China Real estate huge guarantee behind: performance and scale difficulties
In order to maintain the current scale or maintain the scale growth under the condition of being forced to shrink the balance sheet, it is only possible to improve its turnover speed and efficiency, which is one of the institutional weaknesses that central enterprises are difficult to solve.China Real Estate newspaper reporter Li Ye Beijing reported a huge amount of guarantee superimposed debt climb, China real estate pressure is continuing to increase.On February 7, China Communications Real Estate Announced that the total amount of external guarantees of the company and its holding subsidiaries exceeded 100% of the audited net assets of the parent company in the latest period, and the amount of guarantees for units with an asset-liability ratio of over 70% exceeded 50% of the audited net assets of the parent company in the latest period.The guarantee amount of non-consolidated statements has exceeded 30% of the audited net assets of the parent company in the latest period. Investors are requested to pay full attention to the guarantee risk.As of December 31, 2021, the balance of guarantee provided by CCCC for its holding subsidiaries and between holding subsidiaries was 13.737 billion yuan, accounting for 448.73% of the net assets belonging to the parent company at the end of 2020.The guarantee balance for the participating companies not included in the consolidated statements was 2.992 billion yuan, accounting for 97.72% of the net assets belonging to the parent company at the end of 2020.No overdue guarantee, no litigation guarantee.Property also released in the day and make an announcement for the progress of the project company guarantees, pay real estate is a wholly owned subsidiary of pay in shenzhen real estate co., LTD holds a ode to pay ya real estate co., LTD. 99.95% stake in huizhou, huizhou in ode to pay, due to business needs, to the China construction bank co., LTD. Huizhou branch to apply for a loan of 600 million yuan.The guarantor, Huizhou Zhongjiao Yasong Real Estate Co., LTD., was established on June 21, 2021.Earlier, on January 26, China Communications Real Estate Announced that it would provide a joint and several liability guarantee of no more than 999.6 million yuan for Huizhou China Communications Real Estate.By the end of September 2021, The total assets of Huizhou Zhongjiao Real Estate co., LTD are 1.115 billion yuan, total liabilities are 1.017 billion yuan, net assets are 97.78 million yuan, operating income is 0, total profit loss is 2.89 million yuan, net profit loss is 2.22 million yuan.Frequent estate guaranty for the delivery operation, interpublic, chief China economist, vice President of China enterprise capital union BaiWenXi said in an interview with China real estate news reporters, “in real estate in excess guarantees shows that its relied on high leverage, high debt driven high turnover model supported by the scale of the growth of the industry including the commonness.At the same time, it also shows that CCCC is highly dependent on financing, which not only pushes up the liquidity pressure of CCCC, but also faces the contingent liability pressure brought by serial guarantees.”(Contingent liabilities: potential liabilities arising from past transactions or events that may lead to future events.)Liang Nan, an analyst at Zhuge Housing data Research Center, told reporters that The frequent external guarantee of Real estate, to a certain extent, shows that the enterprise liquidity pressure, capital tension.External guarantee will bring certain debt risks to CCCC Real Estate, especially when the financial status of CCCC Real Estate is not very good, the risk coefficient will be greater, and it may also affect the credit qualification of the enterprise.On February 10, the reporter of China Real Estate News called the relevant staff of China Communications Real Estate, but the phone was not connected as of press time.The debt pressure of real estate in debt climbing and over guarantee has a long history.According to the “three red lines” standard for real estate, the asset-liability ratio of real estate enterprises excluding advance payments shall not exceed 70%.Net debt ratio shall not exceed 100%;The ratio of cash to debt shall not be less than one time.According to Wind data, the asset-liability ratio of China Communications Real Estate after deducting advance payments at the end of 2020, the middle of 2021 and the end of the third quarter of 2021 are 83.39%, 86.63% and 83.68% respectively.Excluding the asset-liability ratio after the advance payment, the other two red lines of The “three red lines” of China Communications Real Estate changed greatly. For example, the net liability ratio increased from 204.76% at the end of 2020 to 265.08% at the end of the third quarter of 2021.The short-to-cash ratio fell from 1.43 at the end of 2020 to 0.985 at the end of q3 2021.As of September 30, 2021, CCCC Real Estate from the original two red line into three all step.According to the “three red lines” policy, the situation of real estate companies stepping on the line will directly affect the financing ability of real estate companies, “three red lines” all stepping on the scale of CCCC real estate interest-bearing debt will not increase.CCCC’s interest-bearing liabilities have grown rapidly over the past few years.In 2018, 2019, 2020 and the third