand in the housing rental market and the sudden decline of urban renewal. The reporter found that in October last year, the Guangzhou Municipal Bureau of planning and natural resources issued a work plan for the verification of urban renewal projects in the city, and jointly with the district governments, the Municipal Bureau of housing and urban rural development, the Bureau of culture, radio, television and tourism, and the forestry and garden Bureau, further strengthened the evaluation and scheme optimization of 119 old transformation projects in 11 districts of Guangzhou. The staff of the investment and Expansion Department of a Guangzhou real estate enterprise told reporters that the current urban renewal market in Guangzhou has cooled down, and the pace of investment promotion of cooperative enterprises has slowed down.
According to the introduction of Heyi urban renewal group, the performance bond system for the reconstruction of old villages in Guangzhou is mainly based on the notice of Guangzhou Municipal Bureau of housing and urban rural development on printing and distributing opinions on further standardizing the selection of cooperative enterprises for cooperative reconstruction projects in old villages issued by Guangzhou Municipal Bureau of housing and urban rural development in February 2020 (SUI Jian GUI Zi [2020] No. 16) (hereinafter referred to as “No. 16 document”). According to document No. 16, when participating in the cooperative reconstruction project of old villages in Guangzhou, the intended cooperative enterprises and cooperative enterprises shall pay the corresponding amount of performance security to the bank account under the name of the village collective according to the regulations, which is monitored by the competent government department of the project, the village collective, the cooperative enterprise and the bank at the same time. Unlike the old village reconstruction in Guangzhou, Shenzhen has not established a performance bond system for the old village reconstruction. The relevant policies and regulations on the absence of performance bond in Shenzhen involve the stage of bond, mainly in the stage of collective asset transaction. The deposit involved in this stage is mainly determined by the village collective and the developer through free negotiation, and the amount requirement is generally not too high.
Many insiders believe that to do urban renewal business, we must have excellent trading ability and high market recognition. In addition to policies, the current liquidity crisis of some real estate enterprises has also affected the field of urban renewal. An insider of a real estate enterprise focusing on urban renewal in Shenzhen told reporters that the cycle of urban renewal in Shenzhen generally takes about 8 to 12 years. Although the land value will generally rise slowly, the longer the cycle of old reform projects, the more funds invested by real estate enterprises. Once the temperature of the real estate market drops and the sales slow down, it will bring huge cash flow problems to the company.
Luo Yu, managing director of Heyi urban renewal group, said that due to the strict supervision of real estate and the overall contraction of capital, the financing situation of urban renewal is severe, followed by the cold market trading and investment, many stock projects are thrown out, and the increment is still rising. The incremental projects / secondary local auction objectively squeeze the transaction consideration and cooperation scheme of stock renewal projects. In addition, affected by multiple factors such as economic situation, financial environment and real estate regulation, and urban renewal is increasingly showing the trend of focusing on assets, urban renewal projects have a very high desire for funds, and the market pre financing institutions are limited. In the further tightened real estate financing environment, the industry reshuffle is inevitable.
When it comes to urban renewal, we have to mention jiazhaoye, which focuses on urban renewal business. Recently, China Merchants Shekou Industrial Zone Holdings Co.Ltd(001979) , Great Wall assets and jiazhaoye signed a strategic cooperation agreement. All parties will actively promote the sharing and coordination of advantageous resources in accordance with the principle of marketization, and give priority to the other two parties as partners. According to the agreement, the cooperation between the three parties mainly involves urban renewal, commercial and residential development and commercial operation, culture and tourism, cruise ships and ferries. At the same time, a number of top 100 real estate enterprises “put their assets on the shelf” and actively dispose of and sell projects to recover funds. According to incomplete statistics, since the second half of last year, more than 120 cases have been handled by real estate enterprises. Luo Yu predicted that similar events may be staged again. Under the influence of the Ministry of housing and urban rural development’s policy of preventing large-scale demolition and construction, the speed of new urban renewal projects in Guangzhou and Shenzhen has slowed down. In the subsequent period, the focus in the field of urban renewal will be on digesting stock projects, and the acquisition and merger of stock projects will be the main way to obtain projects.
