With sales of hundreds of billions and restarting land purchases, has Vanke come back to life?

Previously considered to be in a precarious situation, Vanke's cumulative sales from January to May 2024 have reached 102.21 billion yuan, still maintaining a top three position in the current real estate industry.

However, compared to last year, Vanke's sales in the first five months of this year have recorded a nearly 40% decline. In particular, Vanke's average selling price in 2024 has seen a discount of around 14% compared to last year, leading to a significant decrease in sales revenue, indicating significant pressure on Vanke's sales performance.

At the annual shareholders' meeting held at the end of April this year, Vanke's Chairman of the Board, Yu Liang, stated that in order to reverse operational difficulties, Vanke has formulated a comprehensive plan focusing on core business, streamlining and strengthening. This includes actively reducing debt, deleveraging, and completing the transformation of the financing model. In the future, Vanke will exit businesses other than the three main sectors of comprehensive residential development, property services, and leasing apartments, and will clean up and transfer non-core financial investments.

Additionally, Vanke will vigorously promote the revitalization and trading of large-scale assets such as self-owned commercial properties, aiming to achieve 20 billion yuan annually. According to Vanke's debt reduction plan, its interest-bearing debt will be reduced by over 100 billion yuan in the next two years, and the total scale of interest-bearing debt will be reduced by more than half in the next five years.

Vanke's recent series of operations clearly reflect this strategy.

For example, the Shenzhen Bay Super Headquarters Base T208-0053, purchased by Vanke for 3.137 billion yuan in 2017, was recently taken over by Shenzhen Metro and a subsidiary of the Nanshan District State-owned Assets Supervision and Administration Commission for 2.235 billion yuan. Taking into account the funds and construction costs invested by Vanke over the past seven years, this transaction can be described as a "bone-breaking" deal.

Furthermore, the consumer infrastructure public REIT initiated by Hangzhou West Lake Impression City Shopping Center was also listed on the Shenzhen Stock Exchange not long ago, raising 3.26 billion yuan. To some extent, this can also be seen as a move to exit related assets.

In addition to commercial real estate, based on the principle of exiting businesses other than the three main sectors, it would not be surprising if Vanke's other diversified businesses such as hotels, resorts, food, and warehousing logistics are shelved in the future.

However, in terms of reducing interest-bearing debt, due to cash flow pressure, Vanke's recent performance can be described as "going in the opposite direction." This is not difficult to understand, as initially using long-term borrowing to replenish cash flow to withstand short-term financial pressure, and then gradually reducing interest-bearing debt as the company recovers, is not contradictory to the medium to long-term goal of debt reduction.

This is also an important reason for Vanke's frequent financing actions in recent times. For example, since May, Vanke has announced additional loans from Postal Savings Bank of China totaling 1.3 billion yuan, Agricultural Bank of China 2.2 billion yuan, Bank of China 1.89 billion yuan, China Merchants Bank 1.7 billion yuan, and undisclosed bank(s) 8.8 billion yuan.

Additionally, there have been reports that Vanke has obtained approximately 20 billion yuan in syndicated loans by pledging equity in its subsidiary Wanwei Logistics to banks such as China Merchants Bank. There are also recent reports that Vanke is in talks with state-owned banks for a loan financing of around 6.9 billion US dollars (approximately 50 billion yuan), although this information has not been confirmed With the smooth maintenance of financing channels and the continuous optimization and warming of industry policies in recent times, Vanke may indeed see the dawn of emerging from the predicament.

In terms of May performance, despite a significant overall decline, the monthly figure for May increased by 11.7% to 23.33 billion yuan compared to the previous month. However, the average selling price further dropped to 12,000 yuan per square meter, a 9% decrease from the average selling price from January to May.

Moreover, in May, Vanke once again acquired new land reserves, all located in Shenyang. These include land parcels on the north side of Danxia Mountain Road and the west side of Yalüjiang North Street, with equity ratios of 51% each. The equity construction areas are 27,000 square meters and 23,000 square meters respectively, with equity land prices of 133 million yuan and 115 million yuan to be paid.

Although the land parcels are not large in size, this marks Vanke's restart in land acquisition after a 3-month pause, perhaps indicating some directional significance.

Author: Ruisi.com, Source: Ruisi.com, Original Title: "Restarting Land Acquisition with Sales of Hundreds of Billions, Is Vanke Coming Alive?"