Since January 1st, several of the country’s biggest real estate firms, including Evergrande Real Estate Group, R&F Properties Co, Yuexiu Property Co, and Agile Property Holdings Co have announced overseas financing plans. These announcements come on the heels of several companies including Xuhui Holdings and Future Land Development Holding Co. completing IPOs in Hong Kong during November.
According to these developers, the proceeds of their fund raising will be devoted to buying up more land for future development.
Evergrande’s plans, which were announced on January 17th, include issuing 1 billion new shares. R&F and Yuexiu, however, will be raising funds through debt issues, with R&F issuing US$400 million in senior notes, and Yuexiu releasing US$850 million in medium term notes.
China’s largest developer by sales, Vanke, is also shifting more of its fund-raising overseas with its announcement this week of a plan to move the listing of its B-Shares from Shenzhen to Hong Kong. Vanke’s move is seen as a way to derive better value for its shares as it moves away from China’s increasingly illiquid equities markets.
Other reasons for this shift toward overseas financing include the lower interest rates available overseas compared to domestically in China. For bonder issuers, a 3B credit-rated company will pay a 6.55 percent interest rate for a more-than 5-year bank loan, but the 10-year company bond is only 3 percent in the overseas market.
And after selling off land and projects during the recent market slowdown, many developers who remain cash strapped are looking for ways to build up their land banks to prepare for future projects.
In a recent media report, Zhang Dawei, Director of Research for Hong Kong based real estate agency Centaline, said that major domestic property companies spent 43.1 billion yuan on land purchases in December last year, breaking the monthly record of 2011.
For the year of 2012, investment in land purchases amounted to 161.7 billion yuan, a 41 percent jump over the amount spent in 2011.