Agile Property Trips Over Rights Issue, Falls 7.2%

Real estate developer Agile Property Holdings tumbled more than 7.2 percent on the Hong Kong stock exchange today after it became the third China property firm in 30 days to declare a rights issue.

Guangzhou-based Agile is following hometown competitors Country Garden Holdings and Yuexiu Property into the equity markets as China’s ongoing real estate downturn is forcing developers to scramble for funds.

Agile Shores Up Balance Sheet in Downturn

Agile has been a favorite of short sellers this year as the company controlled by tycoon Chen Zhuolin has struggled with high levels of debt and disappointing sales.

As early as February this year the company was already being forced to discount prices by more than 35 percent on a project in Hangzhou, and the developer has a number of projects in some of China’s shakiest second and third-tier markets.

Now Agile’s stock price has fallen by the largest amount in more than two and a half years, and closed the day at HK$5.39 per share. That price is likely to head even lower after the company’s announcement at 6:00 am that it will be offering its existing shareholders the right to purchase one share for every five held at HK$4 per share – a 31 percent discount off of Friday’s closing price.

China Real Estate Developers Turn to Equity Markets

Agile is planning to raise $360 million through the rights issue, which would drop the company’s debt to equity ratio from 106 percent to 93 percent. The equity sale comes after the developer borrowed more than RMB 12 billion from overseas lenders last year at the height of the country’s property boom.

According to figures released earlier this month by China’s National Bureau of Statistics, sales of new housing nationwide slowed 10.9 percent during the first eight months of this year compared to the same period last year. In several of the markets where Agile invested, the drop off in sales has been considerably steeper.

And Agile is not alone in its financial challenges. Earlier this month, Yuexiu Property announced that it was planning its own HK$3.84 billion ($495 million) rights issue, and just a week earlier, Country Garden Holdings which is controlled by China’s richest woman Yang Huiyan had revealed its own equity deal. Country Garden is offering investors one new share for every 15 held at HK$2.50 each, amounting to approximately 1.27 billion in new shares.

All three developers are based in Guangzhou and listed on the Hong Kong stock exchange.