Vanke eats "life-sustaining pills"

City Boundary

2024-06-03 16:13 Posted on the official account of Beijing Municipality

At the moment of in-depth adjustment of real estate, Vanke's every move affects the nerves of the market. After experiencing the public opinion turmoil more than a month ago, Vanke swept away the pessimism shrouded in the market before, and in a blink of an eye, it became the real estate company with the most "courtesy" by the policy.

On May 30, foreign media reported that Vanke had negotiated a loan of US$6.9 billion (equivalent to 50 billion yuan) with banks, and pledged nearly 90 billion yuan of assets to finance the loan. "City Boundary" contacted Vanke in this regard, but the other party said that there was no response for the time being.

If the 50 billion large order circulating in the market is still confusing, the 20 billion loan a week ago is real. On May 23, Vanke received a group loan of 20 billion yuan from China Merchants Bank and other banks, and the price was to pledge all the shares of Wanwei Logistics in its hands.

At Vanke's shareholders' meeting a month ago, in order to get rid of the current liquidity dilemma, Yu Liang personally disclosed the "package" of slimming and fitness. Even Wang Shi, who did not come to the meeting, also reported at the performance meeting that he "took the initiative to give up his annual salary of tens of millions" to show his determination to tide over the difficulties with Vanke.

Vanke's active attitude of survival has injected a shot of strength into the capital market, and has also won the trust of financial institutions and shareholders. Four days after the announcement of the 20 billion syndicated loan, on May 27, Vanke's Shenzhen super general commercial office plot was successfully transferred at a transaction price of 2.235 billion, and the transferee was the major shareholders Shenzhen Metro and Shenzhen Baishuo Yinghai Company.

Right now, Vanke's management is fighting a battle that can't be lost. The challenges brought about by the changing times require them to meet them with all their might. Now, Vanke is undergoing a round of intensive financing and business model adjustments, and the intensity is quite large, but will this allow it to successfully come out of the storm?

01. Take out your family money and exchange the trust of the bank

Recently, Vanke has set up a financing team specifically for financing issues, and President Zhu Jiusheng is deeply involved in it, holding coordination meetings every day. In the face of all kinds of questions raised by financial institutions, Zhu Jiusheng not only has to answer their doubts, but also shows sincerity.

Frightened by a spate of bad bills for real estate, banks began to put more demands on property developers, hoping to increase asset collateral measures to control risks. Chen Hui, a banker in charge of corporate loans, told Shijie, "At present, it is very difficult for real estate companies to borrow from banks without collateral. ”

Vanke also needs to adapt to the new financing model in a timely manner. As a "good student" in the real estate industry, 90% of Vanke's financing model in the past was credit bonds, and rarely involved collateral issues. But under the new financing model, credit alone is no longer enough.

What gives them confidence is the huge operating assets that Vanke has accumulated over the decades. Zhu Jiusheng said, "In the past few months, Vanke has had a lot of exchanges with banks on resource issues and asset issues. Our basic conclusion is that Vanke's collateral, assets and resources are relatively sufficient. ”

Negotiations are moving faster than many people think. On May 23, Vanke announced that it had signed a large order of up to 20 billion yuan with China Merchants Bank and other leading financial institutions, and 10 billion yuan has been received, and the collateral is the equity of Vanke's Wanwei Logistics, which is the largest single real estate financing scale in the year.

In the past few years, only the leading central enterprises have been able to enjoy large loans from the syndicate, and in contrast, Vanke's support for financing has become significantly greater. To the surprise of many, the lead bank of the syndicated loan this time was a joint-stock bank, China Merchants Bank.

Vanke and China Merchants Bank both started in Shenzhen and have a lot of business cooperation. Vanke's major shareholder is Shenzhen Metro Group, which is controlled by the local State-owned Assets Supervision and Administration Commission, while the major shareholder of China Merchants Bank is China Merchants Group, which is a leading central enterprise. At the end of 2022, China Merchants Bank was also the second largest lender to Vanke, with a credit line of 75 billion yuan.

However, this time and that time. In the past year, the pressure on banks from bad real estate debts has continued to rise, and banks have to be careful with every real estate loan they lend. "City Boundary" combed through the financial report and found that in 2023, there will be only one real estate company in the list of China Merchants Bank's top 10 loan customers, two fewer than in 2022.

Chen Hui told "City Boundary", "Now that the wind of financial rescue is rising, many large state-owned banks have taken action, and as the trump card among joint-stock banks, China Merchants Bank also needs to assume the role of bailout." However, in order to reassure financial institutions, Vanke also took out the operating property asset at the bottom of the box - Wanwei Logistics, and pledged all the shares it held to the Shenzhen branch of China Merchants Bank.

