Tommy Wilkes, Marc Jones

LONDON (Reuters – China’s woes in the property market could mean trouble for luxury mega-projects in London and New York as well as other cities, as their developers struggle for funds.

China Evergrande Group has struggled to survive the crisis. But the danger to global property markets worth multi-trillion dollars is caused by its competition, which spent the previous decade trying to build taller and better skyscrapers.

Shanghai-based Greenland Holdings, 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.

According to the developer, they remain committed to their flagship projects, including the long-delayed Spire tower (NYSE: London), which is 235m high. However, the company also placed a part of another London landmark on the market early in the year. Other companies are looking for sales signs.

Evergrande, Kaisa Group (which was the first Chinese property company to go bankrupt in 2015) are trying to sell Hong Kong properties to raise cash. Oceanwide Holdings, however, just saw San Francisco’s highest tower taken by disgruntled creditors.

Omotunde Lawal is the head of emerging markets corporate debt for Barings Asset Management, which owns bonds issued by Chinese property firms.

Lawal stated that Chinese firms have overpaid to acquire prime sites abroad in an effort to grab them. The question now is, who will buy them? They are likely to not get the cost. It all depends on how desperate they become.

SIZABLE ASSET SALES

Guangzhou R&F Properties 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.

However, with almost $8 billion of debt due to be repaid in the next 12 month and only $2Billion of cash on hand, sales falling nearly 30% year over year, credit rating agencies have stated that they will need to cash 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 stated last week that it is “actively” discussing the financial situation of its San Francisco project, with all the involved creditors.

SPENDING SUGAR

Chinese developers were on an international spending spree in 2013 and 2018. However, this splurge is now halting abruptly due to Beijing’s efforts to limit firms’ excess debts.

The London Projects have been funded by more than 28 Billion Pounds in 2018. They spent 1.5 Billion Pounds in 2021’s first half, which is less than 2012 data 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, Poly Property and China Vanke 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, told Reuters she wasn’t aware of any Chinese firms looking to sell-up due to strains back in China.

She added that if they do decide to sell they will likely be able to find buyers fairly quickly due to international money flooding global property markets, such as London. Prices are currently at an all-time high.

Chris Gore is a principal in central London at Avison Young and said that he was not aware of any sudden sales plans. However, the stress on Chinese companies would increase if there were more crises at home.

Gore stated that if they had to sell, and they could make a profit selling the company for an income, they would sell. It wouldn’t matter if some people wanted to sell. But if everyone wanted to leave suddenly, it would be an issue.

($1 = 0.7263 pounds)

($1 = 6.4050 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

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