China’s real estate industry continues to decline, with state-owned enterprise Vanke Group intensifying efforts to dispose of assets to retrieve capital. Recently, Vanke Group transferred assets through its wholly-owned subsidiary for a price of 2 billion yuan.
On August 21, Vanke announced that two wholly-owned subsidiaries, Beijing Vanke Enterprise Co., Ltd. (referred to as “Beijing Vanke”) and Beijing Vanke Huitong Property Co., Ltd. (referred to as “Huitong Property”), will transfer the equity and debt rights they hold in Beijing Wanjin Real Estate Development Co., Ltd. (referred to as “Beijing Wanjin”) to Jiaxing Dongfu Zhengqi Investment Partnership Enterprise (Limited Partnership) (referred to as “Jiaxing Dongfu”) for 2 billion yuan.
According to the announcement, the priority limited partners of Jiaxing Dongfu are China Orient Asset Management Corporation, while the junior limited partners are subsidiaries of Vanke. Jiaxing Dongfu is a consolidated entity of Vanke.
Beijing Wanjin and Jiaxing Dongfu signed a pledge agreement, providing pledge guarantees for the seller (Beijing Vanke, Huitong Property) for performance in this transaction, responsibility in case of contract termination, and safeguarding the buyer’s related rights. The total principal amount of the guarantee is 2 billion yuan, with the guarantee period ending when all debts within the coverage are fully repaid.
After this guarantee, Vanke’s total external guarantee amount will be 88.663 billion yuan, accounting for 35.35% of the company’s audited attributable net assets to shareholders of listed companies by the end of 2023.
In April this year, Vanke’s Chairman Yu Liang announced at the annual shareholders’ meeting that the company had formulated a comprehensive “slimming and fitness” plan, adjusting financing methods and reducing risks. Recently, Vanke has been divesting assets and reducing debts through various means.
On July 30, Vanke announced that a holding subsidiary plans to transfer 50% equity of Suzhou Gaoxin Wanyang Land Co., Ltd.
On August 13, Vanke announced that its subsidiary and relevant partners jointly established an investment fund, mainly for the acquisition of two subsidiary companies of Vanke to retrieve some capital.
However, Vanke is facing tremendous sales pressure. From January to July this year, Vanke achieved a cumulative contracted sales area of 10.85 million square meters, a year-on-year decrease of 26.04%; the contracted sales amount was 146.55 billion yuan, a decrease of around 35%.
Vanke is one of the largest real estate developers in China. The state-owned enterprise Shenzhen Metro is currently an important shareholder of Vanke.
On March 11 this year, international rating agency Moody’s lowered Vanke’s corporate rating to junk status and warned of possible further downgrades. Moody’s revoked Vanke’s Baa3 issuer rating, giving it a Ba1 corporate rating. All of Vanke’s ratings were placed on review for downgrade. Baa3 is the lowest investment-grade rating, while Ba1 and below are non-investment grade, commonly known as junk status.