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China Vanke was one of many major developers that ran into serious liquidity problems when the authorities imposed Beijing’s ‘three red lines’ restrictions to rein in debt in the property sector. Photo: Reuters
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China Vanke sells land once earmarked for new HQ at a huge loss as embattled developer fights to reduce debt mountain

  • The developer sold the plot in the Nanshan district to Shenzhen Metro, its biggest shareholder, and Baishuo Investment, at a loss of about 28 per cent
  • The parcel, originally acquired by Vanke in December 2017 for 3.1 billion yuan, found a buyer quickly having gone up for auction on May 18
China property
Yuke Xie
Yuke Xiein Beijing
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China Vanke has sold a plot of land once earmarked for its new headquarters in Shenzhen for 2.24 billion yuan (US$309 million), almost 30 per cent less than it paid in 2017, as the beleaguered property developer strives to pay down its mountain of debt.
The government-backed developer sold the 19,227 sq m site in the Nanshan district of the southern Chinese city to Shenzhen Metro Group, its biggest shareholder, and Baishuo Investment, according to a stock exchange filing published late on Monday. Shenzhen Metro is the operator of the city’s rail transit network.

The parcel, originally acquired by Vanke in December 2017 for 3.1 billion yuan and designated for commercial use, found a buyer quickly having gone up for auction on May 18.

Baishuo Investment took a 34 per cent stake from the sale, while Shenzhen Metro, which owns 27.2 per cent of Vanke, bagged the other 66 per cent.

The deal will help Vanke “revitalise stock assets and focus on its three major businesses of real estate development, property services, and rental housing,” the developer said in a statement.

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The news came just days after Vanke received a 7.8 million yuan lifeline in the form of bank loans guaranteed by its subsidiaries. The developer has also obtained 20 billion yuan in syndicated loans this month from the country’s biggest lenders including China Merchants Bank.

Vanke was one of many big Chinese developers that ran into serious liquidity problems after Beijing imposed its “three red lines” restrictions to rein in debt in the property sector. China Evergrande, the world’s most indebted developer, was ordered by a Hong Kong court to liquidate in January, while Country Garden and Shimao were forced to restructure their debts.
Vanke had 1.1 trillion yuan of total liabilities as of March 31, according to its latest financial report. That included 248 billion yuan in bank loans and borrowings and 74.2 billion yuan in outstanding bonds. Vanke posted a net loss of 362 million yuan in the first quarter of this year.

The developer will face a maturity wall in 2025 when 36.2 billion yuan of onshore and offshore bonds come due, according to S&P Global. Vanke said in March that it aimed to trim its interest-bearing debt by over 50 per cent in the next five years.

Vanke has offloaded several of its commercial property holdings recently. In March, it sold a 50 per cent stake in Qibao Vanke Plaza to Link Reit, a property investment fund, for 2.38 billion yuan. In December, the developer sold its stake in luxury hotel chain Banyan Tree’s China units in a deal valued at 480 million yuan.

Fitch Ratings last week downgraded Vanke’s long-term foreign and local-currency issuer default ratings to “BB-” from “BB+”, citing liquidity concerns amid “weaker-than-expected” sales this year.

Moody’s cut Vanke’s rating to junk in early March, citing debt repayment concerns.

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