quarter of 2021, the company’s interest-bearing debt was 10.977 billion yuan, 13.207 billion yuan, 37.933 billion yuan and 61.42 billion yuan, respectively, according to Wind data.China Communications Has repeatedly turned to its parent for help to ease its debt obligations.Since the end of 2016 or so, the real estate began to pay real estate group in borrowing, and the loan amount from the original combined with related company borrowing less than 300 million yuan to not more than 10 billion yuan, to borrow from the first 18 months extend to 60 months, this also means that there is an increasing demand of funds in real estate in recent years.At the same time, CCCC property also chose to secure financing.”Compared with direct financing, this method usually has lower interest rates, lower costs, and relatively simple procedures,” said Chen Xiao, an analyst with Zhuge Zhaofang Data Research Center.Data show that China Communications Real Estate has repeatedly provided guarantees for subsidiaries (including wholly-owned, equity, project companies) loans.On October 15, 2021, China Communications Real Estate Announced that the company provided joint and several liability guarantee for the acceptance obligation of commercial acceptance bills issued by eight subsidiaries, with a total amount of 56.3978 million yuan.It is worth noting that the asset liability ratio of the 8 subsidiaries is more than 70%.Subsequently, the company has provided guarantees for the financing of Suzhou Huaqi, Kunming Xisheng and China Communications World Trade Center.Among them, the subsidiary involved in the loan extension of southwest Real Estate Co., Ltd. had occupied the deed tax behavior of owners;CCCC Tianjin Real Estate Co., LTD., and CCCC Real Estate’s Chongqing unit also defaulted on wages.As of December 31, 2021, the balance of guarantee provided by CCCC for its holding subsidiaries and between holding subsidiaries was 13.737 billion yuan, accounting for 448.73% of the net assets belonging to the parent company at the end of 2020.The guarantee balance for the participating companies not included in the consolidated statements was 2.992 billion yuan, accounting for 97.72% of the net assets belonging to the parent company at the end of 2020.In this regard, Bai Wenxi said that the reason why China Communications Real Estate frequently guarantees high-debt subsidiaries should be to support the scale of financing growth and solve the liquidity problems of subsidiaries.Its thirst for scale has not been hidden, and is a big reason for its high debt.Under the double impact of the “three red lines” and the epidemic, most real estate companies are Shouting “deleveraging” and “moderation”, but China Communications Real Estate has not slowed down its pace of expansion.In terms of sales, Li Yongqian, who just returned to China Communications Real Estate as the president in July 2019, boldly proposed the sales target of “sprint 35 billion yuan in 2019, sprint 50 billion yuan in 2020, and far over 100 billion yuan in 2023”.In terms of land reserve, China Communications Real Estate will add 30 new lands in 2020, with a gross floor area of 6.3559 million square meters, up 176.9% year on year.According to the 2020 annual report, China Communications Real Estate’s sales reached 53.3 billion yuan in 2020, up 81.37 percent year on year, exceeding the target, but the total revenue and profit decreased 12.54 percent and 18.26 percent year on year respectively.In the first half of 2021, China Communications Real Estate co., Ltd. added 14 new land (projects), with a new built-up area of 2,615,100 square meters, a total land purchase price of 28.664 billion yuan, and a total equity price of 20.148 billion yuan.By the end of the report period, CCCC Real Estate has 98 real estate projects, with a total construction area of 27.27 million square meters. At the end of the report period, the total completed area is 8.34 million square meters, and the area under construction or to be built is 18.91 million square meters.Kreis data show that by the end of the third quarter of 2021, China Communications Real Estate achieved a total full-caliber sales amount of 68.01 billion yuan.According to the performance announcement of the third quarter of 2021, by the end of September 2021, China Communications Real Estate realized operating revenue of about 1.037 billion yuan, down 48.8% year-on-year.Net profit attributable to shareholders of listed companies is about -160 million yuan, down 199.04% year on year.Basic earnings per share of -0.23 yuan, down 200% year on year.In the impact of 100 billion on the road, the real estate sales significantly improved, profits are significantly reduced.In this regard, China Communications Real Estate explained that the housing delivered area in this period was lower than the same period last year, resulting in lower gross profit;During the period, the number of newly acquired projects and land reserve area are significantly more than before. Most of the projects are still in the early development stage, and the increase of personnel required for new projects leads to the increase of management costs.The Company expects to see an increase in the number of projects reaching pre-sale nodes during the reporting period compared to the same period last year, and thus sales expenses increased accordingly.In terms of selling expenses, by the end of the third quarter of 2021, China Communications