China Fortune Land Development (CFLD) has announced to the Shanghai Stock Exchange that it will accept debt financing of up to RMB 6 billion ($870 million) from Ping An Asset Management, the second-largest shareholder in the developer and a unit of financial giant Ping An Insurance.
The announcement comes just a month after CFLD chief Wang Xuewen announced at a staff meeting that the home builder is aiming to join the ranks of China’s top three developers.
According to this week’s announcement, CFLD subsidiary Jiutong Investment will use the money to invest in two industrial parks — one in Nanjing, in Jiangsu province, and a second in Langfang, in Hebei Province.
Fueling An Expansion
Ping An became a major shareholder of CFLD in July, paying RMB 13.8 billion to purchase 19.7 percent of CFLD and putting it behind only the 42.7 percent stake in CFLD controlled by its parent, China Fortune Land Development Holding.
Following the deal, CFLD took three Ping An executives aboard its management team and two others onto its board of directors.
CFLD Expands Business Scope
CFLD is already the mainland’s biggest builder of industrial townships — industrial developments with attached residential areas and recreational facilities — but also plans to expand its business scope into nursing homes, healthcare facilities, rental apartments, and a variety of commercial projects.
The lion’s share of its new funding from Ping An will go toward building the Gu’an Industrial Township — a 48 square kilometre development in Langfang launched in 2015 — and the Nanjing Industrial Township, a 10 square kilometre project in Lishui district in suburban Nanjing.
According to the Shanghai-listed developer’s announcement, the total amount of new financing from Ping An could be anywhere from RMB 1.2 billion to RMB 6 billion, with Jiutong paying a fixed annual interest of 8.32 percent over an undisclosed number of years.
A Rising Tide of Financing
More than a dozen other major players in the mainland real estate market have also announced funding plans recently, even as financing costs have increased to a three-year high due to rising interest rates and a declining mainland economy. Evergrande, the country’s third-largest developer and its most indebted, issued two US dollar bonds in November, with interest rates of 11 percent and 13 percent, reflecting the risks of investing in the company.
Wang said that Ping An’s financial engagement with CFLD would help boost its fortunes, given Ping An’s stable finances and solid reputation. “When it comes to financing, in the past people wouldn’t even take a look at our projects,” Wang was reported to have said at the staff meeting. “Now, people want to increase their investments in our projects.”
Since the beginning of this year, CFLD and its affiliates have issued at least RMB 17 billion worth of bonds. CFLD in the second half of the year issued a three-year corporate bond worth RMB 1.3 billion at an interest rate of 7.4 percent, and other bonds totalling RMB 5 billion. It has also raised $1.05 billion through the issuance of offshore bonds, with $850 million of that total issued during the second half of the year.