Risk identification The risk identification and control of real estate companies, and effective risk identification is the prerequisite. To identify risks, we must first understand what are the risks of real estate? I personally am used to classifying them by general categories, which include roughly: industry risks, group (shareholder) risks, regional risks and project risks.
(I) Industry risk
Why do I put industry risk first? The reason is very simple, how can there be a complete egg under the collapse of the nest? Let’s talk about the example from a distance. After the era when everyone owns a BP machine, every family has a sewing machine, and every street has a video hall, it is a catastrophe for most companies in the relevant industrial chains of these industries, and there are very few companies that have truly successfully transformed.
Take the recent example, the P2P industry has basically been wiped out now, but is it true that every bankrupt P2P company has problems due to its own business? This is not the case, especially the collapse in recent months. I heard a story at a certain wine shop: a P2P company that has just collapsed recently. Since its founder is an authentic professional finance major and has followed the orthodox path of scale first and then risk control, although the company has expanded rapidly, its capital chain has always been very safe. Until the end of last year, when so many P2P companies had problems, it invested a lot of money in its affiliated companies that do imported red wine business. The profit margin and capital return cycle of the red wine business can actually match its source of funds. So until May and June this year, it could still repay investors' principal and interest in full on schedule, and even maintained a good reputation in a small range. But in the first half of this year, after several giant P2P companies burst into pieces, the media caused an uproar, and the reputation of P2P in society has almost completely stinked. As a result, the entire industry is facing a dilemma of almost only bank runs and no new sources of funds. Sure enough, in just a few months, the company that was originally stable in the industry could not hold on and then collapsed.
As a typical capital-intensive industry, the capital chain risk is also the most significant risk in the real estate industry. Therefore, if the entire industry shows an overall correction or a recession, then the two main sources of funds for real estate (bank loans and sales collections) will be significantly restricted by . Under such circumstances, real estate companies whose industry average debt ratio is rising year by year will be under great pressure on their capital chains and may experience serious systemic risks. Even if some real estate companies with small size and low debt are easily wait-and-see, home buyers are reluctant to take a deep wait-and-see attitude, and the decline in sales prices and sales volume will be delayed. Even some companies that can survive in the past may cause the risk of project completion because the construction company is trapped in an industry-oriented and supply-chain-like funding crisis. Therefore, it is almost impossible for real estate companies to survive the overall risks of the industry. So, what are the main causes of industry risks in the real estate industry?
1. Industry risks caused by policy changes
From the moment the real estate industry was born, it was an industry that was greatly affected by policies. The rise of the real estate industry is certainly the dividend of urbanization in recent decades, but the reason why it has developed so rapidly is the tax sharing system and since the State Council's "Notice on Further Deepening the Reform of the Urban Housing System and Accelerating Housing Construction" listed the real estate industry as a pillar industry of the national economy. Every adjustment in the real estate industry has almost all originated from policy regulation: the first round of real estate adjustments began in the "Notice on Further Strengthening the Management of Real Estate Credit Business" in April 2003, and the second round of real estate adjustments also started from the "Eight National Regulations" and "Six National Regulations"... until the "purchase restrictions", "loan restrictions" and "sale restrictions" in recent years. It can be said that every decline and recovery of real estate is directly related to policy changes. There is a joke online: "No matter how stable the enterprise is, it cannot beat a piece of A4 paper ." This sentence is not only suitable for a single enterprise, but also for the industry. Because of changes in policies, it means changes in the entire industry ecology and the entire industry game mechanism.Industry risks caused by policy changes can be divided into long-term and short-term categories.
(1) Long-term policy risks - also talk about the implementation of long-term mechanisms
The real estate industry has always been hanging on a big boot that has not yet been lost, that is the so-called long-term mechanism. The long-term real estate mechanism is actually a relatively large concept. It includes changes in the land certificate supply system, changes in the real estate tax and fee system, and the establishment of basic affordable housing systems such as leasing, etc. However, in reality, everyone's attention is mainly focused on the changes in the real estate tax and fee system. The attention to the long-term mechanism is also mainly focused on when and how to implement the property tax? As for this issue, some of my immature thoughts are:
① At present, the overall prosperity of China's economy is not as expected. "Stable growth", "Stable investment" and "Stable employment" are the fundamental red lines of all policies of the Party and the country at present. So, in the case of a sharp decline in infrastructure investment, in the context of uncertainty in the prospects of the trade war, and the sharp contraction of manufacturing orders in the southeast coastal coastal manufacturing industry, and in the case of a quarter of the total employed population, , when real estate (land) mortgage loans remain high in the banking system, the country cannot afford the real estate industry's . Therefore, at least before 2020, before China's economy completely stabilizes, real estate tax is unlikely to be withdrawn - of course, it is inevitable to shout and release new news from time to time as a means of real estate market regulation.
② Judging from China's government structure and tax system, it is difficult to implement the real estate tax and fee policy of one city, or in other words, it will not meet the conditions for implementation in the near future. Therefore, the introduction of real estate tax in the future should still be implemented in a national way, and there is a high probability that it will not be directly linked to the price (because areas like Beijing, Shanghai, Guangzhou and Shenzhen that have extremely outrageous rental-to-sale ratios cannot afford it), and there will be a large exemption range. Therefore, although real estate tax is an important part of the long-term real estate mechanism and an important source of local fiscal and taxation in the future, when it is first implemented, its specific role and effect may be far lower than expected.
③The current Chinese economy cannot withstand the real estate collapse, but it cannot withstand the further surge in housing prices. Because with the basically stable exchange rate, China's asset prices have raised China's social costs to an extremely high level. The cost increase brought about by the further increase in housing prices is something that neither Chinese industry nor society can bear. In this sense, China's housing prices have reached a ceiling caused by economic fundamentals. Therefore, if the further rise in housing prices cannot be curbed in the future, and the long-term mechanism of taxation in the maintenance stage and does not meet the conditions for introduction, it is not ruled out that the 20% capital gains tax will be imposed in the transaction stage, which will further curb investment demand.
(2) Short-term policy risks - talk about whether the third- and fourth-tier real estate markets and pre-sale housing systems after the exit of "monetary resettlement in shantytown renovation" will withdraw from the historical stage
① The third- and fourth-tier real estate markets after the exit of "monetary resettlement in shantytown renovation"
At present, the biggest short-term policy risk in the real estate industry is that the "monetary resettlement in shantytown renovation" is about to exit. Two or three months ago, news about the withdrawal of monetary resettlement in shantytown renovation was overwhelming. Although the government subsequently launched a series of rumors to stabilize the real estate market in third- and fourth-tier cities, from what I understand, most of the policies implemented by in third- and fourth-tier cities are: "The old monetary resettlement projects of shantytown renovation will continue to be implemented, but they will no longer approve the monetary resettlement projects of shantytown renovation." The monetary resettlement in shantytown renovation has substantively receded. Therefore, some cities with slow progress in shantytown renovation and are still surging the tail of "monetized resettlement of shantytown renovation" are still rising; some third- and fourth-tier cities whose waves have passed have seen a sharp decline in housing prices and sales volume since the end of September.
At the meeting of the Ministry of Housing and Urban-Rural Development on October 25, 2018, although it was mentioned that "the monetization of shantytown renovation does not take a one-size-fits-all approach", it was clarified: I. shantytown renovation is mainly special bonds; II. shantytown renovation must distinguish whether the income and financing can be balanced (in fact, the full name of special bonds is also "self-balancing special bonds"); III The government purchasing shantytown renovation model was officially abolished, and only the China Development Bank and the Agricultural Development Bank were encouraged to lend to self-balancing projects for income. Therefore, it can be expected that although the "New Three-Year Shantytown Renovation Plan" will continue to be implemented in the future, both the implementation speed and the driving effect of the third- and fourth-tier real estate markets will inevitably be far less than before. In this context, my personal judgment on the third- and fourth-tier real estate market is:
I. The third- and fourth-tier real estate markets occupy a major share in the entire real estate market, regardless of their size or impact on population. Therefore, for the sake of the overall economic situation, what the country expects is neither the continued rapid development of housing prices nor the collapse of the real estate industry, but the stable development of the real estate industry. Now, after the substantial ebb of monetized shantytown renovation, the real estate markets in some third- and fourth-tier cities have shown a significant pullback. Under this circumstance, the country should not continue to introduce too strict control measures for the third- and fourth-tier real estate markets in the future; for some overheating third- and fourth-tier cities with excessive increase and the rise has not stopped, some case-based control measures may be introduced in a targeted and adapted to local conditions; for some cities with excessive declines, in order to avoid the domino effect, some protective policies may even be introduced.
II. However, no matter from the previous shifts of "controlling government debt ratio" and "stabilizing infrastructure" and "stabilizing growth", or from the perspective of "calling for saving the market" and the current situation of the stock market, it is not difficult for us to find that although policy orientation has a huge role in China's social economy, and the real estate market is a very typical policy market, the government's policies may not be able to fully meet its expected goals.
In the third- and fourth-tier real estate markets, investment demand accounts for a very large proportion (especially in this round of "price increase and inventory reduction", investment demand accounts for a very exaggerated proportion). If any investment product, especially investment products with a huge trading group (stocks are particularly obvious), once it falls into a trend downward channel (the probability of falling is significantly greater than the probability of rising, and the room for falling is significantly greater than the room for rising), then the impact of market sentiment on market trends is likely to exceed the impact of capital and policies. Therefore, it is not ruled out that although the country expects the stable development of the real estate market in third and fourth cities, or slowly pullback to a reasonable price, under the influence of the market's pessimistic expectations, the housing prices and sales in third and fourth-tier cities will be unexpected, and the possibility of a spiral accelerated pullback will be trapped.
