SMM: listed in Hong Kong for more than a year, the performance of Silver City International is not optimistic.
After falling short of its target of 20 billion yuan, the veteran Nanjing real estate company set a target of 24 billion yuan in 2020, but as of the previous August, Yincheng International had sales of 8.615 billion yuan, only 35.9 percent of its annual target.
Now, with less than four months to go in 2020, Silver City seems increasingly anxious, and the company has recently tried to achieve rapid growth through acquisitions.
On September 15, Yincheng International acquired all the equity and creditor's rights of Hangzhou Company of Guangzhou Yihe Group at a price of 1.197 billion yuan, thus obtaining 805900 square meters of land in Lin'an, Hangzhou.
In the above projects, part of the land has been developed and not sold, and part of the land is under development and construction. In other words, after obtaining the above projects, Silver City International has reduced the cumbersome steps of demolition and reconstruction, planning and other steps, which can be developed and sold directly, which undoubtedly brings immediate benefits to the scale expansion of Silver City International.
However, after the trading announcement on the morning of September 16, Yincheng International's share price did not rise sharply, but showed volatility and decline, closing at 2.59 Hong Kong dollars per share, down 0.38%.
Capital markets are always the most sensitive. How much can Silver City International gain from this seemingly good deal? Can the size of the company make a new breakthrough? Everything is too unpredictable.
1.2 billion copy Jiahe Real Estate
It is reported that Hangzhou Qingcheng Real Estate Development Co., Ltd. (that is, the target company) is owned by Yihe Real Estate, Zhejiang Huahong and two natural persons (the latter collectively referred to as Huahong). They are 67%, 22.308%, 8.712% and 1.98%, respectively.
On September 15 (after the trading session), Hangzhou Zezhou Enterprise Management Co., Ltd., a wholly-owned subsidiary of Yincheng International, entered into an acquisition framework agreement with Yihe Real Estate, the target company, the guarantor and Hangzhou Hongyuyuan (limited partnership). Hangzhou Zezhou acquired 67% equity and 127 million debt of the target company at a consideration of about 1.091 billion yuan.
On the same day, Hangzhou Zezhou signed an acquisition framework agreement with Huahong Fang and the target company. Hangzhou Zezhou acquired 33% equity and 41.3609 million yuan of creditor's rights of the target company at a consideration of 106 million yuan.
Upon completion of the acquisition, the target company will become an indirect wholly-owned subsidiary of Silver City International and its financial results will be consolidated into the consolidated financial statements of the Silver City Group at a total consideration of $1.197 billion.
Data show that the target company owns a plot of Qingshan Democratic Village, Lin'an District, Hangzhou City, Zhejiang Province, with a total area of about 805900 square meters.
Analysts tell us that since last year, Yihe Real Estate has been reporting problems such as broken capital chain, overdue asset management products, and debt default. In the past few years, Yihe Real Estate has been selling projects. "Yihe Real Estate is very short of money, and selling projects can be realized as soon as possible."
As for Yincheng International, the company disclosed in the announcement that the acquisition of a stake in the target company is based on the development potential of the project and the company's strategy to expand its existing real estate development business in the Yangtze River Delta metropolitan area.
However, analysts believe that Yincheng International has a demand for scale, and the acquisition of the project is a market project, and the geographical location of the project is relatively superior, in line with the enterprise's Yangtze River Delta development strategy.
"one is short of money and the other is short of land, so with this cooperation, this is a deal that each takes what he needs."
Sources show that the Hangzhou site is located in the Qingshan Lake area of Lin'an, where a large number of high-end villa projects are gathered, and the case name of the above project is "Qingcheng Mountain language Room". The first, second and third phases were developed by Huahong, Zhejiang, with a total area of 41000 square meters.
Yihe Real Estate won the land for the fourth and fifth phases of the above-mentioned project by way of shareholding in 2013, with a total area of 39600 square meters, a total area of about 600mu, a volume ratio of 1.05, and a total investment of more than 3.5 billion yuan. It is planned to be mainly villa products, with some small and senior executives, and is expected to launch in 2014.