Real Estate’s selling expenses were 410 million yuan, compared with 282 million yuan in the same period last year, an increase of 128 million yuan.For the substantial increase in sales expenses, in real estate said, mainly for the current pre-sale project increase, advertising and planning costs increased.Under the pressure of declining performance and capital, China Communications Real Estate is also frequently adjusting its senior management team, trying to reverse the declining performance by adjusting the management team.According to public information, Gao Shenhao resigned as the company’s vice president for personal reasons in December 2021. On the same day, China Communications Real Estate Announced the appointment of Xu Aiguo as the company’s executive president.In June of the same year, Li Yongqian resigned as president of the company, and the board of directors agreed to appoint Wang Jianping as president of the company and Sun Weidong as executive president of the company.According to the media incomplete statistics, in five years four times the real estate change.On January 21, media said that China Communications Real Estate will deduct the 2021 year-end bonus of its management and all its headquarters employees.This news, further highlighted the current situation of real estate capital chain tight.How does “two bans and two controls” affect?In order to further strengthen the administration of the central enterprise financing guarantee to prevent serious risk of loss of funds, promote the development of the enterprise quality, issued by State-owned Assets Supervision and Administration Commission of the State Council on early January “on strengthening the central enterprise financing guarantee management notice (hereinafter referred to as the” notice “), for the central enterprise financing guarantee scope, object, scale and management requirements of the specific,Financing guarantees for central enterprises will be banned and controlled.The circular makes it clear that the scope of control includes all financing guarantees, including not only various forms of guarantees provided for corporate financing, but also implicit guarantees with guarantee effect.Stricter control requirements.On the one hand, based on the principle of one share, one right and one risk control, “two prohibitions and two controls” are implemented for financing guarantee of central enterprises: it is strictly prohibited to guarantee non-shareholding enterprises outside the group, it is strictly prohibited to guarantee over shareholding ratio of participating enterprises, and it is strictly controlled to guarantee over shareholding ratio of high-risk sub-enterprises.On the other hand, the guarantee scale is strictly limited.Referring to the current average proportion of the guarantee scale of central enterprises in net assets and the guarantee management regulations of listed companies, it is clear that the total guarantee scale of central enterprises shall not exceed 40% of the combined net assets of the group, and the guarantee amount of single-family subsidiaries (including the headquarters) shall not exceed 50% of the net assets of the enterprise.Control is more “real”.Considering enterprise guarantee belong to major risk issues, company law and other regulations guarantee has to be made by the board of directors or the shareholders meeting resolution, therefore inform embarks from the actual management of central enterprises, guarantee budget by the board of directors of the group or its authorized decision-making in order to improve the efficiency of examination and approval, but the enterprise guarantee system and special guarantees for examination and approval of the board of directors by the group, give full play to their role as the risk control of the board of directors.The rectification requirements are more “detailed”.We will make it clear that enterprises will be held accountable for new illegal financing guarantee activities, and require them to rectify the existing illegal financing guarantee business within a time limit, striving to rectify 50% of the existing illegal financing guarantee business within two years, and in principle, complete the rectification within three years.”The implementation of the ‘two bans and two controls’ has a certain impact on CCCC real estate.”Liang Nan said, according to the “two banned two control” requirement, the central enterprises always guarantee no more than 40% of the net assets of the group size, single-family son enterprise (the department) guarantee amount cannot exceed 50% of the enterprise net assets, this means that if the general guarantee for enterprise scale, the guarantee amount in excess of the prescribed proportion, rectification is a must, and pay property guarantee amount in the current view,There is still some difficulty in rectification. In Bai Wenxi’s opinion, the notice has a direct impact on China Communications Real Estate, which will force China Communications Real Estate and its subsidiaries to reduce debt, deleveraging and even reduce the balance sheet of assets.In order to maintain its current scale or maintain its scale growth under the condition of being forced to shrink its balance sheet, China Communications Real Estate Can only improve its turnover speed and efficiency to the extent possible, which is one of the institutional weaknesses that central enterprises are difficult to solve.