In the past, real estate enterprises relied on land dividends and financial dividends. Under the new normal, the management, products, services and innovation capabilities of real estate enterprises are more important.
Since mid-2020, the profound transformation of the real estate industry has begun. Under the policy of “no speculation for housing and housing”, policies such as “three red lines”, “five-tier housing loans” and “centralized land supply” are issued intensively, which makes the industry shake.
Different from previous regulation focusing on the demand side, this round of regulation pays more attention to the reform of the supply side. Through the reconstruction of the rules of land supply and financial leverage, a stable and resilient industry ecology has been established. More importantly, the principle of quantitative management in financing tries to make the industry risk in a state of overall control, but it also has a profound impact on all kinds of enterprises.
The logic of real estate industry has changed fundamentally. In the past few years, most of the real estate enterprises have pursued the development mode of high leverage and high turnover, and many of the rapidly growing real estate enterprises have taken advantage of this trend. In the past, real estate enterprises relied on land dividends and financial dividends. Under the new normal, the management, products, services and innovation capabilities of real estate enterprises are more important.
Since the new regulations were implemented, the transformation of the real estate industry gradually appeared.
The risks of high leverage and high debt real estate enterprises are gradually exposed, and the phenomenon of “big fish eat small fish” often occurs, which is a new development footnote of the industry. Meanwhile, in order to survive, many real estate enterprises maintain their survival status within the safe threshold through asset realization, allotment financing and split and listing.
On July 21, the 21st century economic report real estate research group issued a report “farewell to the real estate dividend and strengthening management risk control -” three red lines “and” two concentration “investment strategies (hereinafter referred to as the report). Through the comprehensive observation of listed real estate enterprises, the paper analyzes the survival outlook of real estate enterprises in the post bar era.
Of course, changes in the policy environment will also have an impact on various market players. In this regard, the report also gives relevant suggestions from the perspective of investors, home buyers, regulatory authorities and other market participants. Therefore, the report will provide a panoramic reference for the market in the post leverage era.
Survival under the red line
After the “three red lines” policy was launched, downshift became the main theme. According to the 100 sample real estate enterprises of Shell Research Institute, the number of zero line real estate enterprises will reach 29 in 2020, 12 more than that in 2019. Judging from the changes, downshifting has become the main theme. The proportion of downshifted real estate enterprises reached 40%, of which 10 enterprises decreased by 2 grades compared with that in 2019, and one enterprise rapidly decreased by 3 grades.
From the overall situation, among the Green Housing enterprises, the steady state-owned enterprises are still the mainstream, and the private enterprises such as Longhu, which have been operating prudently, are also among the Green Housing enterprises. Among the Yellow file real estate enterprises, rongchuang’s performance has attracted attention, dropping two consecutive stalls from “red file” to “yellow file”. In this file, the number of deep ploughing real estate enterprises is more.
Most of the real estate enterprises that have entered the orange market have grown up relying on high leverage and high debt in the past few years, among which there are many dark horse real estate enterprises. Many of the real estate enterprises classified as “red file” have already had difficulties in operation, and also have some vicious events such as bond default and commercial paper default. In this position, real estate enterprises such as Taihe, Tianfang and Huaxia happiness are not optimistic in terms of business data or debt status, and it is difficult to realize the shift. Evergrande and Fuli are concerned by the market because of the tight capital chain.
The report points out that the “three red line” mainly restricts the debt scale and financial indicators of real estate enterprises. Therefore, the real estate enterprises mainly optimize through two ports in reducing the debt level and optimizing financial indicators. One end is to increase the operating cash flow, the other end is to enlarge the shareholders’ equity funds.
Specifically, it mainly shows in five aspects: 1. Reducing land acquisition and increasing the proportion of cooperative development; 2. To clear some heavy assets and to put back funds lightly; 3. To exchange the quantity with price, accelerate the acquisition of the first opportunity for the sale of houses; 4. Equity financing, introducing war surrender low leverage; 5. The assets are re appraised to increase their rights and interests.
At the same time, in order to reduce the scale of interest bearing debt, real estate enterprises will also make part of the debt off the balance sheet.
According to the statistics of Guojin securities, the minority shareholders’ equity proportion of Top50 listed real estate enterprises will continue to increase by 2.3 percentage points to 38.67% in 2020, and the proportion generally increases. The off balance sheet liabilities of 42 real estate enterprises increased, and the minority shareholders’ equity of Xiangsheng, Hongyang and South China real estate enterprises increased by more than 15 percentage points, which is possible to reduce leverage when they are out of balance sheet. In addition, comparing the proportion of minority shareholders’ equity to its actual profit (minority shareholders’ profit and loss / net profit) will also help to judge whether the real estate enterprises contain hidden liabilities. The difference between jiazhaoye, Bluelight, Aoyuan, Xinli and sunshine city is more than 30%, which is possible to make clear the real debt.
The report reminds that off balance sheet liabilities can be identified by focusing on the scale of long-term equity investment and the scale of external guarantee of real estate enterprises. Under the current policy framework, off balance sheet liabilities are likely to be included in the scope of supervision, and then affect the decision-making of market entities.