China Developer Shimao Warns Of Asset Selling Over Sales Gap

Chinese developer Shimao Group has admitted it might have to sell off assets to bridge a sales gap this year that it’s blamed on the deepening liquidity crisis in the country’s property sector.

Group chiefs told investors on Friday its sales this year will be 12% below target due to the national credit tightening and warned it would consider selling come commercial and hotel assets if prices were good.

In a filing late on Friday, the company – the nation’s 13th-biggest property developer by sales – said it bought back $1.5 million of 4.75% senior notes due in 2022.

In a separate filing, Shimao denied reports that it had discussed extending the payment schedule for its borrowing with Lujiazui International Trust, adding the cooperation with the trust company is normal and stable.

The developer’s shares sank 13.3% on the reports, while four of the corporate bonds of its unit traded in Shanghai plummeted over 20%.

During the call, the Shanghai-based developer said its project companies may have issued some wealth management products but the amount is very small, the investors said.

Government Lending Restrictions

Missed payments by China Evergrande Group and Kaisa Group on their wealth management products – a popular way of borrowing in China that sidesteps stringent government lending restrictions – have sparked worries about the wider risks in the sector.

Pressured by tight credit, Shimao said it has started cutting home-selling prices since July to boost sales, and stopped buying land to reserve capital. It forecast 2021 sales will be around 290 billion yuan ($45 billion), missing its 330 billion yuan target. Its contracted sales were 300.3 billion yuan in 2020.

Despite some recent signs of easing in development loan and mortgage lending, it said market liquidity and confidence will take a long time to recover and the coming two months will be critical for the sector before more loosening is expected next year.