Hundreds of billions of real estate companies are "stumped" by 1 billion of foreign debts.
01
Shimao really defaulted
I remember that in the first half of last year, the pace of real estate regulation had just started. Shenzhen’s strict inspection of operating loans kicked off, and various regulatory policies were implemented one day at a time to suppress real estate.
There is a voice in the real estate industry:
The property market is about to enter the era of slow growth.
Now Slow Bull has not waited, but has waited for the technical bear market.
was previously known as the "long-distance runner" who emerged from the Slow Bull market, and has a halo of glory:
's always stable financial structure is Shimao's "internal strength."
Precise investment layout is Shimao’s “stunt”.
The productism that has long been adhered to is Shimao's "mindset".
Of course, this statement is not unreasonable.
In 2020, the sales of apartment products in Shenzhen Shimao Shenzhen-Hong Kong International Center exceeded 5 billion, continued to rank first in Shenzhen and top three in China;
Nanjing Shimao gained reputation and became the champion in Nanjing in terms of number of apartments signed and the amount of more than 4 million apartments, annual sales The amount reached 3.8 billion yuan;
Beijing Shimao Xishan Longyin’s annual sales exceeded 5 billion yuan, leading the benchmark for luxury housing sales in Beijing;
Guangzhou Shimao Tianyue and Shimao Swan Bay won the tens of millions of luxury houses in Guangzhou and Guangzhou Binjiang respectively. The total price of 25 million + topped the sales list...
But now, all of this has turned into a slap in the face.
No one expected that such a billionaire real estate company, which claims to be "steady in growth, good at making money, strong in health, and rich in money and food", would not be able to pay back the money, defaulted on the contract, and was lying flat.
On the evening of July 3, Shimao Group Holdings Co., Ltd. announced that the company failed to repay the principal and interest of a US$1 billion bond that matured on July 3.
It is reported that the note is due on July 3, 2022, with a coupon rate of 4.75%, and a total principal and accrued unpaid interest of US$1.023 billion is due and payable.
However, external institutions and investors are quite tolerant of Shimao:
Currently, Shimao has not received any notice of accelerated repayment from overseas creditors, and most of the participating lending banks that cooperated with the syndicate in 2018 and 2019 also issued notices to the company. issued a written letter of support stating that it supports Shimao in principle and has no intention to take legal action.
Actively communicating with creditors while actively disposing of assets are two positive gestures taken by Shimao in the face of the liquidity crisis: First, Shimao continues to discuss with relevant creditors regarding the principal payments of other overseas debts that have not yet been paid, with a view to reaching an amicable solution.
"The company will resolutely maintain the stability of project construction and business operations, with a view to creating favorable conditions to resolve the common concerns of all stakeholders."
Shimao expressed its most sincere apology to all creditors for being unable to repay as scheduled , and at the same time, we will resolutely maintain the stability of project construction and business operations, with a view to creating favorable conditions to resolve matters of common concern to all stakeholders.
apologizes when there is a problem, which is a bit like the national football team (male).
However, how could a debt of more than US$1 billion stump an industry giant who was once among the top ten in the industry and whose sales once reached 300 billion? In addition to this debt, how much debt is there?
can only wait for the follow-up to explode.
02
Shimao crisis
This time Shimao will also follow in the footsteps of many real estate companies and join the army of US dollar bond extensions.
Evergrande , Sunac , Greenland, Sony, Kaisa... lined up to welcome Shimao into the big family.
In the real estate industry facing liquidity pressure, companies with problems are like whack-a-mole, popping up out of nowhere.
However, Shimao’s breach of contract was a failure. What should have happened at the end of last year was only due to its own foundation and a series of operations by the management, and it was not revealed until today.
On November 5, 2021, a rumor spread on the Internet that " Shimao Group and Lujiazui Trust are negotiating an extension." Just one day ago, another well-known real estate company, Kaisa, had an overdue payment problem for its wealth management products.
has always been one of the stable private real estate companies in the eyes of investors. Shimao, who has thick eyebrows and big eyes, has also joined the camp of real estate companies suspected of defaulting.
For a time, there was a lot of noise, and the rumors of trust extension made investors of Shimao Group panic.
On that day, the stock price of Shimao Group closed sharply down by more than 13%, and the prices of many Shimao bonds such as 15 Shimao 02, 19 Shimao G2, and 20 Shimao G1 dropped sharply by more than 20%.
On the afternoon of November 5, 2021, Shimao quickly held a conference call with investors. The relevant person in charge claimed that the news circulated on the Internet was untrue, saying that Shimao and Lujiazui Trust have a 3 billion yuan cooperative financing product. There is no maturity in 2021, and there are no overdue or deferred repayments. The cooperation between the two parties is normal.
Lujiazui Trust also issued an announcement on the same day, saying that the cooperation projects between the two parties were operating normally and there were no overdue or deferred payments.
