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在线翻译:
szdaily -> Business
Property companies seeking to reduce risks
    2017-October-31  08:53    Shenzhen Daily

AS the froth comes off China’s housing prices, there are increasing signs that some property developers, particularly those with a heavy debt load, are becoming less aggressive.

They are reducing balance sheet leverage, buying land through joint ventures with other companies to reduce risk, or diversifying into other businesses.

Their concern is that they can no longer bank on paying ever richer prices for land if the value of the apartments they build on that land isn’t also still surging.

A minority, such as Tianjin-based Sunac Holdings, are planning to reduce their land purchases and focus instead on selling more of the apartments they have already built. The nation’s sixth-largest real estate developer by sales won’t grow as fast as before but it may be in a position to cut its debt ratio.

“We have been developing too fast in the past,” said Gao Xi, vice president at Sunac, which in July bought 91 percent of 13 tourism projects from conglomerate Dalian Wanda Group for US$6.5 billion. “Our next step is to slow down the land bank and increase sales. We will unlock profitability and then the gearing will come down,” Gao said at an earnings conference.

The company aims to cut net gearing — total borrowings less cash divided by shareholders’ equity — to 70 percent by the end of 2019 from 260 percent at the end of June.

Evergrande, which has China’s second-biggest pile of corporate debt on its books behind energy giant CNPC Capital, said it aimed to cut the ratio to 70 percent by the end of the decade from 240 percent at the end of June.

“China’s property market has moved from a golden era to a stable one, so we need to adapt,” said Evergrande vice chairman and CEO Xia Haijun at an earnings conference.

China’s new home prices registered a second straight month of weak growth in September, with prices in the biggest markets slipping and gains in smaller cities slowing.

“This cycle is different as developers have taken advantage of the strong demand and are destocking,” said Alexander Wolf, Standard Life Aberdeen senior emerging markets economist.

S&P Global Ratings said in September the sector would see only a moderate improvement in financial leverage over the next 12 months and that any significant deleveraging was unlikely.

Record land prices and fierce competition, especially in bigger cities, have pushed developers to join hands to bid for land so that they can afford a higher price and share the risks.

Country Garden has raised the amount of its land bank purchased via joint ventures to 50 percent from 28 percent, according to CLSA estimates.

“Growth is in their DNA. We will see more joint ventures as the battle for land banks becomes fierce. This will not only see smaller stakes for companies but will also make debt disappear from some balance sheets,” said Macquarie’s property analyst David Ng. “It helps balance sheets look a bit better.”

Some of the major property companies have been diversifying into other businesses to hedge their bets.

Vanke, the country’s second-largest developer, has been getting into logistics and education, Beijing-based Sino-Ocean Group into overseas ventures and investments and Sunac has acquired a smart TV manufacturer.(SD-Agencies)

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