At present, some of the above projects have been developed and unsold, and some are to be developed. While Silver City International won all the shares in the above-mentioned projects at a price of less than 1.2 billion yuan, on the one hand, the transaction cost was significantly lower than the total investment of the project; on the other hand, due to the low threshold for project acquisition in Lin'an District, coupled with the favorable planning of light rail and other supporting facilities, this area has become more and more recognized by property buyers in recent years.
According to the point of view of real estate new media access to a number of intermediary platforms learned that the average selling price of the above projects is about 21000 yuan / square meter. At the same time, in the ranking of commercial housing transactions in Hangzhou in the first half of the year, the Yuexiu West Coast project, located in Qingshan Science and Technology City in Lin'an, won the top spot. In other words, the area where the project is located has a large sales base and customer base.
For Silver City International, this seems to be a good deal.
An "out-of-date" deal
Only from the transaction price point of view, this deal is indeed a bargain, if combined with the current financial situation of Silver City International, market factors, the deal may not be so "preferential".
According to the point of view real estate new media learned that in the past two years, Silver City International due to debt problems, financial pressure and frequently appeared in the topic of discussion.
Data show that by the end of 2019, Yincheng International's interest-bearing debt was 10.5 billion yuan, an increase of 3.03% over the same period last year, of which short-term loans accounted for 47% and long-term loans accounted for 53%. At the end of the period, the company had a cash balance of 4.031 billion yuan and a cash-to-short-term debt ratio of 0.82 yuan.
In mid-2020, the company's debt situation improved, holding currency funds of 6.58 billion yuan, up 20% from the end of 2019, and the cash-to-short debt ratio rose sharply to 1.57 times from 0.82 times at the end of 2019.
In terms of debt, the net debt ratio of Silver City International from 2015 to the end of 2019 and mid-2020 recorded 113.51%, 205.73%, 218.99%, 351.49% and 160.64%, 100.9%, respectively. Among them, it fell by 190.85 percentage points last year and 59.74% in the middle of this year compared with the end of last year. However, the leverage level of Silvercity International is still at a high level in the industry.
Insiders in the industry told us that this year is the peak period for debt repayment for housing enterprises. Coupled with the outbreak of the novel coronavirus epidemic at the beginning of the year, the real estate industry has been greatly affected. For small and medium-sized housing enterprises, now is the time to withdraw funds to supplement cash flow to tide over the difficulties, or priority should be given to survival.
In this way, this is not a timely deal.
In addition, the announcement revealed that the Kunlun debt owed by the target company to Kunlun Trust was 358 million yuan, while that owed to Yihe Real Estate and Huahong was 127 million yuan and 41.3609 million yuan respectively.
Due to the failure of the target company to repay the operating payment of RMB 46.583 million, about 21000 square meters of the Yihe site is subject to seizure measures, while about 285000 square meters of the Yihe site has been mortgaged by the target company to Kunlun Trust as collateral for Kunlun debts.
In addition, the total amount owed by Yihe Real Estate Group to Yihe creditors is about 1.05 billion yuan, and Yihe creditors have initiated legal proceedings against Yihe Real Estate Group for debt recovery and applied to freeze 67 per cent of the target equity.
The equity relationship and debt relationship of the target company are intertwined and complex, which means that Silver City International needs to spend more effort to sort it out.
It is reported that in this transaction, Silver City International pays the price of the transaction by means of internal resources of the group and loan allocation from Hangzhou Hongyuyuan (limited partnership).
However, after the transaction, Yincheng International needs to transfer 49 per cent of the shares of the target company to Hangzhou Hongyuyuan (limited partnership) as collateral for the loan, and owes Hangzhou Hongyuyuan up to 990 million yuan. The interest-bearing loan amount should be repaid to Hangzhou Hongyuyuan on or before September 9, 2023.