On the day of Shimao Trust rumors, Shimao Group Chairman Xu Rongmao also increased his holdings of 116 million shares of Shimao Group at a cost of approximately HK$1.614 billion. At the same time, Shimao Group repurchased US$1.5 million in notes on the open market that day, as if to demonstrate its good financial status to the outside world.
However, one wave has not subsided, and another wave has arisen.
At the beginning of this year, the "CITIC Trust Shenzhen Longgang Financing Collective Fund Trust Plan" issued by CITIC Trust entered the observation period and may face an extension plan of about 24 months, involving a trust scale of nearly 6 billion.
Coincidentally, the "Chongqing Trust Xinhong No. 1 Collective Fund Trust Plan" recently issued by Chongqing Trust has also been extended for 16 months, involving a trust scale of 400 million.
One is CITIC Trust, a veteran in the industry, and the other is Chongqing Trust, which is known as the "safest trust company." Both "top students" in the trust industry are "flat" in the financing projects of Shimao Real Estate .
Moreover, both Chongqing Trust and CCX Trust chose to advance funds for the previous Evergrande project, but they unanimously chose to postpone the issue when dealing with Shimao.
I don’t know whether Shimao’s problem is more serious than Evergrande’s problem, or whether advance payments are not allowed under the guidance of the “New Asset Management Regulations”.
Of course, it is not only these financial institutions and investors who are being cheated, but also ordinary people like us.
On June 30, 2022, nearly 200 property owners gathered at the Weifang Shimao Yuntu sales office to defend their rights. However, the handover is still far away. Buildings 1, 2, and 9 have only been sealed, and other processes have not yet begun.
What is even more worrying is that the construction site has been suspended for eight months since October last year.
Delayed delivery is not scary, but the lack of hope caused by the shutdown is the most despairing.
Of course, this is by no means an isolated case. The outbreak of Shimao's debt default shows that the company's cash flow has dried up, and projects that have not yet started or are currently under construction will most likely be suspended one after another. It would be a good thing if they can be resolved in the future. If they cannot be resolved, there will be a large number of unfinished real estate projects.
No matter what, everyone has a common feeling: I really misjudged Shimao.
I can only say that when a speck of dust of the times falls on every individual, it is like a mountain.
03
Real estate financial games
Many people think that 2021 will be a period of concentrated outbreak of real estate risks. After 2022, the spring of real estate may come.
At present, real estate policies have been somewhat relaxed, especially the home purchase policy that has begun to warm up. A number of first-tier cities represented by Guangzhou and Zhengzhou have successively introduced home purchase policies, reducing down payment ratios, lowering social security requirements, and a series of policies once again pointing to Real estate destocking .
But the property market is also a market. What is most important in the market?
Confidence is the most important!
After a wave of violent operations in 2021, and the explosion of real estate companies starting from Evergrande, everyone’s confidence in buying a house has been destroyed step by step. Everyone is afraid of buying an unfinished building, and everyone is afraid of the price soon after buying a house. plummeted.
This can be seen from the situation of Shimao.
In May this year, Shimao Group achieved contracted sales of only about 6.11 billion yuan, a 79% decline compared with 29.05 billion yuan in May last year.
In the first five months, Shimao Group’s cumulative contracted sales reached approximately 34.26 billion yuan, a decrease of 72% compared with approximately 121.79 billion yuan in the same period in 2021.
This is enough to prove that Shimao is unable to sell its houses, causing it to make ends meet.
Faced with this crisis, Shimao is also actively helping itself. Since December last year, Shimao Group has begun selling assets.
The news about Suite 93 in Shanghai last year dominated the circle of friends for a while. These houses are located in Lujiazui, Pudong, where land is at a premium.
It was originally said that the seller was a mysterious landlord who sold 93 houses in the same community at once, cashing in 450 million and selling them at 20% off the market price.
At first, everyone thought it was a hidden rich man. As the situation further developed, it emerged that the real owner of these houses was the Suzhou-Shanghai Regional Company, a subsidiary of the real estate developer Shimao Group.
Unexpectedly, Shimao Group not only sold off new houses, but also sold off old houses.
In December 2021, Shimao Group sold a property development project called "Victoria Harbor" in Southwest Kowloon, Hong Kong, for HK$2.086 billion;
On January 21 this year, it sold the Shanghai Bund Core for 1.06 billion yuan. A commercial office plot in the district was transferred to the state-owned enterprise Shanghai Jiushi;
On November 24, 26.67% equity of the Guangzhou Asian Games City project was sold to China Overseas Real Estate at a price of 1.845 billion yuan;
On November 28, it was sold to China Overseas Real Estate for 45 The Hyatt Hotel on the Bund in Shanghai was sold to Shanghai Real Estate Group for a price of 100 million yuan.
In recent months, Shimao has successively sold nearly 20 assets including Shanghai 21 Street, Beijing IN Sanli, and Shimao Yurong Wuyi Resort Hotel.
But unfortunately, the accumulated withdrawn funds are a drop in the bucket in the face of debt.
As a result, we finally couldn’t hold on any longer, and this time there was a US$1 billion debt default.