III. Overall, I personally believe that even if monetization and shantytown renovation exit in the future is a major trend, the historical opportunity of "price increase and inventory reduction" will pass soon. However, because China's space scale is very large, the differences in the development degree and development stage of third- and fourth-tier cities are very large, so the real estate market in the future will show significant differentiation:
Some monetized resettlement is coming to an end. In this round of "price increase and inventory reduction", housing prices have increased too much, and cities that have overdrawed market demand in the next few years (such as Nanchong City, which has always been among the top in the country), there is a very high possibility of a correction in the future, and the room for a correction will not be small. Even if the selling price will not collapse due to government intervention, sales volume will decline sharply, showing a trend of unlimited price; and for some, there is still a certain amount of support for monetized resettlement, but the population base The construction of new districts in the early stage has basically digested market demand (for example, the construction of Yaoqiao New District in Ya'an has basically digested the demand released by the shantytown renovation in the early stage. Now the newly launched Daxing New District, further away from the old city, is no longer so sustained and vigorous demand support), is likely to show a steady (or slightly decline) trend of falling volume in the future; while some cities with small price increases in the early stage, large real estate companies are not sufficiently sinking, and a large local population base still have a certain room for development in the future.
②The pre-sale housing system exits
Another short-term policy that may cause risks in the real estate industry is the exit of the pre-sale housing system that has been rampant in various news media recently. I think, first of all, we have to figure out why local governments have to mention "current housing sales" at this node. Is it because the pre-sale system transfers risks to home buyers and has congenital defects? I don't think so, because if it were such a moral factor, I wouldn't have waited until today. Is it to further tighten the capital chain of the real estate industry and completely suppress the real estate market? I think it is even more not true, because this is inconsistent with the country’s original intention of maintaining the stability of the real estate market as mentioned earlier.
I think the biggest reason for mentioning "current housing sales" at this node is that in the past few rounds of real estate pullbacks, a large number of unfinished building projects have been produced, which have consumed a lot of local governments' energy and time to maintain stability and mediate. Therefore, after the current trend of the real estate market correction has been basically determined, local governments are very worried that a large number of unfinished houses will appear again in the future, so they proposed to promote and increase "current housing sales". However, the complete termination of the pre-sale system will cause a devastating blow to real estate companies and accelerate the collapse of the real estate industry, which is inconsistent with the original intention. Therefore, I think the most likely thing is that the new land auction projects in some cities will be added to the "current house sales" conditions during the land contract stage, while other cities and projects will maintain the pre-sale unchanged.
2. Industry risks caused by basic changes in the industry market
Ren Zeping once put forward a very famous view: Real estate looks at population in the long term, land in the medium term, and finance in the short term. My personal experience is: The real estate industry looks at policies in the short term; the medium term still looks at policies; the long term is population and industry (because in my opinion, behind the changes in financial factors such as leverage and currency, policy fluctuations are actually still the fluctuations in policies) . The impact of policies on the real estate industry is the most direct and fastest; the migration of population and industries has the most profound and lasting impact on the real estate industry. Specifically:
(1) Aging and childbirth
The most essential use value of real estate is residence, people's residence. Therefore, the foundation of the real estate industry is still in population, and the simplest supply and demand relationship is the correlation between the number of effective houses and the urban population. From this perspective, the long-term risks of the real estate industry are indeed relatively huge.
Because specifically, my country implemented strict family planning around the 1980s, which led to a rapid decline in the population fertility rate. As the fertility rate declines, after long-term development, the turning point of my country's population age structure has gradually formed, and the trend of population aging has become increasingly obvious. From 1982 to 2017, my country's elderly dependence ratio increased from 8.0% to 16.7%, especially since 2000, the upward trend was obvious. The peak of the working-age population aged 15-64 years old to the total population fell sharply year by year after reaching a high of 74.5% in 2010.
Although second-child births have been relaxed in the past two years, the long-term low fertility rate and low birth rate since the 1980s have greatly pushed up the overall cost of fertility, education and medical care in society, and social fertility has always been suppressed to an extremely low state:
① The number of births in 2017 was 17.23 million, a decrease of 630,000 from 2016. That is to say, just two years after the "two-child" opening, China's birth population began to turn down again;
② The population of women at the peak of fertility increased by 41% from 2011 to 2017, but at the same time, the number of births for one child nationwide decreased by 31%. This shows that social fertility intention has been low to the point where it is difficult to reverse the population trend.
Someone on Zhihu has made a calculation: Due to the artificial acceleration 20-30 years ago, we will reach the current birth level in Japan in 5 years, and will be far lower than the current birth level in Japan in 10 years. Perhaps, using the example of Japan may be too far away, so the master who made calculations on Zhihu used the more familiar three northeastern provinces to compare: in 2016, the permanent population of the three northeastern provinces was 108 million, with a total of 678,000 children born. Multiplying these two numbers by 13 each will be almost the total population and birth population of China in five years.In other words, in five years, the average birth rate in China will be the same as the current three northeastern provinces. The current population age structure of the three northeastern provinces will be widely performed nationwide in 5-10 years. By then, except for the central urban agglomerations in various regions, most of China's land, most small and medium-sized cities, most small counties, and most of its population will probably face the same economic difficulties as today's Northeast .
At the same time, the survey in the 2016 "Social Blue Book" released by the Chinese Academy of Social Sciences also showed that the housing ownership rate of households surveyed in 2015 was 95.4%, of which the housing ownership rate of households of urban residents was 91.2%, and 19.7% of households owned more than two houses. Judging from these two data, in the future, except for the five major metropolitan areas, other small and medium-sized cities will eventually see more and more houses and less valuable houses.
"Financial Observation" 2018 No. 7 has a more interesting article "The Long-term Impact of Population Evolution on the Housing Market", which has conducted a comparative analysis of the population and real estate trends of China and Japan, and has drawn three conclusions that I find interesting and highly recognized:
① Following the basic law of peaking of the natural population growth rate of about 20 to 30 years ahead of the basic demand for housing, affected by the rapid decline in birth rate after 1990, my country's rigid real estate demand will usher in a turning point around 2020, drop to a low point in 2050, and enter a stable range after 2070;
② From the perspective of population spatial structure, according to the forecast, 2025 Before the year, my country's population will still gather in cities and towns at a relatively high rate, and the urbanization rate will be relatively fast. In 2025, the urbanization rate will reach about 70%, and then the urban speed will drop significantly. Therefore, considering the urbanization process and population structure, around 2025, my country's housing demand will decline overall;
③ Based on the changing trend of the future social dependency ratio, my country will enter the population debt zone in 2030, accompanied by the sharp increase in housing loan risks.
So, in the long run, the real estate industry is indeed about to enter an industry recession, and the overall long-term risks of the industry cannot be avoided.
(2) Urbanization and
in third- and fourth-tier cities are actually in line with the previous topic, that is: Since the real estate industry is about to enter an industry recession and long-term industry risks are prominent, does that mean that the real estate industry is about to fail? Does this mean that bank credit will be withdrawn on a large scale? Does it mean that in the context of aging, only metropolitan areas can use population flows to hedge the impact of aging, so can bank loans only intervene in the first- and second-tier real estate markets? I don't think so. Because:
①First of all, from the above analysis, it is not difficult to draw several conclusions: I. Due to the buffering of the urbanization process, it will take another 5-10 years for China's real estate market to lose population support and truly enter the industry recession from the market level, while the term of real estate public credit for public credit is generally only 3-5 years; II. Population is a slow variable, so the recession of the real estate market based on population changes will definitely not be achieved overnight without the interference of other factors such as policies. The collapse-like recession is a long-term, trend-based slow decline; III. The process of urbanization has never been directly from rural areas to metropolis, but must be a process from rural areas to small towns, from small towns to small and medium-sized cities, and then from small and medium-sized cities to metropolitan areas. Therefore, there must be development opportunities for third- and fourth-tier cities in the process of urbanization. It is just that this round of "price increase and inventory reduction" has overdrawn the demand of some cities in the next few years, so it needs to be treated differently.
② This urbanization process is supported by data: Judging from the data in "When the Real Estate Market No longer Diverse" published in "Financial Development Review" 2017 (11), it is different from the inherent impression that "population is preferred to gather in first- and second-tier cities" in everyone's impression - from the data, in the past five years of urbanization, the growth rate of urban population in third- and fourth-tier cities has actually been higher than that in first- and second-tier cities for a long time - the population in third- and fourth-tier cities is indeed outflowing, but due to the increase in urbanization rate, urban population is growing at an accelerated rate.
③Indeed, after an industry enters a recession, there will inevitably be a major industry reshuffle, and a large number of small and medium-sized enterprises will either go bankrupt or be merged. But the industry's recession does not mean that the industry is completely finished and hopeless. For example, the sewing machine industry I mentioned at the beginning of the article, after the era of every household's essential sewing machine has passed, not all sewing machine manufacturers have died, and not the entire sewing machine production industry has no longer existed. Indeed, many sewing machine manufacturers have disappeared from the industry reshuffle, but a large number of companies still survived, either transforming to produce other products or focusing on a specific item, such as industrial sewing machines. Some of these businesses have even developed better than before. For example, the glass industry as a whole is an overcapacity and sunset industry, but many of the high-end market segments are still due to a period of vigorous upward development. For example, in the textile industry, after the major reshuffle during the industry recession, the leading companies that survived have obtained a lot of resources and gained more market share because they were in the major reshuffle, and even lived better than before the major reshuffle.
Therefore, even if real estate enters the overall recession period of the industry, the leading companies in the industry will survive, or at least have a very high possibility of successful transformation, and humanity's basic demand for a better quality of life will not change. Therefore, even if the real estate industry really enters the recession period in the future, it will not completely disappear, and there should even be outstanding business opportunities in some sub-sectors and innovation fields.
(3) The impact of industrial transfer and industrial structure adjustment on the real estate industry
First of all, the population growth rate directly determines the demand side of the future housing market and is long-term; while the population age structure directly reflects the differential demand for housing in the current period, and the population spatial displacement rate affects the increase in housing demand in cities of different levels. As we know, the industrial structure and population structure are inherently strongly correlated (for example, in both first-tier cities, Beijing and Shanghai have similar population and industrial structures, while Shenzhen is completely different; for example, in both third- and fourth-tier cities, the population and industries of coastal third- and fourth-tier cities and western third- and fourth-tier cities are also completely different). Therefore, when we consider the future trend of a city's real estate industry, we must consider the current status of its industrial composition, as well as its current position and future trend in the process of industrial transfer.
