Ministry of Finance Owned Cinda Real Estate Becomes Land King

Why is Cinda Real Estate pouring money into land, and where is the money coming from? It is a hunt for quality assets by MoF owned parent Cinda. The key passage from the article
regardless of whether they make money in the end, it has completed the parent company China Cinda asset allocation needs, to some extent, it is more important than pure profit.

Since last year, Cinda Real Estate is a big spender in the land market, becoming a the land king. "I am the money" is a synonym for Cinda Real Estate. And peers have exclaimed the do not understand the prices paid by Cinda Real Estate prices, some people even plainly say "they're all unprofitable." So what gives Cinda the confidence to make such high offers?
Their owners:
Cinda Asset registered capital of 25.1 billion, the company is the nature of non-bank financial institutions. Its 67.84% stake directly held by the Chinese Ministry of Finance.

Cinda real estate size is not large, in 2015 reported a full-year operating income of 8.136 billion yuan. This is less than 4% of the revenue of real estate industry top company Vanke.

Although small, given Cinda's lineage, no firm can match its financial strength.

In 2015, Cinda real estate had total debt of 30.501 billion yuan, an increase of 70.45%, mainly by increasing the short-term, long-term loans and issuing bonds to increase external financing, including short-term debt of up to 14.25 billion yuan, an increase of 93.25%, long-term debt 16.251 billion yuan, an increase of 54.47%.

By the end of 2015, Cinda real estate had only 5.9 billion yuan on hand. The annual report shows net cash flow from operating activities -4.346 billion, net profit of 813 million yuan, a difference of -5.159 billion.

Entering 2016, Cinda real estate debt continued to rise significantly.

Earlier this year, Securities Credit Rating Co., Ltd. to do an assessment, as of the end of March 2016, Cinda real estate debt-to-asset ratio and debt-to-net-asset ratio was 83.96% and 315.48%, respectively, in financial leverage the industry is also at a high level and if in the future the development is continued, debt levels and increased investment in land development projects will rise further.

Cinda real estate's higher debt ratio has a very simple explanation, it is from buying land.
The article goes on to ask:
Where does the money come from?

CRIC Research Center released a "17 billion rush to the king, Cinda real estate money come from? "The report said, in addition to bank loans, equity pledge, and other common issuance of financial instruments, the Fund is to Cinda Cinda real estate" blood transfusion "channels, summarized into three methods: by funds entrusted loans, shares performed by the Fund , and debt investments through the fund to attract partner.

In 2014, Cinda real estate investment and financing set up a special unit to explore the financial and real estate business model.

Public information, the letter of the property have been involved in the establishment of Shenzhen City Xinda Development Fund, Department of Finance Qin Ningbo Shun equity funds, investment funds Wuhu Xinda Silk Road, Ningbo, Department of Finance Qin Yu fund, Lu Jiaxing sink equity funds more than just equity investment funds.

Product design point of view, these funds target basic real estate investment business, it can be made FOF fund or product information management, equity, debt or a combination of ways to invest in stock and bond single project earnings and accounted for separately. Although the investment strategy and risk control model is not much different from other real estate funds on the market, but many of the Fund's priority subscribers are Cinda Asset, and the sums are comparatively large.
Cinda Real Estate is said to invest 10 billion yuan in capital in 2016, which translates into 30 billion in purchasing power:
According to the person in charge of housing prices declined to be named said the letter of real estate rush to first- and second-tier market expansion this year, its investment plans in the land market is 10 billion - the principal!

According to the relevant requirements of the land transfer, the bidding companies in the bidding land, 1/3 is the developer of its own funds of funds, in other words, the size of the letter of real estate investment this year could reach 30 billion yuan actually.

Compared to 8 billion land investment disclosed in the 2015 annual report, the scale is larger by nearly 4 times.
So why is Cinda parent giving so much money to Cinda Real Estate? It needs to invest a large amount of capital in an asset that won't suffer from currency depreciation, in a market where there is a shortage of quality assets. In sum, like Chinese households, real estate is one of the few viable assets:
In the current economic and market context, China Cinda is actually most needed asset allocation. From the beginning of July 2015, the offshore renminbi exchange rate continued to decline, coupled with the impact of inflation, the renminbi devaluation accelerated, so rational allocation of assets to avoid exchange rate risk is to consider the needs of enterprises. Cinda and China as one of the four AMC, is a typical "not bad money," asset allocation requires a class capable of carrying large amounts of funds into the industry, and real estate is the most appropriate.

"Asset shortage" worsening quality of land resources is the best choice for preservation. Capital market liquidity, strong liquidity, and have actually highlights the scarcity of high-quality assets. The real estate industry still has good prospects, the core block tier cities most appreciation potential, can not be directly owned real estate development risk by investing in real estate stocks, "Quxianjiuguo" also proved this point, China Cinda obviously well versed in this Road. Cinda real estate so "crazy" wins the king, regardless of whether they make money in the end, it has completed the parent company China Cinda asset allocation needs, to some extent, it is more important than pure profit. Therefore, only the final letter of the real estate industry to meet the main needs of asset allocation tool is still the main financial industry escort born.
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