Wanwei Logistics, which China Merchants Bank is looking at, is an out-and-out sweet spot in the diversified system of Vanke Group. As early as 2014, when Yu Liang shouted that real estate had entered the silver age, Vanke began to get involved in logistics real estate. In 2015, Vanke became independent of its logistics brand and established Wanwei Logistics.

Today, the comprehensive strength of Wanwei Logistics ranks in the first echelon of the industry, and the scale of cold chain warehousing ranks first in China. It is this high-quality logistics asset that gives China Merchants Bank great confidence. Chen Hui said, "Even if the loan does become non-performing in the future, the bank can get back some of the funds by auctioning off the pledged equity." ”

In addition to China Merchants Bank, Vanke has also recently obtained intensive loans from a number of banks, including the Postal Savings Bank, Bank of China, Agricultural Bank of China, and Bank of Beijing, with a total financing amount of nearly 10 billion yuan. Looking at these financings in detail, without exception, there are equity pledges as loan guarantees.

According to incomplete statistics from the media, since May, Vanke has received more than 30 billion yuan in financing. In addition, Vanke also successfully issued a CMBS with a scale of 1.435 billion yuan. However, bank loans of more than 30 billion yuan alone cannot completely solve Vanke's capital needs.

02, 2.2 billion sold the headquarters, and the major shareholder took it

On the other side of negotiating loans with banks, Vanke is also in full swing to deal with asset transfers.

At the previous shareholders' meeting, Yu Liang made it clear that not only will the interest-paying debt be reduced by more than 100 billion yuan in the next two years, but the total scale of interest-paying debt will be reduced by more than half in the next five years. Eight days after announcing this goal, Vanke put the "Shenzhen Super Total" plot that had been covered for more than 6 years on the shelf.

The Vanke Shenzhen Bay Super Headquarters plot was won by Vanke for 3.137 billion yuan on December 19, 2017, and was originally planned to be built as the new headquarters building of Vanke Shenzhen. But at a time when Vanke is encountering unprecedented difficulties, the dream of a "super headquarters building" seems a bit extravagant.

It is not easy for Vanke to "break away" from the total plot of land in Shenzhen. Once, owning a piece of land in the Shenzhen Super General Base was the dream of many Shenzhen bigwigs. Every piece of residential land here has been sold, and people have given it a good name, "the future image spokesperson of Shenzhen".

In order to get the total admission ticket of Shenzhen Super League, Vanke also worked hard. According to media reports, as early as November 5, 2015, Yu Liang visited Jiang Jianjun, secretary of the Nanshan District Party Committee, Wang Qiang, head of the district, and others to negotiate the location of Vanke's new headquarters in Nanshan District.

It was not until December 19, 2017 that the two super total plots of Shenzhen Bay were sold together, and Vanke had the opportunity to settle in. On the same day, Vanke won the T208-0053 parcel for 3.137 billion yuan. Coincidentally, another adjacent plot T208-0054 was acquired by Evergrande for 5.552 billion, and the two giants were still in full swing at that time.

However, after a huge wave of real estate, Evergrande and Vanke still did not become neighbors in the end. For Evergrande, the Evergrande headquarters, which was originally planned to have a height of 400 meters, was stopped due to a public thunderstorm in September 2021, and was acquired by Shenzhen Anju Construction Group in 2022.

Vanke has no shortage of ideas for this treasure land. At the beginning of the land acquisition, Vanke not only conducted two rounds of international bidding for the project design scheme, but even introduced the "Crystal" scheme of PCPA Architects in the United States. But now, the cold wind of the real estate industry has blown indiscriminately on Vanke, and "slimming" has become a must-have choice.

According to the latest transaction documents, most of the construction progress of the plot is still at the stage of completion of underground structures and engineering piles, and there is even some earthwork in the north area of the project that has not been excavated. In addition, the site is a commercial office and hotel property, with a self-ownership ratio of up to 70%, and high requirements for construction and operating funds.

