China property: Country Garden auctioning US$530 million worth of assets in Guangzhou to overcome cash crunch, defaults

The Foshan-based developer has listed five properties for sale in Guangdong’s provincial capital, including a five-star hotel valued at US$181.5 million
Last week, Country Garden’s Australian arm finalised the sale of its Sydney development, paving the way for its exit from the country

China property

Yuke Xiein Beijing

Published: 1:43pm, 23 Jan 2024

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Embattled mainland Chinese developer Country Garden Holdings has put a chunk of assets on the block in Guangzhou in a bid to repay sizeable debt due within the next six months.

The move comes on the heels of an agreement struck last week by the developer’s subsidiary to sell its last investment in Australia.

The Foshan-based developer, once China’s largest home builder by sales, is auctioning five properties in the capital of the southern Guangdong province, according to a recent listing on Guangzhou Enterprises Mergers and Acquisitions, a property-transaction platform.

“At the moment, investors in the mainland, especially those owned by the state, still have plenty of dry powder, so they might consider [picking up] property projects, especially the good ones,” said Shen Meng, a director at Beijing-based investment firm Chanson & Co. “One main thing to consider is whether the listing prices are attractive enough. In Country Garden’s case, there will definitely be room for negotiation.”

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The assets – two office towers, a hotel, a residential building and commercial property – have a combined base price of 3.82 billion yuan (US$530 million), marking Country Garden’s most ambitious attempt at divestments in the city.

Country Garden Phoenix City Hotel, a 573-room five-star hotel, has an asking price of 1.3 billion yuan, while an office building in the southern district of Panyu, is listed at 1.2 billion yuan, according to data available on the platform.

Country Garden did not reply to the Post’s queries regarding the asset sale.

Country Garden’s debt woes show no signs of ending. It is among a host of mainland developers mired in financial trouble since Beijing began targeting the industry with its “three red lines” policy in August 2020. Saddled by debt of 257.9 billion yuan as of last June, the company has nearly 109 billion yuan of borrowings due by June 2024, according to its financial statement.

Country Garden has been working on a debt restructuring proposal since defaulting on US$11 billion of offshore bonds. On January 16, the company appointed KPMG China as its principal financial adviser to help with the restructuring of its offshore liabilities.

Last week, the company’s Australian subsidiary, Risland, agreed to sell its remaining stake in most of Wilton Greens, located around 65 kilometres southwest of Sydney, for around A$240 million (US$157 million).

Yang Huiyan, Country Garden’s chairwoman, said at the company’s annual meeting on December 8 that the priority for 2024 is to “guarantee delivery, guarantee operations, and guarantee credit”.

Country Garden also pledged to deliver more than 480,000 homes in 2024, after failing to achieve its goal of 700,000 units in 2023.

Sentiment in mainland China’s commercial property segment is likely to remain weak this year, according to Martin Wong, director and head of research and consultancy for Greater China at Knight Frank.

“A lack of investment in commercial property is also an issue,” he said.