CFLD Offloading $1.8B in Mainland Projects to China Resources Land

China Fortune Land Development is selling its interests in three mixed-use projects in the cities of Wuhan and Nanjing to mainland property giant China Resources Land for a total of RMB 12.4 billion ($1.8 billion), as the default-prone developer moves to slash its debts.

China Resources Land agreed to buy CFLD’s entire equity interest in the two Wuhan projects and 60 percent of its equity interest in the Nanjing project for the nominal sum of RMB 1 each, while the company will acquire RMB 12.4 billion of debt associated with the assets, according to a filing on the Hong Kong stock exchange.

The group will also acquire all of CFLD’s equity interest in property management firm Huayucheng (Shenzhen) Property Management. CFLD expects to see a pre-tax loss of around RMB 2.1 billion from the transaction, the developer said in its own filing to the Shanghai bourse. Under the terms of the deal, subject to state approval and other conditions, the payments would be made in five installments over the next four years.

Beijing-based CFLD, a former top 10 mainland developer best known for building and operating industrial parks, has announced plans to restructure its RMB 219.2 billion of onshore debt as well as nearly $5 billion of offshore bonds amid a string of defaults that began in early 2021.

Works in Progress

The two projects being sold in the central city of Wuhan, capital of Hubei province, include Wuhan Changjiang Center, located in the Wuchang Binjiang central business district, and Wuhan Zhongbei Road, situated in the central Wuchang district. Named after the road it adjoins, the Wuhan Zhongbei Road project sits near Sha Lake and is slated to include residential and office space.

Wuhan Changjiang Center is envisioned as a 1.5 million square metre (16.1 million square foot) complex along the east coast of the Yangtze River that will integrate residential buildings, a 323,000 square metre, 400-metre-tall office tower designed by Kohn Pedersen Fox Associates, and a 210,000 square metre high-end shopping mall crafted by Lead8.

CFLD’s Nanjing Dajiaochang project in the eastern city of Nanjing is a redevelopment of a defunct military airport in Qinhuai district into a 428,568 square metre scheme that preserves the original runway as a historic feature. Approved by the Nanjing Planning Bureau last year, the project is designed to include residential, office and shopping space.

In its filing, China Resources Land said it expects the target projects to generate consistent investment returns and considers the acquisitions to be in line with the company’s long-term development and investment strategy.

Shenzhen-based China Resources Land, a subsidiary of state-backed conglomerate China Resources, was the mainland’s eighth-largest developer by contracted sales in 2021. China Merchants Bank agreed in January to lend RMB 23 billion to the developer to finance property acquisitions.

Debt Woes

CFLD became the first victim of a liquidity crisis that has engulfed China’s real estate sector since the government began restricting access to credit under the “three red lines” policy, when it defaulted on $530 million in dollar-denominated bonds in February 2021.

Following a series of further debt delinquencies, the company launched an onshore bond restructuring effort, and in September, drew creditor opposition for its proposed offshore bond restructuring plan. Analysts noted the plan would only allow bondholders to recover about 30 percent of their original investment by the end of 2023 under a best-case scenario that included the completion of asset sales by CFLD.

Under the proposal, CFLD would strive to dispose of several industrial developments located mainly in Langfang, Hebei province for an estimated RMB 42 billion in cash proceeds, along with “several commercial properties and other properties” that would be sold for roughly RMB 33 billion, according to the offer.