Secondly, the rise of China's real estate originates from urbanization, while the development of China's urbanization originates from the huge wave of global industrial transfer in recent decades. The pace of global industrial transfer has not stopped yet. On the one hand, it is shifting from China to Southeast Asia, and on the other hand, it is still shifting from the east to the central and western regions. Due to the large spatial scale of China and huge differences in regional development, the locations of coastal cities and central and western cities in the industrial transfer chain are extremely different, and the urbanization rate is extremely different. Therefore, the trends of real estate development in the east, central and western regions will inevitably be extremely different in the future. Therefore, we cannot ignore this difference in actual real estate credit business and adopt a one-size-fits-all policy.
(4) Price ceiling and housing price ceiling
Real estate is an industry that involves a very wide range of areas. The excessive prosperity of the real estate industry will inevitably raise the average cost level of the entire society. This is actually the internal logic of industrial transfer mentioned earlier: the development of manufacturing has promoted the urbanization process → the urbanization process has pushed up housing prices → the rise of housing prices has pushed up the overall social cost → After the social average cost is raised, the manufacturing industry, which has a low profit margin, is forced to transfer and repeat the process to the next place.
Suddenly I thought of a very interesting data: the national Engel coefficient dropped below 30% for the first time (29.3%), and in the first three quarters of 2018, it further dropped to 28.5%. This is the level of the richest developed countries such as the United Kingdom and the United States, but why do people do not feel rich? Let’s talk about the data. It took 18 years for China’s Engel coefficient to drop from 60% to 50%. In these 18 years, the disposable income of urban residents has increased by 13.1 times, and consumption expenditure has increased by 11.6 times. It only took 4 years for the decline from 50% to 40%. In these four years, the disposable income of urban residents has increased by 29.8%, and consumption expenditure has increased by 27.5%.What is behind the soaring Engel coefficient? Real estate prices have soared in the past two decades. Considering the high leverage ratio of residents who are known to everyone (total leverage ratio of residents' debt/total disposable income = 112%, exceeding 108.1% in the United States) and the high proportion of new bank credits in residential housing purchase loans (at the end of 2017, the balance of household loans per household accounted for 62.14% of the total deposit balance, and real estate accounts for more than 68% of household assets), it can be said that unless the RMB has significantly depreciated inflation and depreciation, the current total social cost has reached the ceiling that manufacturing and small and medium-sized enterprises can bear, which also means that housing prices have also reached the ceiling limited by economic fundamentals.
I think the housing price ceiling can be further subdivided into three categories:
①The current housing price ceiling in first-tier cities is because housing prices in first-tier cities are already so high that they are close to the limit of social affordability (the proportion of real estate in Beijing and Shanghai household assets has exceeded 85%), so it is a macroeconomic-oriented ceiling;
②The housing price ceiling in second-tier cities is a "horse-pulling" policy imposed by the "price limit policy" in order to suppress the locomotives of rising housing prices;
②The housing price ceiling in second-tier cities is a "horse-pulling" policy imposed by the "price limit policy" at the national level;
③The ceiling of housing prices in third- and fourth-tier cities is relatively complicated. On the one hand, housing prices that rise too quickly meet the upper ceiling of local residents' income levels. On the other hand, housing prices in third- and fourth-tier cities that rise too quickly have approached or even exceeded the market-oriented ceiling of second-tier cities under the "price limit".
So, I personally think that since September this year, the volume and price correction encountered by the real estate market in a large number of third- and fourth-tier cities will continue; first-tier cities will be suppressed by housing prices before the long-term mechanism is implemented (the price peak of high-end residential buildings will break through, but the average price will be suppressed), and after the long-term mechanism is implemented, the rental market will be dominated by the rental market; therefore, the largest and safest market opportunities in the future real estate industry are still in second-tier cities and provincial capitals.
3. Also talk about real estate cycle
Does the real estate industry have cycles? In terms of data, there must be some. Whether it is a model based on single indicators such as selling price, transaction volume, and newly started area, or a model based on new indicators based on different weights, a certain periodic law of a complete cycle of 3-5 years can be obtained.
But if we look at some more data, we will find that the cycles of models made based on indicators such as selling price, transaction volume, newly started area, and real estate investment are all different (the graph does not overlap at all, and there is no significant correlation). Moreover, no matter which indicator the model is based on, the data from 2015 and before will not predict the rapid rise of the real estate market after 2016. Why? Because this wave of rise in 2016 was entirely driven by the so-called "destocking" and "monetizing shantytown renovation" policies; the tail of this wave of "cycle" is also extremely long, and it is also due to the influence of various "price limits" and "sale restriction" policies. Therefore, it is better to say that the real estate industry is cyclical, but rather that the real estate regulation policies are cyclical (the real estate market is unstable, support policies are issued, and control policies are issued if the real estate market is unstable, and if the real estate market is growing too fast).
(II) Group (Shareholders) risk
Why put the group (Shareholders) risk second? This is because the risks of the group (shareholders) are extremely sensible and unforeseeable, and the impact on a single project is huge. Simply put, it means: A single project company has risks. As long as the group (shareholders) has no problem, no matter whether the group guarantees are guaranteed or not, it can generally rely on the group support to solve it. On the contrary, even if the risk management of a single project company is in place and the group (shareholders) has problems, a single project is basically considered to be done with . This is true for small and medium-sized real estate groups or national real estate giants:
There is a private real estate developer R. There is a commercial and residential project in a very good location in the center of Chengdu. The project has a mortgage that far exceeds the loan amount as collateral, and the actual controller has a full joint and several liability guarantee. The floor land price of the project is relatively low. It should be a very safe project.But what happened? Because the house was sold too well, the major shareholder and the minor shareholder had a dispute over the distribution of income. The minor shareholder was angry and seized the project and forced the major shareholder to make concessions. As a result, a private financing creditor followed the project and another private creditor waited for the seal. Then the construction party could not sit still... The construction party began to ask for advance payment for the project, and the home buyer asked for a compensation for withdrawal... A good project was so abrupt and inexplicably dying.
For example, a national real estate giant J Group (the department and subsequent data about J Group are all derived from public data, Dr. Ye Xinjie's "Research on China Real Estate Financial Risk Disposal Based on Market Subjects") was listed on the main board of the Hong Kong Stock Exchange in 2009. It owns multiple business segments such as real estate group, financial group, cultural group, commercial group, property group, tourism and hotel group, shipping group, and catering group. Due to its good business development, it has won the title of "Top 10 Brand Value of China Real Estate Companies" many times. As of the end of 2014, J real estate companies' sales revenue reached 23.9 billion yuan, ranking 19th in the country, with an average annual compound growth rate of 48% in the three years from 2012 to 2014. The operating conditions of real estate projects in various places are also normal. From a single project, there are no risks, and even from a financial perspective, there is no risk to the group.
However, in mid-October 2014, it was rumored that the chairman of the board of directors of J real estate companies was delayed in Hong Kong and did not return due to suspected corruption cases. Public information from Shenzhen’s Land and Resources Department in November 2014 showed that nearly 2,000 properties in four real estate projects developed by J real estate companies in Shenzhen were “locked by the Administration”. Subsequently, the major shareholder and chairman of the board of directors of J real estate company sold 11.21% of the shares to other acquirers for a total consideration of HK$1.668 billion, and the company's largest shareholder changed people. J real estate company failed to repay the relevant HK$400 million on time, and HSBC Bank announced on January 3, 2015 that J real estate company defaulted, which in turn triggered cross-border defaults on other financial creditors, bonds and other financing. On January 8, 2015, J real estate companies were pre-sentenced for failure to pay a bond interest of US$23 million, which triggered a chain reaction. In the next week, the number of financial institutions applying to the court for pre-sentenced property preservation for several assets of J real estate companies quickly rose to 19. At the same time, several bank accounts of the company were frozen and deducted by several banks due to the application of other creditors. The 710 million yuan of working capital was frozen and unusable. At the end of 2014, the unrestricted cash was only 310 million yuan, and the cash flow was severely exhausted. A large number of project companies that were originally operating normally across the country were sealed several rounds of times due to various relationships, and the group's risks were quickly transformed into credit risks for each single project.
So, how should we judge the risks of the group (shareholders)?
1. Let’s first talk about how to judge and control the risks of small and medium-sized real estate companies mainly based on individual shareholders. From my personal experience, for small and medium-sized real estate companies mainly composed of individual shareholders, the reason why banks are willing to consider intervening in their projects is definitely because the various conditions of the project itself are quite high-quality, so the main risks that need to be considered are the overall risks of the group. There are mainly the following aspects:
① Risk of the source of funds
The risk of the source of funds is the most common risk for small and medium-sized real estate companies, that is, it is difficult for us to know what the source of funds is, how many are real own funds, and how many funds are obtained from private high-priced financing? After all, some of them seem to be single shareholders, but in fact they are composed of multiple sources of funds behind them; many small and medium-sized real estate companies have even legal or political risks. Therefore, I personally suggest that before doing credit business, it is necessary to do:
I. Through the study of the entire development history of this group (shareholders), we will initially judge the cumulative profit in the historical operation process, and compare it with the current overall assets of the group (shareholders) and the funds required for the project to be developed to see if it matches and whether there are a large number of assets or unknown sources of funds.
II. Through various Internet tools (if necessary, you can even use financial big data companies to conduct special investigations), verify the situation of the affiliated companies of the group (shareholders) and verify the litigation of all affiliated companies and affiliated executives.
III. It is best to require the branch of the group (shareholders) to make a fortune or where the main business is located to intervene in the credit, and use the power of the local branch to understand the reputation of the small and medium-sized real estate group (shareholders) in the local real estate circle and financial circle from various channels, and to understand whether they have hidden liabilities or other abnormal situations.
② Capital chain risk
The second biggest risk of small and medium-sized real estate companies is capital chain risk. These small and medium-sized private real estate companies often have several major characteristics:
I. Real estate groups with too small size (small real estate groups with only one or two projects) often do not have a very strict financial system and complete financial personnel. In addition, investment is often based on the boss's personal wishes, and often intervene in other unrelated industries such as small loan companies, film and television companies, and other unrelated industries whose capital volume is not small, which is very easy to generate capital chain risks.