Chen Fei, an industry insider in charge of bulk asset trading, told Shijie, "In the past, companies that were interested in acquiring would first investigate the project and then decide whether to buy it, but now they don't even look at it because there is no budget." What's more, the capital of 2.2 billion yuan is not a small amount for any enterprise. ”

At the critical moment, Shenzhen Metro and Shenzhen Baishuo Yinghai Company, a subsidiary of the State-owned Assets Supervision and Administration Commission of Nanshan District, Shenzhen, jointly bid for the bid at a transaction price of 2.2 billion yuan. According to the calculations, although Vanke's initial land acquisition price was 3.137 billion yuan, if the book value of financing and construction costs was 4.016 billion yuan, this transaction was equivalent to a 5.5% discount for Vanke.

Although it is a loss-making business, in the M&A market, where buyers are everywhere, it is much more important to get cash flow than to sell more and sell less. The takeover of Shenzhen Metro is a strong signal to the outside world: behind Vanke is Shenzhen Railway, and behind Shenzhen Railway stands Shenzhen State-owned Assets Supervision and Administration Commission.

Next, Vanke's action of "selling, selling, selling" will inevitably not stop. According to Yu Liang's plan, Vanke will sell 20 billion assets this year, "This year's goal is 20 billion, and I hope to sell 20 billion yuan every year in the next few years." ”

03. The 20 billion loan only quenched the "near thirst"

At Vanke's shareholders' meeting a month ago, Yu Liang made it clear that Vanke would "firmly slim down" and focus on its three main businesses of "integrated residential development, property management and rental housing" in the future, and withdraw from other businesses.

This means that Vanke's overseas business, hotel and vacation, food, logistics and warehousing, commercial development and operation business, etc., which have been transformed and deployed in the past, will all enter the list of "disconnection", and these are all assets that Vanke has accumulated over the decades of diversified exploration.

According to the research report of Founder Securities, if core assets such as Wanwuyun, SCP and Wanwei Logistics have not been used for financing in the past, Vanke's potential financing space can provide sufficient repayment guarantee for bonds maturing in 2024.

At present, relying on the loans and asset transfers of many banks, Vanke can take a breath of relief. According to public information, in 2024 alone, Vanke will face debt repayment pressure of 26.1 billion yuan, of which two US dollar bonds will mature in May and June, amounting to US$1.45 billion and US$600 million respectively, equivalent to RMB 14.5 billion.

But bank loans can only solve a temporary crisis. As a leading real estate company, Vanke's debt scale is still very large. As of the end of 2023, Vanke's total liabilities were 1.1 trillion yuan, with total interest-bearing liabilities of 320.05 billion yuan, and interest-bearing liabilities were mainly medium and long-term liabilities.

Judging from the financial report data, as of the first quarter of 2024, Vanke's monetary funds still have 83.07 billion yuan, which is further reduced from 99.81 billion yuan at the end of last year. In addition, due to the fact that some of the pre-sale regulatory funds are involved, the actual available funds are not as abundant as they seem on the books.

What to do about the peak debt repayment period after that? This is also a problem that Vanke's management needs to face. In the long run, the foundation for Vanke's stable operation and real alleviation of liabilities is still inseparable from the stabilization of sales in the real estate market, which is also the concern of rating agencies about Vanke.

On the same day that Vanke received the good news of the RMB20 billion syndicated loan, Fitch announced that it had downgraded its long-term foreign and local currency Issuer Default Ratings (IDRs) to 'BB-' from 'BB+'. Fitch believes that "the continued deterioration in sales has impacted Vanke's access to non-bank financing".

Judging from the sales data alone, Vanke has not yet gotten rid of the dilemma of the industry's downturn. According to the data, Vanke's total attributable sales from January to April were 50.4 billion yuan, a year-on-year decrease of 42.2%; The contracted sales in April were 20.89 billion yuan, a year-on-year decrease of 37.59%.

Since May, real estate has finally felt the warmth of the new deal, and major cities have successively announced policies such as lowering loan interest rates, lowering the lower limit of down payments, and relaxing purchase restrictions, and real estate stocks have also followed a wave of returns.

As the belief of the whole real estate industry, the market value of Vanke A has also regained its position of 100 billion. As of the close of trading on May 31, the latest market value of Vanke A was 98.4 billion. However, compared to the stock market, the property market takes much slower time to take effect.

For Vanke, the industry is generally facing a lack of confidence, and Vanke's management still needs to work hard to survive the long recovery period and wait until the moment when buyers' sentiment is mobilized again, but no one can say how long it will take.

"I believe that with the support of all aspects and our own efforts, we can improve ourselves and save ourselves, and there may be more people to help us, and we will do better and better." Zhu Jiusheng said.

(Chen Hui and Chen Fei are pseudonyms in the article)

Author | amuse

Edit | Sun Chunfang

Operations | Zhang Daxing

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