Then why did Shimao fall from being a top student to the clouds and become a crisis?
Many people say that it was the "buy, buy, buy" in the early years.
In 2019, the ambitious Xu Shitan took over Shimao Group. After the acquisition, Shimao was known as the "King of Mergers and Acquisitions" for a long time. It has successively acquired corporate projects such as Vantone Real Estate, Tahoe , and Mingfa Co., Ltd.
The "big merger of the century" in 2020 - Shimao acquired the first major real estate company Fusheng.
In the first half of last year, Shimao Group remained in the green zone of the "three red lines". After deducting advances, the asset-liability ratio was 68%, the net debt ratio was 50.9%, and the cash-to-short-term debt ratio was 1.9 times.
However, in the second half of last year, the market took a turn for the worse, and Shimao's crisis began to erupt.
On February 23, 2022, Moody's downgraded Shimao Group's corporate family rating (CFR) from "B2" to "Caa1".Meanwhile, Moody's has changed its outlook from watchlist to negative.
In Moody's rating system, a Caa rating below means that the rating object has entered the default range, and the debt involved may default in part or in full.
It seems that cash flow is consumed, which has become the root cause of a series of problems currently faced by Shimao.
In fact, this only sees the first layer of the problem. The financialization of real estate is the real culprit!
The first people to engage in real estate financialization were Americans. In the United States, the technology stock bubble burst in 2001, causing heavy losses in the stock market. Coupled with the terrorist attacks launched by bin Laden, the confidence of Americans has been severely damaged, and everyone is in danger.
Under the double attack, the top priority is to strengthen security defense and boost the economy. Therefore, the United States launched the war in Afghanistan and entered an interest rate cutting cycle.
The most beneficial thing about the interest rate cut is the real estate industry. The real estate industry in the United States has developed rapidly.
When Americans buy a house, they will also go to a bank for a loan. The bank loan process is similar to ours. The bank will evaluate the credit of the lender, and if it is qualified, you can apply for a home mortgage loan.
This is equivalent to writing an IOU to the bank. If the money is not paid, the bank will take away the house. Of course, the purpose of the bank is definitely not to buy your house, but to earn interest.
Many people take out loans to buy houses, so the bank receives many, many IOUs, and the mortgages are repaid slowly, so at this time, two problems arise. question.
First, what should I do if the lender still fails to repay the money? This is a risk. Second, the money in the bank is not inexhaustible. It is impossible to hold an IOU without money.
But The extremely smart people on Wall Street have created a derivative instrument that can quickly collect money and transfer risks. They packaged home loans into a securitized product that could be sold. (Subprime loan)
For example:
Zhang San borrowed a house loan of 250w, and the total repayment in 30 years was 500w;
Li Si borrowed a house loan of 500w, and the total repayment in 30 years was 1000w.
The bank packaged the mortgage contracts of Zhang San and Li Si together (MBS), priced them at 8 million, and sold them to the investment bank. Once it changed hands, the bank made a profit of 500,000, and the risk of Zhang San and Li Si not paying back the money was also transferred to the next owner.
has considerable profits and no longer bears the risk of default, which is a great incentive for banks.
As a result, the bubble blew bigger and bigger, and the risks accumulated. Finally, it burst one day in 2008... It directly caused 30 million people to lose their jobs, and 50 million people fell below the poverty line, and it also spread to Europe. and the Middle East , which triggered the European debt crisis and the revolution in the Arab world.
Although we do not have mortgage securitization financial instruments like US subprime mortgage crisis, we do have pre-sale systems, public stalls, and urban investment auction sites.
Especially the pre-sale system is a huge risk generator. Real estate has been completely turned into a financial game, with loans for land acquisitions, asset mortgages and refinances, and pre-sale properties selling owner loans.
As long as there are no problems in the real estate sector, as long as there are no problems in the economic environment, and as long as housing prices do not collapse, this game can continue to be played.
But what if there is some trouble?
So, it became like this: one debt default after another.
So, look at those real estate companies, why don’t they just go to the last step? They are going to be doomed soon and they are determined not to sell their assets. Because all the assets have been mortgaged, they are still barely positive assets now. If it is sold at a low price, the assets will be revalued, and it is very likely to become insolvent.
html Shimao Group’s US$1 billion bond defaulted on 3.6 trillion US dollars. html The US$31 billion in debt cannot be repaid. Does this mean how difficult it is for the company to have liquidity?
Of course, Shimao will never be the last one on this road.Because of their style of play, the entire industry is playing it. It is nothing more than a difference in scale. One explodes early and the other explodes late. Sooner or later, they will explode.
Now someone wants to ask, is there any solution?
can be said to be yes or no. Why?
If a person borrows money, he must pay it back, right? What can I do if I can't afford it?
Either deny it, or sell it to repay the debt. (Default and asset impairment)
It’s just that in this invisible food chain, the people who are injured are always the people who need to buy houses.
I hope that in 2022, there will be no unfinished buildings in the world.