Therefore, for this type of enterprise, in addition to seeing the project risks clearly and understanding the rationality and legality of the source of funds, it is more important to understand the customer's funds and industry merging, and comprehensively judge the overall capital chain of this type of group through customer consolidated financial statements or the statements and other information of major member companies.
II. For medium-sized real estate companies, such private real estate companies often have relatively sound financial systems and financial systems, and most of them have even conducted a certain degree of group equity review. Therefore, at least within the scope of their consolidation, their main business is still very prominent, and generally there will be no capital chain risks due to simple capital scheduling.
However, this type of enterprise still has three potential risks: on the one hand, due to the increase in the complexity of the enterprise, it is difficult to understand the historical evolution of the source of funds by treating the first type of enterprises, so the source of funds is often more confusing; on the other hand, although this type of enterprise is more difficult to raise funds in banks, leverage tools from various other channels are most used, and the actual leverage ratio is generally extremely high; thirdly, this type of enterprise generally focuses on a certain city, several cities, and at most to a small area. Once there are major policy changes or market fluctuations within this range, such enterprises with higher leverage ratios are extremely likely to explode in the capital chain risk.
Therefore, for such enterprises, we should select the best from the best, carefully intervene in enterprises with low overall debt ratio and clear financial capital, and pay attention to the overall risks of the group in a timely manner and be prepared to exit at any time.
③Shareholder dispute risk
Shareholder dispute is also one of the important risks for small and medium-sized real estate companies. Whether it is sharing risks, integrating personal connections, or due to financial pressure, there are not many small and medium-sized real estate companies with a single shareholder (father and son, husband and wife can also be considered single shareholders). Most small and medium-sized private real estate companies generally have 1-3 small and medium-sized real estate companies in addition to major shareholders (actual controllers). The example of private real estate developer R mentioned earlier is that because the small shareholder did not provide guarantees for the bank's credit, when the major shareholder and the small shareholder had disputes over the distribution of interests, the small shareholder did not seal the project to force the major shareholder to make concessions, which caused a series of subsequent problems.
Therefore, for private real estate companies with unclear interests between shareholders, regardless of the previous counter-guarantees and interest distribution of their shareholders, it is recommended to ask all shareholders to provide guarantees before intervening. If the small shareholder is unwilling to provide full joint and several liability guarantees like the actual controller, it is also necessary to provide joint and several liability guarantees according to the equity ratio.
④Potential risks left by historical evolution
The biggest advantage of many small and medium-sized private real estate companies is that their land prices are cheap. Why are land prices cheap? There are only two points: then it is early to acquire land, then it is to acquire land from companies that acquire land earlier by acquiring companies.This brings two risks. The first risk is the risk of the land being taken back by the government or forced to pay idle funds. This risk is not very large in actual operation. The more important risk is the risks left by previous shareholders. For example, the shareholders sold more shares, and the shareholders had borrowed money outside in the name of the project company. These problems will directly lead to the project company's possible litigation, which will affect the safety of the smooth development and financing of the project.
Therefore, for such companies, we should not only pay attention to the current shareholder situation, but also conduct a survey on the situation of their historical shareholders. Some companies will retain the original shareholders as small shareholders for a period of time after the merger and acquisition for risk control purposes; but more importantly, they will directly clear the original shareholders' equity. This situation requires us to have an understanding and investigation of the borrower's historical evolution and historical shareholders in addition to the equity structure shown in the articles of association.
2. What about large real estate groups? What factors cause these large listed real estate groups to be at an overall high risk? Is it a high turnover? Or high debt? High leverage? High land price? High inventory? Why do traditional commercial banks generally believe that the group risks of companies such as Evergrande, Country Garden , and Blu-ray are relatively high?
To be honest, I didn’t understand these issues at the beginning, so I found many audit reports from listed real estate companies in recent periods to study - I understand that even the financial reports of listed companies may not necessarily reflect the financial situation of the company. Just like the J Group mentioned earlier, when the debt risk broke out, the audit results of the accounting firm hired by the creditors showed that as of the end of 2014, J real estate companies had a total assets of 114 billion yuan, a total liabilities of 102.2 billion yuan, and a net assets of 11.8 billion yuan. Compared with the interim financial report released by the company in 2014, J real estate companies' interest-bearing liabilities increased significantly by 34.2 billion yuan, while net assets fell by 14 billion yuan. But no matter what, with the improvement and strictness of the listing disclosure system, the financial reports of listed companies are relatively the most fair and objective in reflecting the business and financial situation of the company.
When sorting out the 2018 semi-annual reports of these seven listed companies, it was found that when each company disclosed the data, whether the scope of the disclosed data was size or the type of data disclosed, there were big differences (for example, Evergrande disclosed it more comprehensively, for example:
① In terms of land reserves, Evergrande not only disclosed the area and price of newly purchased land in the first half of 2018, but also explained the price and area distribution of all land reserves in first- and second- and third- and fourth-tier cities, and even the payment plans for the land payment that has not been paid in the next few years;
② For example, it also explained the repayment amount of full-scope liabilities in the future by year, which are not both points in the semi-annual reports of other real estate companies). So, I can only choose universally disclosed data to make comparisons.But even so, we can find many interesting things from the table below:
(1) Who is the real high turnover? We used two very simple indicators, "sales amount/total assets" and "sales amount/inventory", and found it interesting: Country Garden and Blu-ray really live up to the name of "high turnover" and deserve it; but Evergrande, Greenland, and R&F are basically on the same level, and they are still far from Poly and Vanke !
(2) Who is the most short of money? I won’t mention the indicator of debt-to-asset ratio. There are various debt optimization tools such as perpetual bonds and various financial means to achieve (for example, Evergrande and Greenland, which have a high debt-to-asset ratio, have significantly carried forward their income to increase undistributed profits. Of course, this alone cannot explain that Evergrande’s debt-to-asset ratio can drop so sharply, and there are many twists and turns in it. The space here is limited, so I won’t introduce it in detail). I used several other simple and clear indicators: “Cash/Debt due within 1 year”, “Cash/full-scale loan”, “Debt due within 1 year/full-scale debt”, and some situations are clear at a glance:
① Country Garden’s debts due within 51 years account for the highest proportion of all interest-bearing debts, and the cash has the lowest coverage ratio of debts due within 1 year and all liabilities. No wonder it is so heavy to assess financing, high turnover and collection;
② Poly and Vanke are really not short of money, especially Vanke . The debt structure is indeed in the industry No. 1;
③ Evergrande’s debt ratio due within 1 year is also significantly higher than that of other companies, but fortunately, the cash on the book is still sufficient;
④ What if we consider the cash in addition to cash? After introducing "(Inventory - Contract Liabilities + Advances)/Debts due within 1 year", it was found that Country Garden is still the most short of money.
(3) Which company is the best at making money? We found that high turnover seems to have nothing to do with gross profit margin. There seems to be no fundamental difference in gross profit margins in Evergrande, Country Garden , which are in the third and fourth tiers, and R&F, which are mainly in the first and second tiers, and Poly , which seem to be in the gross profit margins. Greenland and Blu-ray's gross profit margins are significantly lower than those of other real estate companies. Greenland is probably due to the low proportion of its main real estate business, while Blu-ray is really fighting for sales and cash recovery.
(4) Which company has the most exploited the construction party’s funds? I used an inaccurate but simple and clear indicator "(Payment-Receivable)/(Prepayment + Inventory)", and Blu-ray is significantly higher than other similar companies.
(5) Banks generally like Poly and Vanke . Is it just because its shareholder background is good? I don't think so, because even from the perspective of its financial indicators and operating indicators, they are also typical "good kids" in the eyes of bank risk control:
First, let's take a look at the most typical "good kids" Poly :
① The business area layout is reasonable, and there is no large-scale entry into third- and fourth-tier cities that banks generally are not optimistic about: Poly first- and second-tier cities have nearly 78%, and the two core urban agglomerations of Pearl River Delta and Yangtze River Delta account for 31% and 20% respectively; the expansion amount and area of first- and second-tier cities in the newly acquired land account for 68% and 50% respectively. Third- and fourth-tier cities mainly focus on the surrounding core urban agglomerations such as the Pearl River Delta and the Yangtze River Delta. The company has an area to be developed by 89.5 million square meters, of which 5425 first- and second-tier cities are 5.425. 10,000 square meters, accounting for about 61%; the two core urban agglomerations of the Pearl River Delta and the Yangtze River Delta have 41.24 million square meters, accounting for about 46%.
② Focus on the main business: Poly The main business of real estate accounts for 90% of revenue, and the sales of the company's residential products account for 90%, of which 90% of small and medium-sized residential products below 144 square meters account for 90%.
③The debt type structure is reasonable: interest-bearing liabilities are mainly bank loans, accounting for more than 71%, and direct debt financing tools such as corporate bonds and medium-term notes account for about 14%;
④ Various financial indicators are good: debt-to-asset ratio, etc. I will not go into details. Focus on the current ratio, Poly 1.78, far exceeding the level of other real estate companies 1.0-1.2 - no wonder China Construction Bank, which has always had the best ability to grasp the general trend, has left almost the vast majority of the real estate shares to Poly .
Vanke also has similar characteristics that are popular with financial institutions for risk control:
① Highlights of main business: Vanke points in business, the settlement ratio of the Group's total revenue in the first half of the year was 95.0% from real estate; among the products sold by the Group in the first half of the year, residential accounts for 85.9%, commercial accounts for 10.9%, and other supporting facilities account for 3.2%. Among residential products, small and medium-sized apartments with a ratio of less than 144 square meters account for 91%.
②Reasonable regional distribution and proper development strategy: by region, Vanke 's business share in the south, Shanghai, North, and Central and Western regions is 28.85%, 35.83%, 15.75% and 19.57% respectively, with a complete risk sharing mechanism, and 90.8% of the new projects are cooperative projects; ③ High sense of social responsibility (political awareness): Long-term rental apartment business covers 30 major cities, with a cumulative number of rooms acquired by more than 160,000, and a cumulative number of openings of more than 40,000. The average occupancy rate of projects over 6 months of opening is about 92%; ④Healthy financing structure, and there is no excessive high interest liabilities: According to the debt of Vanke 's debt, bank loans account for 60.4%, bonds payable accounts for 21.3%, and other loans account for 18.3%.
