Category Archives: Developers

Chinese property giant in trouble?

Evergrande is reportedly the most indebted China-listed property firm.

China’s second-largest developer, Evergrande Real Estate Group, claims it can meet debt obligations despite Standard & Poor’s assessment that the company is now vulnerable to non-payment, after debt doubled in the past 12 months, reported Bloomberg.

According to data compiled by Bloomberg, the developer is now the most indebted of the 198 listed real estate firms in China.

Jimmy Fong, investor relations official at Evergrande, said the group will meet its near-term obligations after a property market pick up had improved liquidity.

However, there is still a 6.2 percent probability that Evergrande will miss payments in the next year, according to Bloomberg’s Default Risk model. The model tracks metrics including share performance, liabilities and cash flow.

“Default risk has risen as Evergrande leverages up aggressively to speed up construction and land acquisition, as well as expansion into non-property related businesses,” said Tony Chen, credit analyst at Nomura Holdings. “Refinancing needs are very heavy.”

There was a massive 90 percent jump in total debt at Evergrande in 2015, and Bloomberg reported that this total was 15 times what the company earned before interest, taxes, depreciation and amortisation. This figure happens to be more than double the industry median of 6.6 times.

Data also revealed that the Chinese developer has CNY159 billion of obligations due before the end of 2016, and CNY54.8 billion in the following year.

That led to Standard & Poor’s cutting Evergrande’s unsecured bond rating to CCC+ in April. This rating means it is vulnerable to non-payment and dependent on favourable business conditions.

Moody’s Investors Service also has concerns about the company, detailing in a report that the debt-fuelled expansion has weakened the developers’ credit quality despite the improved liquidity.

“We have CYN164 billion of cash on hand at the end of 2015 and we achieved CNY67 billion of contracted sales in the first quarter this year, which will reduce leverage,” Fong said. “Most of the debt due this year can be easily be rolled over.”

This article was first published on DDproperty.com, Thailand’s leading property site.

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Developers get creative to sell units

To entice home buyers amidst the challenging housing market, developers are resorting to new marketing gimmicks, like holding games where everyone wins a prize, organising trips to Singapore, and launching their projects in other countries, reported The Straits Times.

For instance, Kingsford Development held a ‘Property Tycoon Challenge’ for buyers of Kingsford Hillview Peak in Upper Bukit Timah over the weekend.

Styled after Singapore’s Mandarin version of ‘Who Wants to be a Millionaire’, the top prize at stake is a $250,000 cash rebate. But every contestant will be leaving with at least $5,000 in cash rebates, which will increase if they give the correct answers to the questions in the game. Buyers also have a chance to win an electric scooter and two hoverboards in a separate contest.

Meanwhile, Guangzhou-based Country Garden has teamed up with travel agencies to host Singapore tours for Chinese tourists, in the hope they will purchase units in Forest City, a mega project sited on man-made islands near the Tuas Second Link.

According to its spokesperson, the three-day trip, which includes a drive into Johor Bahru, is mainly for shopping and sightseeing, with expenses to be borne by the visitors.

The developer is also dangling discounts of up to 20 percent for those who purchase early, and pay in cash. “Promotions vary by property type, payment formality and time period,” said the spokesman.

In addition, some developers are launching their new projects in emerging economies to woo affluent buyers there.

For instance, City Developments Limited (CDL) held a property showcase in Jakarta over the weekend for its Gramercy Park project, to be followed next weekend in Surabaya, wherein one tower with 87 units is being offered in the range of $2,800 psf.

The 174-unit project will be unveiled in Singapore soon, and there are also plans to hold similar events in Hong Kong and mainland China, noted a company spokeswoman.

CDL’s move follows CapitaLand’s successful launch of Cairnhill Nine in Indonesia. It rolled out the development in Jakarta in late February before launching it here last month.

The project has found buyers for 193 of its 268 units, with foreign buyers, mostly Indonesians, contributing 50 percent of the sales, added a CapitaLand spokesman.