"Three Red Lines" Shock Wave: Real Estate Companies Continue To Boom In Financing, And Investment Scale Drops Sharply

The financing supervision policy represented by the "three red lines" is influencing enterprise decision-making imperceptibly.

According to the data released by Zhongyuan Real estate, since September this year, the domestic bond issuance of real estate enterprises has exceeded 100 billion yuan, up 48.6% from 67.3 billion yuan in the same period of 2019, continuing the financing blowout in July.

Among them, the current low cost of financing and the tightening of financing policy are inseparable.

The prudent management policy of real estate finance represented by the "three red lines" was formally put forward in August this year. According to the requirements of the regulatory authorities, the management of real estate financing is mainly based on the "three red lines", which are as follows: after excluding advance collection, the asset liability ratio is greater than 70%; the net debt ratio is greater than 100%; the cash short debt ratio is less than 1 times. According to the real estate enterprise's "line" situation, it is divided into "red, orange, yellow, green" four grades, and then implement differentiated debt scale management.

As the policy will be implemented in the way of "pilot before promotion", it will leave a "window period" for real estate enterprises to adjust. In addition to the continued blowout of financing, real estate enterprises' land acquisition and investment strategies are also adjusting.

Last window

Affected by loose liquidity and falling financing costs, the scale of real estate financing has remained at a high level since the second quarter of this year. In the second half of the year, the scale of domestic bond financing as the main means increased significantly.

Compared with the past two years, the financing cost of real estate enterprises is generally low this year, and the cost of most real estate enterprises is mainly maintained at the single digit level. On October 23, Xiamen Xiangyu issued a short-term bond of 900 million yuan, with an interest rate as low as 2.7%. On October 26, Greentown issued 950 million corporate bonds, of which the coupon rate of 5-year term of variety 1 was only 3.82%.

Zhang Dawei, chief analyst of Zhongyuan Real estate, pointed out that the average coupon rate of real estate financing in recent years is about 4% - 5%, significantly lower than the level of 6% - 8% in the same period last year.

A person in charge of a listed real estate enterprise in Beijing told the 21st century economic report that the reason for the blowout of financing is not only the environment of low capital cost, but also the time window before the full implementation of the "three red lines".

According to the new regulations, if the three indicators exceed the threshold value as "red file", the scale of interest bearing liabilities of real estate enterprises shall be the upper limit at the end of June 2019, and shall not be increased; if two indicators exceed the threshold value, the annual growth rate of interest bearing liabilities shall not exceed 5%; if one index exceeds the threshold value, it shall be "yellow", and the annual growth rate of interest bearing liabilities shall not exceed 10%; all three indicators shall not exceed the threshold The annual growth rate of interest bearing liabilities should not exceed 15%.

It is also understood that for real estate enterprises whose land sales ratio exceeds 40% in the past year or the net cash flow generated by activities has been negative continuously in the past three years, the regulatory authorities will also reduce the scale of credit bond issuance according to the actual situation, and impose restrictions on trust financing, asset management products and overseas financing.

GF Securities believes that this adjustment means that the allocation rules for financial resources of real estate enterprises are adjusted from the past "market-oriented allocation" to "policy constrained allocation".

The financial statement data of 434 real estate enterprises (including non listed real estate enterprises) were collated and found that the proportion of red, orange, yellow and green enterprises accounted for 28%, 18%, 33% and 21% respectively. The agency pointed out that in view of the new financing scale of the real estate industry in the past two years, the new deal will not have a big impact on the stability of the industry, but it will undoubtedly bring constraints for some real estate enterprises trying to achieve high growth by means of high debt.

The above-mentioned people from real estate enterprises pointed out that the "three red lines" mean the end of the era of real estate high leverage. Before the full implementation of the policy, real estate enterprises are facing the final "window period". For some time to come, the "downscaling" through the replenishment of liquidity will still be the main action of the real estate enterprises.

The way to downshift

In fact, in the "downsizing" road of real estate enterprises, in addition to increasing financing, strengthening sales and tightening investment have also become important actions.

In terms of sales, some real estate enterprises have implemented the strategy of "exchanging price for quantity" and achieved obvious results. According to the data of the National Bureau of statistics, in September this year, the sales area of commercial housing in China was 186 million square meters, up 7.25% year-on-year; the sales volume was 1.87 trillion yuan, up 16% year-on-year. Both indicators reached a record high in the same period.

In terms of investment, the action of enterprises has slowed down significantly. According to the statistics of e-ju Kerui, after the impact of the epidemic, real estate enterprises ushered in the replenishment peak in the second quarter of this year. But in the third quarter, with the continuous tightening of financial supervision, the investment amount of real estate enterprises decreased significantly.

Data show that the investment amount of top 50 real estate enterprises in the third quarter decreased by 26% compared with that in the second quarter. Among them, after the introduction of the "three red lines" regulatory policy, the monthly investment amount in September fell by a cliff, 42% lower than the monthly average in the second quarter, only higher than that in January, February and March this year.

"On the one hand, after the replenishment in the second quarter, the focus of enterprises is still on" promoting sales, grasping payment collection and stabilizing cash "; on the other hand, with the introduction of the" three red lines "regulatory policy, corporate financing has been further tightened, which has also led to a decline in the willingness of real estate enterprises to invest."

This mentality has a direct impact on the land market. According to the statistics of the above institutions, the number of times in which 200 real estate enterprises participated in the auction of key plots decreased significantly in September. 53% of the enterprises did not participate in the transfer of the key plots. Another 32% of the real estate enterprises participated in the auction for 5 times or less, and only 6% of the real estate enterprises participated in the auction more than 10 times. Compared with the previous active participation in the auction, the cautious investment attitude of real estate enterprises at the end of the third quarter can be seen.

Most institutions believe that although the fourth quarter is the peak of land acquisition, the investment attitude of real estate enterprises will continue to be cautious.

In addition to the above-mentioned short-term behavior, many real estate enterprises have launched long-term measures on the way of "downsizing". For example, optimize the management structure, improve turnover efficiency, reduce operating costs, and so on. Many of them have implemented salary adjustment and even layoffs.

In addition, some real estate enterprises have begun to adjust the consolidated statement caliber of their projects, so as to reduce the scale of on balance sheet liabilities.

It is easier to adjust debt through debt replacement than through debt replacement. The net debt ratio and the asset liability ratio (excluding the accounts receivable in advance) are related to the operation level, so it is difficult to adjust them. " The person said that it is expected that in the next one to two years, this is one of the business focus of real estate enterprises. (Editor: Zhang Weixian)