However, Vanke has one more hidden concern than Poly : foreign currency liabilities account for 31.6% (even far higher than Evergrande, which is constantly criticized by the media for saying that US dollar financing is too high). If the RMB depreciates significantly, the exchange risk will be extremely high.
(6) Why do bank risk control generally believe that corporate groups such as Evergrande and Country Garden are at a high risk? In fact, these companies also have some common features:
① Like Country Garden , it is too sinking to third- and fourth-tier cities ( Country Garden 63% of sales revenue comes from third- and fourth-tier cities); ② The guarantee amount for mortgage loans is too large ( Country Garden has a total guarantee of mortgage loans of 311.1 billion yuan); ④ The financing cost is relatively high (for example, the average interest rate of Evergrande's total interest-bearing liabilities is 7.92%, while Poly is only 4.86%); ⑤ The proportion of liabilities due within one year is too high (for example, Country Garden The proportion of liabilities due within one year is more than 70% of all liabilities); ⑥ The owner's equity is relatively weak (for example, a large number of perpetual bonds are included in equity. Out of the 20 billion Blu-ray owner's equity, 5 billion is perpetual bonds, and 5 billion is minority shareholders' equity. After excluding perpetual bonds alone, the debt-to-asset ratio will soar to 87.11%; for example, Evergrande's owner's equity, Among the 324.5 billion equity accounts, 178.7 billion yuan is non-controlling equity, accounting for the highest proportion among the leading real estate companies studied); ⑦ The main business is not prominent and the business is too diversified (for example, only 71.7 billion of Green's revenue belongs to the real estate sector, and the construction industry's revenue is 77.2 billion yuan, and the gross profit margin is only 3.16%); ⑧ Commercial office accounts for a high proportion (for example, Greenland's commercial office accounts for 30.9%); ⑧ The coverage rate of cash to debts is low (for example, Country Garden Cash to the coverage rate of maturing debts and all liabilities within one year is only 39.55% and 28.59%)
3. Which type of enterprises are safer in large, medium and small real estate companies?
In fact, judging from the previous discussions, I think everyone should have an answer to this question in their minds. In the medium and short term, facing the trend of increasing tightening of real estate capital, ① Large enterprises have a large room for maneuver and the least risk; ② Small enterprises do not involve private financing, generally due to financing difficulties, leverage is relatively lowest, so as long as the funds are controlled, the risks are relatively small. ③ Medium-sized real estate companies have high leverage and high regional concentration, and the risks are actually relatively the greatest. Of course, in the long run, from the general trend of China's long-term population structure, 10-20 years later, only the top 10-15 large real estate companies are truly safe.
(III) Regional risk
1. The regional risk we are talking about actually has two scales, one is large-scale regional risk such as Northeast, Southwest and Central China. This regional risk is mainly aimed at some real estate groups that have not achieved national layout or are not balanced in the country.
For example, Blu-ray Group, of its 3.8422 million square meters sales in the first half of 2018, 2.1009 million came from Chengdu regional companies, while the total area of Chengdu and Yunnan Chongqing District is as high as 2.8826 million square meters, with a very high regional concentration. This is also the reason why Blu-ray's gross profit margin is significantly lower than that of other real estate companies - Sichuan and Chongqing have entered the harvest period of local governments. Whether it is third- and fourth-tier cities, Chongqing or Chengdu itself, the land prices are not low; however, Blu-ray's main fast-sales market is not high, resulting in volume but not price change, and the gross profit margin is significantly lower. For example, Shoukai Co., Ltd., known as the "No. 1 Beijinger", had sales of only 52.464 billion yuan as of the end of September this year, with an annual planned completion rate of only 50.5%, and a sales area of only 1.9922 million square meters, a year-on-year decrease of 13.02%. This is because its business is too concentrated in the Beijing area, which has encountered strict purchase and price restrictions this year. Another business, Shouchuang Real Estate, which is also mainly concentrated in Beijing, has also encountered almost similar situations, with the annual plan completion rate as of the end of October only 60%. Greentown, which is too focused on first- and second-tier cities and focuses on mid-to-high-end, has a plan completion rate of only 64.1%, and there is still a plan of 64.6 billion that has not been completed. It can be seen that the regional situation has a huge impact on the operations of the real estate group.
2. Another is regional risk in a smaller scale, which refers to the risk caused by the personalized characteristics of different regional sectors in the same city.
During this year's Dragon Boat Festival holiday, I walked 40,000 to 50,000 steps a day in Tokyo for three days. I walked around the city of Tokyo like a flash and found a very interesting situation: that is, as the only metropolis in Japan that continues to have net population inflow, the population inflow in each region is also significantly different, and even the population structure and industrial structure between different regions are completely different; and these differences are not necessarily related to whether transportation is convenient or their distance from the city center. We saw that some areas were clearly very convenient for transportation, but during the morning rush hour (8 am), there were only pedestrians in groups of three or three at the huge subway station. We saw that some areas were clearly near Shizhong District, but their popularity was lonely. There were no pedestrians on the street at 6 pm. The subway, bus, and parks were also full of old people. However, Roppongi, Shibuya and other places were full of people and young people at any time. Only in these places can we clearly feel the youth and vitality of this city, which is completely different from other dusk places. Due to limited time, I did not carefully compare the housing prices and real estate sales in these places, but even with basic logic judgment, I can draw completely different future potentials of these areas. Therefore, the fate of the same real estate project may be completely different in different regions.
In short, I think: ① The larger the city, the more obvious the differentiation within the city will be. Different countries have different population and industry gradients around the world; different cities form this population and industry gradient within the country; within a metropolitan area, different regional development conditions reflect this population and industry gradient and differentiation; ② Young people in metropolitan areas always gather in 1-2 regions (usually no more than 3). These areas are the future development direction of a city and are also real estate hotspots for at least 10-15 years in the future; ③ Once this aggregation effect is formed, it is generally difficult to change no matter how the policy guides it, especially if the area that has fallen into aging begins to decline, even if the policy is favorable, it is difficult to look back.
This is easy to explain why everyone thought that the Chengdu Chengnan section, especially the Dayuan section, had a serious surplus of office buildings and complexes. As a result, a few years have passed, but it has not been as sad as those "professional" third-party institutions had predicted back then. Instead, it has become a new urban CBD in Chengdu and an undisputed price highland in the Chengdu real estate market. Why? There is nothing more, because young people gather and are getting more and more gathering; it is easy to explain why the northern part of the city is obviously scarce for business and office, and the government's policy of reform in the north is so strong, but it is one that is open and one that is half dead, and housing prices are always lukewarm.Why? Because this area has been abandoned by young people, because it is completely different from "all the way to the south", the north of the city has been completely abandoned by the market. There is also the city center that has also begun to aging. Although many young people gather to work during the day, there are not many young people in this area after get off work. So recently, the commercial complexes in the city center have closed one after another, one after another. Even the popularity of bars in Jiuyanqiao and Lan Kwai Fong has been getting worse every year (young people have gone to popular areas such as Nanmen Tiexiang Sishui Street).
The only two controversial ones are:
(1) What will happen to the future of in Qingyang District?
Qingyang District is actually an area that has begun to fall into aging, but as a traditional old district with rich educational resources, it does have more and better educational resources than the emerging area of Nanmen. It can also attract some young people who cannot obtain enough high-quality educational resources in the south to settle here, and can maintain a certain housing price base within 5-10 years. But with the maturity of educational resources in the south (the south has already begun to Daxing schools. With the population quality of the south, the educational resources in the south can mature in at most 10 years, and catch up with or even surpass traditional old areas like Qingyang District). By then, the Qingyang District, where a park can be built for four or five years, has no movement, has backward transportation planning, and the buses are full of elderly people, will inevitably be surpassed by the south side of a new park in three months and a new school in five months.
(2) Will Chengdu go east or south in the future? How many years will the gimmick of government relocation work?
Two years ago, this was not a problem, because at that time, Chengdu was "all the way south" from top to the next. However, in the past two years, the Chengdu Municipal Government has clearly fallen in love with each other. The proposal of the concept of "three cities and three capitals" and the promotion of the "eastward advance" strategy all show the city government's determination and ambition to go east. There were even rumors everywhere in the world, saying that the municipal government was persuading the provincial government not to move south as planned, but to move eastward, to stand up for Chengdu's strategy of moving eastward. In my personal opinion:
①The possibility of the provincial government moving east is relatively small (there is too much involvement), and even if it is moved east, it will not be as powerful as the provincial and municipal government moving south plan. Because Chengdu’s eastward plan happened to catch up with this round of real estate adjustments, and the automobile industry with the core layout of Dongmen is also facing a historic major adjustment, so I think: Within 3-5 years, eastward migration may only be a gimmick for everyone to make money together.
② From a longer time scale, the Chengdu-Chongqing metropolitan area will inevitably become one of the five metropolitan areas in China and will inevitably become the core of the entire western China economy. The Chengdu Dongmen area between Chengdu and Chongqing does have good development space and conditions. However, due to the natural barrier of Longquan Mountains , it has become a sub-center that is significantly inferior to the southern part of the city at most.
(IV) Project risk
Real estate projects will eventually be based on specific projects, so project risks are also the most direct and intuitive risks. Generally speaking, the risks of real estate projects include: project positioning risks, location selection risks, business format (house type) selection risks, capital chain risks, mortgage hanging risks, etc. But for the project, judging from my years of experience, it is really something that is different from one's own opinion. Real estate projects are very simple, unlike chemical projects and high-end manufacturing projects, which have such high technical thresholds, and almost everyone can understand the project (or thinks it is understood). So this happens often. People who have been doing credit business for decades are experienced and clear logic, but their views and perspectives are often completely different for the same real estate project. So, I won’t go into details here.
Risk control 1. How to control group risks? Can the current popular concentration truly control the risks of the group?
In the past one or two years, with the exposure of many large enterprise groups, major banks have placed group risk control in a very important position.But from the actual situation, it seems that major banks do not have very effective means to prevent and control group risks. Basically, there are three tricks: strengthening the inclusion management of group customer identification, balance upper limit management, and share upper limit management (that is, the so-called concentration management).
