On June 7, Vanke’s wholly-owned subsidiary Shenzhen Yinli Management Co., Ltd. transferred 48% of the equity of Shanghai Xingxinman Enterprise Management Co., Ltd. (Shanghai Xingxinman Enterprise Management) to foreign shareholder RECO YIYUAN PRIVATE LIMITED. In the face of financial difficulties, Vanke continues to sell assets to rescue itself.
Shanghai Xingxinman Enterprise Management is jointly owned by Shenzhen Yinli Management and RECO YIYUAN PRIVATE LIMITED, each holding 50% of the shares. According to enterprise search data, Shanghai Xingxinman Enterprise Management Co., Ltd. underwent a series of industrial and commercial changes in June. The most significant change is that Shenzhen Yinli Management Co., Ltd. transferred 48% of the project’s equity to the Singapore government investment company RECO YIYUAN PRIVATE LIMITED. Following the equity transfer, the latter holds a total of 98% of the shares of Shanghai Xingxinman Enterprise Management Co., Ltd., while Yinli retains 2% of the shares. This change indicates that Vanke may have completed the sale of the primary equity of this project, while Shenzhen Yinli Management is wholly owned by Yinli Commercial Properties Co., Ltd., an associated company under Vanke. RECO YIYUAN PRIVATE LIMITED is a government investment company in Singapore.
At the same time as the equity transfer, the enterprise type of Shanghai Xingxinman Enterprise Management changed from a limited liability company (Sino-foreign joint venture) to a limited liability company (foreign investment, non-sole proprietorship).
The main asset under Shanghai Xingxinman Enterprise Management is the Shanghai Nanxiang Impression City MEGA. Impression City MEGA is one of Yinli’s product lines, positioned as a city-level super large commercial center.
For Vanke, Shanghai Nanxiang Impression City MEGA is an important project contributing significantly to its revenue. Vanke’s 2023 semi-annual report revealed that Shanghai Nanxiang Impression City MEGA was the second-largest commercial project operated and managed by Vanke in terms of operating income ranking. During that period, Shanghai Nanxiang Impression City MEGA achieved operating income of 193 million yuan, accounting for over 4% of Vanke’s total operating income in the commercial business sector (including non-consolidated projects) of 4.3 billion yuan. As of the end of June 2023, Shanghai Nanxiang Impression City MEGA had a rental rate of 99%.
Simultaneously, Vanke completed the sale of its largest commercial project, the Shanghai Qibao Vanke Plaza, earlier this year. In February 2024, Vanke transferred the remaining 50% equity of Shanghai Qibao Vanke Plaza to Link REIT for a consideration of 2.384 billion yuan. Vanke had previously stated that the transaction of Shanghai Qibao Vanke Plaza brought in over 1 billion yuan in profit.
A person in charge of a listed real estate development company told Caixin’s website that the real estate industry is still in a downturn, and Vanke’s move this time is likely to involve the sale of Shanghai Nanxiang Impression City MEGA equity at a discount.
In addition to the aforementioned two commercial asset sales, in May of this year, Vanke completed the listing transfer of the land use right of Plot T208-0053 at the Shenzhen Bay Super Headquarters Base. According to the Securities Times news on July 6, the transfer price of Shenzhen Bay Super Headquarters Base was 2.235 billion yuan. In addition, Vanke also completed operational business exits through channels such as issuing REITs. In April of this year, the Yinli Consumption REIT, with the West Lake Yinxiang City as its underlying asset, was listed, with the raised capital used to repay project debt of 2.23 billion yuan.
Caixin’s website believes that Vanke’s crisis has not yet been resolved. At the end of October 2023, real estate industry risks spread to mixed-ownership enterprises, and Vanke faced its first credit crisis.
By the end of February 2024, rumors in the market suggested that Vanke is negotiating a second extension of non-standard debt with multiple insurance institutions, facing a second credit crisis.
According to Caixin’s statistics, for the full year 2024, the total principal of Vanke’s maturing domestic and foreign public debts, financing for its supply chain, and CMBS issued by its commercial sector Yinli is approximately 32.2 billion yuan. From now until the end of the year, including Yinli, Vanke still has over 5 billion yuan of public debts to repay.
An individual close to Yinli told Caixin’s website that for Vanke to survive, it should focus on strengthening rather than expanding on its strategy moving forward.
Vanke is a Fortune Global 500 company and one of the largest real estate developers in China and globally. The Communist Party of China’s Shenzhen Metro currently holds a significant stake in Vanke, which has ties to China’s state-owned assets. In the persistent downturn of the Chinese real estate market, Vanke has not been immune.
The 2023 annual report released on March 28 showed that in 2023, Vanke’s net profit attributable to shareholders of the listed company was 12.16 billion yuan, a decrease of 46.4% year-on-year.
In the first quarter of this year, Vanke incurred a net loss attributable to shareholders of the listed company of 362 million yuan, shifting from profit to loss; the net loss attributable to shareholders of the listed company, excluding non-recurring gains and losses, was 1.675 billion yuan, also shifting from profit to loss.
On March 11 this year, the international rating agency Moody’s downgraded Vanke’s corporate rating to junk status and warned of further downgrades. Moody’s withdrew Vanke’s Baa3 issuer rating and assigned a Ba1 corporate rating, placing all of Vanke’s ratings under review for a downgrade. Baa3 is the lowest investment-grade rating, while below Ba1 is considered non-investment grade, colloquially known as junk status.