On May 28, Vanke Corporation (Vanke) announced that the land of Vanke’s Shenzhen Bay headquarters had been sold, bringing back 2.235 billion yuan in capital. This move is another step taken by Vanke to alleviate financial stress by selling assets to generate funds.
In the “Announcement on Public Listing of Asset Sale and Related Transactions” on May 28, Vanke stated that in order to implement the comprehensive plan of Vanke’s streamlining and revitalizing existing assets, Vanke entrusted Shenzhen Trading Group Co., Ltd. on May 8, 2024, to publicly transfer the land use rights of the Shenzhen Bay headquarters by way of public listing, with a starting price of 2.235 billion yuan.
By the deadline on May 27, 2024, Shenzhen Baishuo Yinghai Investment Co., Ltd. and Shenzhen Metro Group Co., Ltd. formed a joint buying party and won the bid for this transaction with 2.235 billion yuan.
The announcement stated that Vanke had signed a land use right transfer contract and confirmation letter with the joint buying party on May 27, 2024.
Data shows that in December 2017, Vanke acquired this piece of land at a base price of 3.137 billion yuan with the original plan to build its headquarters building. When the land was resold this time, the price was discounted by approximately 28.75% compared to the purchase price.
Vanke stated in the announcement that, considering construction costs and other factors, the land has an asset value of 4.016 billion yuan. The discounted transaction is expected to incur a loss of 1.785 billion yuan for the company.
A source familiar with the matter told Caixin that as early as 2022, Vanke issued a warning to “tighten the belt” and planned to sell this piece of land. “Before, the company was not under such pressure and could afford to wait for better offers,” but with recent intensified financial pressure, they had to sell at a significant discount.
The main reason Vanke sold the land at a discount is that Vanke is facing a liquidity crisis.
In the full year of 2024, Vanke’s total outstanding principal of domestic and foreign public debts, financing for its supply chain, and commercial real estate-backed CMBS issued by Inlisky amount to approximately 32.2 billion yuan. From now until June, Vanke has two U.S. dollar debts to repay, with a total principal amount of about 14.815 billion yuan.
At the annual performance meeting held on March 29, 2023, Vanke’s President and CEO Zu Jiusheng admitted that the company’s available monetary funds faced short-term debt repayment pressure.
On April 30, at the 2023 annual shareholders’ meeting, Vanke Chairman Yu Liang also stated that Vanke’s current focus is risk avoidance and improving fundamentals, requiring the firm commitment to “streamlining” the company and adjusting financing methods to reduce risks. The transfer of the Shenzhen Bay headquarters land is one of Vanke’s actions to promote “streamlining and revitalizing”.
In addition to asset sales, Vanke has pledged the equity of Vanke Logistics Development Co., Ltd., a subsidiary, as collateral and applied for a 20 billion yuan loan. The loan is a syndicated loan led by China Merchants Bank, with other participating banks including Industrial Bank. So far, 10 billion yuan has been disbursed, showing Vanke’s efforts to raise funds for self-rescue.