Strengthening group customer identification and inclusion in management is naturally a matter of course, but the latter two are worth discussing. The management of balance upper limit is indeed scientific, but based on the financial data of the previous year, there is a certain lag and difference in determining the credit balance for the next year. In addition, the group's customers are generally large in size and bank approval is time-consuming. In addition, the internal management structure of many banks has led to the initiation of many leading group customers, and the overall operation model and operation plan of the group are relatively superficial, which leads to the upper limit of the balance approved by the risk-approved balance is often too conservative and cautious, which seriously limits the development of the business.
The share upper limit solves the rigid problem of balance upper limit and is more conducive to business development. But there is a bug: a company has raised 4 billion yuan in full scope, and the concentration limit approved by Bank A is no more than 25%, and the current balance is 1 billion yuan, which has reached the upper limit; at this time, the company found its own financial company or other banks that do not have concentration requirements to raise 4 billion yuan. According to the concentration requirements, Bank A can increase another 1 billion yuan. At this time, the risk has been controlled or expanded? Moreover, the essential nature of the upper limit of share control is a herd and follow-up strategy. In addition to showing lack of confidence in one's own risk control capabilities, can it really control risks? A corporate group with a debt of 10 billion yuan collapsed. Is the third-1.5 billion yuan definitely safer than the first-ranked 3 billion yuan? I'm afraid not. If we form a debt committee to advance and retreat together, the rate of compensation for everyone should be similar; if we fight each other, the bank with the highest share will generally receive more risk mitigation measures because of its better customer relationship and more voice. In many cases, the rate of compensation is even higher than that of the bank with the third and fourth share rankings.
So how should we control the risks of group customers? I think the risk of group customers is not to do more or less, but to run faster or slower. Therefore, if you really want to have assets safe, you can only "go boldly when you advance and decisively when you retreat". To achieve this, big data must be necessary - of course, this is just a trend, and there are still major difficulties and problems in realizing it, I will talk about this in detail later.
2. Which one is more important, mortgage or guarantee? Is it possible to not mortgage it if you have a guarantee from the group?
The financial circle has completely different preferences for mortgages: ① A large state-owned bank known as the "Whampoa Military Academy in the banking industry" attaches great importance to mortgages, especially for mortgages for under-construction projects. From the head office to the branch, they all attach great importance to mortgages for under-construction projects. Whether it is approval or post-loan management, whether there is a group guarantee or not, the land must be mortgaged, and almost all require that the under-construction projects be "full of all". This is not only a prerequisite for the bank to withdraw funds, but also the release of under-construction projects is the strictest management among the bank's interbanks. ② As for a large cosmic bank, although land mortgage is also necessary, for construction projects, many times, they only mention one sentence in the approved management requirements (sometimes they will not even withdraw), and do not make rigid requirements when withdrawing money. When post-loan management, they can usually pass the construction project with parking spaces or shops. ③ The state-owned bank, which is known as the most unrestrained among the four major banks, is really unrestrained. After obtaining the land mortgage, he basically doesn’t care much about mortgages for projects under construction.④ As for joint-stock banks, they are more pragmatic and flexible. When there is a guarantee for companies with good shareholder background, land mortgages can be avoided; for ordinary small and medium-sized private real estate companies, in addition to guarantees and pledges, mortgages must be strictly required, and land and projects under construction must be strictly managed; ⑤ As for trust companies, many of the customer groups that may intervene are high-risk customers that can bear high prices of trusts, so risk control measures are actually the strictest. I won’t talk about the conventional guarantees and land mortgages. Some will also require equity pledge (some even require "equity transfer + repurchase" to achieve actual holding), co-management of badges, regular inspections of third-party inspections, etc.; for mortgages and sales receivables in construction projects, on-site asset management managers will be dispatched to do very strict management, which is really to achieve "full payment", "release on demand" and "closed management of sales receivables".
From the above description, we may be confused: if mortgages are very effective, then why do some banks do not value mortgages so much; if mortgages are useless, why do some banks and financial institutions take mortgages so seriously? I will say this question in the subsequent "How to balance risks and markets", here is a question that I will first talk about whether mortgage is useful.
(1) Let’s talk about whether land mortgage is useful?
From the perspective of monetization ability, land mortgage is useless: because according to the relevant provisions of the Supreme People's Court's "Reply on the Preferential Right of Payment of Construction Project Prices", after consumers pay all or most of the funds for purchasing commercial housing, the contractor's priority right of paying for the project price enjoyed by the commercial housing shall not compete with the buyer, which means that the bank's mortgage right cannot compete with the expectation right of the buyer. Therefore, after the pre-sale of commercial housing, the bank's mortgage right of land use rights almost loses the ability to cash out the ability to cash out the land use rights. In fact, even if it is only partially pre-sale, it actually loses the ability to cash out quickly because it involves the recognition of the ground attachments at the time of mortgage, involves the division of land certificates, etc.
But in terms of risk control, land mortgage is extremely useful: ① First of all, land mortgage is extremely exclusive and controllable. That is to say, if the land is mortgaged, then whether it is a second-order mortgage or an additional mortgage on construction projects, the real estate center generally needs to solicit opinions from the land mortgage owners, which can effectively ensure the ownership status of our project is clean; ② Secondly, extreme situations really occur. Whether we are based on the land mortgage right seizure project or from the perspective of having a good position in bankruptcy liquidation, land mortgage has a great effect.
(2) Is mortgaged for projects under construction useful?
From the perspective of risk control, it is indeed of great significance, because this is the clearest and most practical mortgage, and it has a strong monetization ability compared to land. But from actual operation, it is the most meaningless.Why?
①First of all, in terms of operation process, when the Housing Management Bureau used to apply for a mortgage on the construction project, it was often not necessary to release the mortgage on the construction project when applying for a pre-sale certificate. It only needed to issue a letter of consent. Then each house would be displayed to the outside world at the Housing Management Bureau, including the mortgage, available for sale, sold, contracts that have been drafted, etc., and when the sales need to be released, it would be released in a targeted manner. However, in the past year, the lottery policy has emerged in various places. In addition, the separation of the Housing Management Bureau and the Real Estate Center, when the Housing Management Bureau handles the pre-sale certificate, it usually requires that all the under-construction projects of the corresponding buildings be released as a prerequisite (there are many places where the unified lottery is not required, and the Housing Management Bureau also follows the trend of such requirements). The cycle of a house from construction to sales is very short, so the risk mitigation effect that the under-construction project can actually play is extremely small;
② From the attitude of all parties towards mortgages for under-construction projects, real estate companies definitely do not want to mortgage projects under-construction, because the sales department of real estate companies is generally the most awesome department in their company, and the financial department is generally unwilling to take the blame for mortgage projects under-construction projects. As for banks, due to the complex internal collateral management process and insufficient staff, and the real estate center is also troublesome to handle mortgages and release materials and processes for projects under-construction projects, they are generally unwilling to frequently mortgage mortgages and release them. Therefore, it usually ends up as mortgage parking spaces and basements, which only meet the formal conditions.
(3) Overall, for small and medium-sized real estate enterprise groups, mortgage is definitely extremely important. It is extremely necessary to have sufficient mortgages, or even require additional net land or real estate mortgages (the private real estate developer R mentioned earlier was seized by various creditors in the past, and the bank finally successfully resolved the potential adverse risks because the mortgage was very worthwhile).
For large real estate groups with strong strength, mortgage is optional when the group's risks are not completely exposed. Anyway, there are generally cross-breach terms for loan contracts of financial institutions, so if the group can still hold on, the group will coordinate funds to solve the dilemma of a single project. But once the group encounters extreme situations and the ultimate risk breaks out, the collateral becomes particularly important again. The example of J Group mentioned before is like this:
When there is no problem, from the group's financial statements, the group is solvency, but for real estate groups, especially non-state-owned real estate groups, they often have complex equity structure and huge related transactions. Many real estate developers often have the same project, including off-balance sheet financing, repeated financing of on-balance sheet loans of project companies, or in vitro companies with clear shares and actual debts, or even companies with premium trading of assets within and outside the system to embezzle funds. Therefore, when the risks of the group company are exposed, these hidden liabilities will gradually surface, and the group will quickly lose the ability to help its subsidiaries. Just like Group J, after the risks were exposed, with the deepening of the special audit, it was discovered that the entire group's liabilities were as high as 65 billion yuan, far exceeding the 30 billion yuan disclosed in the previous financial report. From the time HSBC announced its default on January 3 to the end of January, in less than a month, the entire J Group suffered more than 80 lawsuits and seizures and frozen items. The largest creditor bank quickly seized 53 assets of J real estate companies because it has always attached great importance to collateral and held more mortgage rights in its hands. On the one hand, it prevented J Group from transferring assets, and on the other hand, it grasped the initiative in negotiations, which ultimately resolved the credit risk.
3. How to manage collaterals to be the safest?
Since collateral is so important, how should we manage it? The specific management methods of collateral have standardized operating procedures and management specifications in each bank. So I think in terms of the operation process, there is actually no need to say anything. Here we discuss how to collateral, and more of it is discussed from the perspective of legal risks - take the under-construction project as an example to focus on (land mortgage is too simple):
(1) Regarding mortgage on real estate under-construction project.Article 3 of the Ministry of Construction's "Regulations on Urban Real Estate Mortgage Management" (hereinafter referred to as the "Measures") clearly stipulates: "The mortgage of under construction projects referred to in these Measures refers to the act of the mortgagor to mortgage the land use right obtained by the law in order to obtain funds for the continued construction of the under construction projects, together with the input assets of the under construction projects, to mortgage the land use right to the lending bank in a manner that does not transfer possession as a way to repay the loan." Article 11 of the Measures also stipulates: "If the part of the under construction projects has been mortgaged, the land use right will be mortgaged accordingly." "Interpretation of the Supreme People's Court on Several Issues Concerning the Application of the Guarantee Law of the People's Republic of China Article 47 of 》 (hereinafter referred to as the "Interpretation") stipulates: "If mortgages are approved for a house or other building that has not been built or under construction in accordance with the law, the parties shall register the mortgage and the people's court may determine that the mortgage is valid." Combined with the "Measures" of the Ministry of Construction and the "Interpretation" of the Supreme Court, it is necessary to pay attention to the mortgage loan for the under construction project: the purpose of the mortgage loan for the under construction project is "the mortgage loan for the mortgagor to obtain the funds for the continued construction of the under construction project". The purpose of the loan is to continue construction projects. The mortgagor of the mortgage on the under construction project must be the debtor of the loan contract and the right holder of the land occupied by the under construction project. This requires us not to accept loans from the debtor using the under-construction project of a third party as collateral. Although the judicial interpretation of the Guarantee Law does not require this, it only clearly stipulates that "if the parties have completed the mortgage registration, the people's court may determine that the mortgage is valid." The departmental regulations of the Ministry of Construction are not sufficient to serve as the basis for the invalidity of the mortgage contract. However, basically, the real estate registration center will control this item when registering.