For Silver City International, after the completion of the transaction, the project company will be merged to Silver City, and the two sides will "share weal and woe" in the future. However, after the merger, and no matter how much revenue the project can bring to the company, in the short term, the consolidation of the project company will increase the debt of Silver City International itself, as well as the debt owed to Hangzhou Hongyuyuan. This is undoubtedly a heavy load for the originally highly leveraged Silver City.
The difficult problem of harmony
Silver City International may be able to expand rapidly in a 1.2 billion yuan deal, but it is also possible to further increase the leveraged data. But for the other side of the deal, the heavily discounted deal may give it a brief respite.
In fact, Yihe Real Estate from the initial loan, mortgage, step by step to today's asset sale, there are market factors, but also corporate strategy-oriented.
Yihe Real Estate is an established property company in Guangdong, which was founded earlier than R & F and Evergrande. He Jianliang, the founder of Yihe Real Estate, was originally in the business of international cruise hotels. By coincidence, he Jianliang returned to the land and started a real estate business.
In 1999, the company independently developed the first real estate project "Yihe Villa" became famous, as a result, Yihe Real Estate rose to fame in the Guangdong real estate market.
The success of Yihe Villa laid the gene for the development of the company, and then Yihe Real Estate focused on making characteristic luxury houses. According to news, Yihe Real Estate once sold a villa for 300 million yuan, the same scenery, the company had planned to list in Hong Kong in 2010, raising HK $1.95 billion to HK $3.12 billion, but later failed to complete the listing plan.
The listing failed, and the development road of this enterprise has become more and more bumpy.
It is reported that in 2015, Yihe Real Estate established the sub-brand "Yihe Home" and officially entered into old-age real estate. Since then, the company has been laying out tourism real estate, housing rental, education and other areas.
However, these products all have the characteristics of large upfront investment and long return cycle, coupled with the regulation and control of the property market in those years, which greatly affected the luxury property business of Yihe Real Estate. In the case of slow hematopoiesis, it continues to invest capital into new long-cycle projects, making it more and more difficult for the company to develop.
According to statistics, Yihe's sales in Guangzhou, its stronghold, were less than 280 million yuan in 2017, while Evergrande recorded contracted sales of 500.96 billion yuan and R & F real estate recorded 81.86 billion yuan in the same year.
With the great pressure of sales rebate, Yihe Real Estate began to break its arms to survive. In 2017, Yihe Real Estate sold its Summer City project in Shenyang to Evergrande. In June 2018, Pearl River Industries acquired about 30% of Huadu Yee and Shengshi Project Company in the form of "equity + debt". In the same year, Yihe Real Estate sold the Taishan Yihe project to Shimao.
After the continuous sale of assets, Yihe Real Estate was able to catch its breath, but with the continuous strengthening of real estate regulation and control, Yihe Real Estate, which takes luxury projects as its main product line, is once again in crisis.
At the end of 2018, the company was caught up in a dispute over commercial housing pre-sale contracts after two trust plans were in crisis, and its subsidiaries were reported to have violated the law. In September 2019, Yihe Group was listed as the executor of breaking promises four times in a row, Chairman he Jianliang Synchronize was put on the list of restrictions on high consumption, and its company was plagued with lawsuits, seized and frozen.
In November 2019, the Securities Regulatory Commission and Guangdong Regulatory Administration disclosed that of the nine defaulted debts of Yihe Real Estate, the single amount exceeded 10 million yuan, with a total amount of more than 5 billion yuan. Because Yihe Real Estate is not a listed company, there is very little data that can be searched, and the information disclosed by the Regulatory Authority has undoubtedly become the most intuitive observation of the enterprise by the outside world.
Now that Yihe Real Estate is selling the Hangzhou project again, perhaps this self-rescue is far from over.
The "fall" of Yihe Real Estate may result from the persistence of luxury housing projects, from the transformation of pension and tourism, or from the change of industry policy. in short, this 1.2 billion yuan transaction has once again put Yihe Real Estate in the spotlight. however, only time will know whether this deal can save Yihe and what changes it will bring to Silver City.
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