(2) Article 286 of the Contract Law stipulates that the priority right of compensation for construction projects is preferred over the realization of bank mortgage priority. The "Reply on the Preferential Right to Pay for Construction Project Prices" (Fa Shi [2002] No. 16) adopted by the Supreme People's Court on June 11, 2002 also clearly stipulates that the contractor of the construction project has priority over the mortgage rights and other claims. The approval also restricts the period for the construction project contractor to exercise priority rights, and stipulates that the period for the exercise of priority rights is six months, which shall be calculated from the date of completion acceptance of the construction project or the date of completion agreed in the construction project contract. According to the above provisions, the priority right of compensation for the contractor under construction is better than the priority right of compensation for the mortgage right, and the priority right of compensation for the mortgage right of the loan bank will be in a "name but not real" situation. In actual operation, the bank issued a mortgage loan for the under-construction project, but the development company did not pay the contractor's construction project payment as promised, and the bank's mortgage right is likely to be lost. There may even be a fact that the project employer and the contractor collude to fabricate the fact that "the contractor fails to pay the project payment as agreed", resulting in the mortgage right being legally valid and actually invalid. Therefore, when issuing a mortgage loan for construction projects, we must do:
① Monitor the use of loan funds to ensure that the direction of the loan is used for the under-construction project, and promptly understand the payment progress of the project payment;
② If the project has been completed, the borrower is required to provide a certificate that the under-construction project price has been paid, and it will be converted into real estate mortgage after completion acceptance;
③ When a lawsuit occurs between the mortgagor and the contractor, we must promptly request the court to participate in the lawsuit as a third party to verify whether the construction project price exercises its rights within six months.
④If possible, the contractor may be required to issue a written document waived the right to priority compensation.
(3) Most real estate centers that handle mortgages can add mortgages under construction under the conditions of the same creditor and mortgagee, without releasing the land mortgage, but some places will require the cancellation of the original land mortgage and re-process the mortgage on construction. At this time, we should pay attention to: First, if the land use right as the mortgage has been sealed by the court, if we go to the registration machine to pay attention to the cancellation of the original registration, we will not be able to handle the new registration, and once the cancellation is cancelled, it will not be possible to even restore the original state; secondly, after the bank cancels the mortgage registration of the land use right and within a short time before the mortgage registration of the under construction, the mortgage property will be suddenly sealed, and at this time, the mortgage registration of the under construction project cannot be handled.When we are applying for land use rights mortgage to mortgage under construction, we must first go to the registration department to find out whether the mortgaged property has been seized by the court or other judicial departments. If it is seized, new registration procedures shall not be processed, and we can only file a lawsuit in accordance with the law to exercise the mortgage right. If the mortgaged property has not been seized, you must bring complete registration information during the process of handling the new mortgage procedures and strive to complete the registration procedures in the shortest time. At the same time, confidentiality measures should be taken to prevent other creditors of the borrower from notifying the judicial authorities to seize the mortgaged property after they are informed.
(4) Try to get the company to buy insurance for projects under construction. Insurance requires that the bank shall be the first beneficiary during the period of the mortgage right, and the original insurance policy shall be kept in the bank; at the same time, in order to avoid the insured declaring the loss of the insurance policy and then applying for a refund, it is recommended that the insurance company agree in the policy when handling the insurance: "Unless the written consent of the first beneficiary of the insurance, the insured shall not interrupt or revoke the insurance for any reason"
(5) When the mortgage under construction is completed and accepted into real estate mortgage, the status of the mortgage must be verified to avoid the situation where the mortgage has been rented at a low price. This will make it difficult to deal with the mortgaged property, because according to the principle of "buying and selling without breaking the lease", if "renting first and then deducting", even if the borrower cannot repay the loan on time, it will be difficult to deal with the mortgaged property in actual operation because the lease is still valid.
4. How to balance risks and markets?
(1) Let’s talk about the balance between risks and markets in mortgages from the construction projects
From the previous content, it is not difficult to see that in extreme cases, the collateral is still a very effective means of mitigating risks. Then why do many banks do not value mortgages or even land mortgages as long as they obtain group guarantees from large real estate companies? This is a question of risk and market balance. First of all, banks are an industry that operates risks, and pays attention to profit coverage risks rather than absolute security; secondly, the banking industry is a full competition, and it can even be said to be an industry that is overcompetitive due to homogeneity and oversupply. Therefore, the rules of the game are never decided by the bank itself, let alone a certain bank.
So this situation occurred. For many banks with radical risk preferences, they think that as long as large real estate groups do not have political risks like J Group locked up by the government, in terms of normal operations, they will not be destroyed in two or three years without any risk signs - because whether it is the exposure of industry risks or the deterioration of their own cash flow, there are actually a process. Large real estate groups generally have a wide area coverage, many projects, and a lot of reserve land. By selling land and projects, they can support the cash flow for another two or three years, while development loans for a single project generally last for only two or three years. Therefore, for high-quality customers, many banks with radical risk appetite feel OK when they get the group guarantee.
At this time, for many banks with cautious risk preferences and high requirements for collateral, it is embarrassing in the market: small private enterprises that are too poor have mortgages and pledges. As long as the banks are willing to give money, it is not a problem. However, since these banks have cautious risk preferences, even if they get so much collateral, they are still unwilling to intervene in small and medium-sized private real estate companies. For large leading real estate companies, banks that do not have collateral are rushing to provide credit, so why do they come to you? Therefore, such banks with prudent risk preferences can only choose some midstream developers. But as we analyzed before, for an industry, it is generally relatively safe to have one end and one end. It is precisely these midstream companies that have neither scale advantages, high leverage, and greater overall risks.
So this shows a very interesting and embarrassing result: banks with radical risk preferences seem to have given up a lot of the power of collateral and increased risks, but in fact they have mastered high-quality customer resources, and the risks are smaller; banks with cautious risk preferences seem to have good risk mitigation measures with collateral, but in fact they have led to greater systemic risks in terms of customer structure. Therefore, sometimes it is really hard to say whether it is prudent or short-sighted.
(2) Is it feasible to manage fully closed sales collection? What is the security bottom line of sales collection management?
As mentioned in the previous paragraph, in a full or even over-competitive market, the rules of the game are never decided by the bank itself, let alone a certain bank or several banks. But what’s interesting is that many banks’ risk control departments still like to do research behind closed doors and still feel that their standards are golden rules. This is the most typical example of the management of sales collection.
Some banks have a very "perfect" logic, that is: for real estate companies, they buy land by themselves, and bank loan funds for construction, so after selling the house, they should be fully closed and managed to repay the loan first (after the loan is settled first, the more they sell, the less they sell, the less they sell, the loss is the one that sells, and the money they make, is the developer's own business), which is a perfect closed loop. But the actual situation is that there is a "pre-sale" system in reality, especially in many places, it is still possible to pre-sale with "positive zero". How long will it take for a property to be built to "positive zero"? 2-3 months; how much does it cost? It's just tens of millions, because the construction party advances. Then you can pre-sale and get nearly zero-cost cheap funds.
Therefore, if we strictly implement the "full sales collection is closed and used for loan repayment first", there will be another stupid paradox: if the developer sells a good house, do not use cheap pre-sale payments, so use expensive bank loans? As for the bank, it worked hard to make a three-year real estate development loan, from tracking projects to lending, and it took three or four months or even longer. As a result, the loan was invested in less than half a year and it was about to enter the repayment period. It would be better to do a simple one-year loan. What about the badly sold project? Hey~ Instead, it is very consistent with the perfect closed loop of closed sales collection management. So, should the branch that actually does business be selected for a good-selling project and then lie about military information during the post-loan management stage? Or just find a project that must be bad, and be full of nonsense during the initiation stage?
The policy that is too "snowy" is often useless. Apart from hanging a Shangfang sword that is held accountable at any time on the heads of the account manager who is doing business and the reporting bank, it does not have much effect on actual risk control. So, how should we manage sales collection? What is the bottom line of management security? I personally think that it is necessary to classify management:
①For small and medium-sized real estate companies, the capital must be strictly controlled, the funds must be completely closed, and priority will be used for repayment.
② For the top 10 leading real estate companies and large central enterprises with excellent shareholder backgrounds, when they receive the group guarantee, as long as the deposit income is calculated and posted.
③For real estate companies between the two, I think there is a bottom line, which is to ensure that "the remaining saleable value of the expected saleable within the remaining loan term * discount coefficient - project payment owed - project payment still needs to be paid for the project completion > total loan principal and interest * 1.2". Before this, the management of sales collection can be appropriately relaxed; after this, sales collection management will be strictly carried out, and the money sold must be returned to ensure that the bank "either holds the house, then holds the money."
(3) Talk about capital, audit statements and entrusted payments
Let’s talk about entrusted payments first, which has to retrace the gap between the bank’s own rules and the actual market rules. Entrusted payment originates from the three laws and one guidance of the People's Practice. Its original intention is definitely good, and its effect is definitely there. But how is the market actually playing? ① The developer habitually drags down the project progress payment and uses the construction party to advance payment to support project development; ② Basically, it is based on the specific application progress of the construction party and the actual project progress, and will pay continuously and sporadically. The construction party will never be given hundreds of millions at a time of 30% of the project progress, and then hundreds of millions at a time of 50%; ③ Oh, by the way, when it comes to the project progress, there is almost no supervision report in actual operation that will issue a supervision report that clearly defines the progress of the entire project.
So, what will happen? It will cause the bank to be the old man before getting the money, and the developer can give whatever the bank wants; after getting the money, the old man borrowed the money, and the bank can never get in the way of using the money (in order to cooperate with the bank's obsession with entrusted payments, many developers are used to using the construction companies within the group. At most, they can get the entrusted payments and then collect the group's cash pool).
Let’s talk about capital and audit statements. The risk control department of the bank generally cares about capital, and generally requires that in the prerequisites for loan approval: a proportion of capital not less than XX% is fully in place and first invested in the project before the loan can be issued; these capitals must be equity funds, so they must be reflected in equity accounts in the financial statement account. Is this risk control measure useful? To a certain extent, it is useful. After all, the amount of capital is directly related to the leverage ratio, and the leverage ratio is directly related to the security of bank loans.
But as long as you have actually been exposed to some real estate development loans, you actually understand that the registered capital of real estate project companies is generally 50 million to 100 million, and the rest is all based on the so-called capital reserve to meet the capital requirements of each bank. Those who have dealt with bad debts are even more aware that when it comes to the day when the bad debts are cleaned up, if you go to the project company to drag the most real statement, you will basically find that: ① All these so-called capital reserves have returned to their supposed positions and other accounts payable; ② And the capital reserves (shareholder loans) that should have only existed before and have been returned long ago, or have been receivabled by other receivables to some unknown place.
In this case, it is a bit ridiculous whether the 25% taxable amount must be removed from shareholders' loans to increase capital reserves. But, so what? A more stringent requirement must be registered capital? Not to mention that this method also has loopholes. More importantly, it is back to the problem I mentioned before: in this full and even overcompetitive market, the risk preferences between banks are different and difficult to unify. In this case, prudent risk preferences may not only cause the loss of the market share, but also have no benefit in controlling risks.
5. Big data risk control
(1) What are the current obstacles to big data risk control?
Big data risk control is an inevitable development trend for banks in the future, because the two most difficult problems of banks are large and small, both require big data risk control to solve: for the credit needs of many small and micro enterprises, big data risk control is needed to achieve efficient and low-cost risk judgment; for huge and complex groups, big data risk control is also needed to provide comprehensive and fast risk warnings. But after so many years of big data risk control, why hasn’t it been truly implemented? (Some banks have used credit grants to small and micro enterprises to a certain extent, but in fact they only used a few very basic versions of taxation, litigation and other data, and there is still a lot of room for improvement in accuracy)
mainly because of the following obstacles:
① Obtaining external data: At present, the domestic external data is very scattered. Since the data in various departments and regions are divided, large national banks do not necessarily make it easy for small banks or online financial institutions to obtain external data. It can be said that no external data obtained by a financial institution is sufficient to effectively control big data risk.
② Full utilization of internal data: For big data applications, internal data is more important than external data, because there is no effective data model established based on internal data, no matter how much external data is, it is meaningless. However, most internal data in most banks have not been completely connected, let alone integrated utilization and effective model establishment.
③Internal and external data connection: After solving the previous two problems, there is another important problem: how to connect internal and external data in real time, because this involves a banking system and data security issue.
(2) Pros and cons of big data risk control
The advantages of big data risk control will not be discussed in detail, we will only talk about potential problems here.An important problem in the early stage of the development of big data risk control is that in the reality that banks are homogeneous and risk preferences are also close, the risk models of different banks are likely to be very similar, which creates a problem: just like when the stock market is filled with quantitative transactions and the data model is similar, once there is a turbulence, it may be an overreaction + a trampling retreat like a domino.
6. High returns, high risks, and high costs? →High returns, high costs, low risks!
Speaking of big data risk control, I suddenly remembered the online evaluation of Internet finance: high returns, high risks, and high costs. But is the truth really that? There is no doubt that Internet finance has high returns, and high costs are also obvious. After all, in addition to the high capital cost, the customer acquisition and risk control costs of Internet finance are also getting higher and higher. But is the risk really as high as everyone thinks? It seems that it may not be. For example, the 2017 financial report of Ant Merchant Bank showed that its non-performing rate was only 1.23%, far lower than everyone's inherent impression. Why? Because in fact, high costs and high risks are contradictory. If you spend high costs on due diligence and risk control, it is impossible to have high risks. The basis for high costs on due diligence and risk control is high returns.
I think this is actually suitable for the real estate industry. For small real estate companies, traditional thinking is that the returns are high but the risks are higher. This is actually because traditional financial institutions do not have so much manpower and material resources to do due diligence and risk control. If the due diligence is really done in depth like some trust companies, and even dispatching management personnel to manage funds and sales collection, and the dispatching personnel even manage the project company seal and certificate, even the credit of small real estate companies can actually achieve low risk.
7. Finally, when the tide recedes and the risks break out, what cards can be used as a development lending bank? What is the order of playing cards?
Let’s take J Group as an example. After all, I was also one of the main participants in resolving J Group’s debt risks back then. I can share some of my experiences with you. However, as stated earlier, all data comes from public data query and has nothing to do with my work or work unit.
(1) The first step is to quickly carry out pre-trial preservation
When the risk breaks out, the first thing the development loan bank needs to do is to apply for pre-trial preservation measures according to the law based on the loan contract, guarantee contract and other legal documents, and take judicial seizure to preserve the assets. This will not only prevent the debtor from transferring, concealing and disposing of assets, and maximize the protection of the creditor's own legitimate rights and interests, but also take the initiative in subsequent negotiations to promote negotiations.
If the company that has problems no longer has the possibility of rescuing, or lacks willingness to rescue itself or repay debts, the litigation procedure should be decisively promoted; if the company is believed to be valuable after a comprehensive assessment of assets, liabilities and operating conditions, and the company's willingness to rescue itself and repay debts is strong, you can consider taking various measures to resolve potential adverse risks; or if it is calculated that the debt repayment rate that can be obtained through litigation is extremely low, you can also consider other methods such as debt restructuring. But the premise of all this is to carry out pre-trial preservation as soon as possible and get as much bargaining chips as possible.
(2) Establish a debt committee to make unified decisions and jointly advance and retreat
Real estate groups generally have many financing channels. When the group risks break out, when creditors rush to seize assets, small owners collectively protect their rights and petition, and market panic spreads, it is urgent to establish a debt committee and unified rights protection. The debt committee needs to clarify the goals and implementation paths of debt restructuring work, promote the signing of the "Debt Restructuring Framework Agreement", determine the internal debt restructuring rules of creditors, act in concert, and prevent "mutual stampedeship"; continue to promote judicial enforcement procedures; and report and communicate closely with government leaders and regulatory agencies.
(3) Strengthen communication with regulatory agencies to win understanding and support
The debt committee must promptly report to the government and regulatory agencies to the progress of the restructuring, reflect the demands of creditors, and gain the understanding and support of all parties.Once a risk occurs in a real estate company, its creditors will generally involve construction companies, and then the salary of migrant workers, and at the same time involve home buyers. At this time, the creditors committee needs to actively protect small and medium-sized investors from the overall situation of maintaining social stability, which is also the basis for gaining support from the government and regulatory authorities.
Because maintaining social stability and financial order is the top priority of government management in the current economic development process, in the Internet era, information dissemination is extremely fast, and risky events often attract attention from all walks of life, and many misunderstandings and rumors may arise within the social scope due to information asymmetry. Therefore, in the process of dealing with real estate financial risks, governments, financial institutions and real estate companies need to take maintaining social stability as the core of risk resolution work, and promptly convey the risk disposal process and related information to the public within a legal and reasonable range. This is conducive to gaining understanding and support from all sectors of society and seeking more effective support and more favorable environmental factors for risk disposal.
(4) Hire a third-party consultant to study assets and debts
From the perspective of protecting the common interests of creditors, after establishing a debt committee, professional institutions such as KPMG should be hired as financial consultants to conduct debt repayment investigation and analysis of the debtor group to understand the true financial status of the company. It provides important data support for future negotiations by the Debtor Commission. Local projects should also hire well-known local accounting firms to evaluate the project's cash flow, and use the evaluation results as an important basis for external negotiations. In order to strengthen the sales and fund supervision of restructuring projects, it is possible to consider hiring independent third-party institutions to conduct closed supervision of the use of project funds and sales recovery funds throughout the process.
If there are off-balance sheet financing with complex structures such as "credit-like" in financing, because it often nests a multi-layer limited partnership structure, and some even embeds a trust plan, involving the spot and forward transfer of trust income rights, the substantial creditors are often not legal creditors, so professional legal institutions need to be introduced to comprehensively clarify the transaction structure and legal structure, and lay the foundation for subsequent negotiations.
(5) Finalize the restructuring framework through overall negotiations, and then classify the debt risks of specific projects.
The debt committee should adhere to the bottom line of negotiations, strive to understand the interests, and finalize the overall restructuring framework with the debtor from the perspective of overall debt resolution. The restructuring framework should follow the following principles: ① Implement project asset mortgage, strengthen actual control of assets, and ensure that debt restructuring is better than the front hand; ② Complementary and complementary projects, provide follow-up financing support, actively revitalize existing stocks, and achieve overall exit; ③ Strengthen communication with regulatory agencies to ensure compliance with restructuring plans; ④ Strengthen supervision of project funds; ⑤ Adhere to the use of fighting to promote talks, and do not give up the bargaining chips in hand until the restructuring is confirmed, and do not give up the preparation of litigation channels; ⑥ Classified policy implementation: I. Based on project construction As for future cash flow conditions and mortgage status, classified processing, for projects that have basically completed the project construction, the mortgage ratio is sufficient, and the future cash flow can cover principal and interest, appropriate extension can be considered; II. For projects that lack collateral but have the conditions for credit enhancement, and can fully cover cash flow after restructuring, they can be resolved by binding other supplementary debt repayment entities and increasing collateral; III. For projects that have not formed assets and cannot cover or are uncertain in the future cash flow, they can be considered by transferring debt + credit enhancement.
