Faced with curbs on luxury residences
and fundraising at home, China’s biggest mainland-listed
property developer is building apartments for wealthy Chinese in
Singapore and raising debt in the city’s currency.
China Vanke Co., which also plans developments in San
Francisco and Hong Kong, sold S$140 million ($113 million) of
four-year notes with a 3.275 percent coupon on Oct. 31,
according to data compiled by Bloomberg. That’s a premium on the
average 1.8 percent coupon for Chinese bonds in the currency.
The yield on the company’s five-year U.S. dollar bonds fell 54
basis points since June, to 4.14 percent on Nov. 5, data
compiled by Bloomberg show.
Vanke has teamed up with Keppel Land Ltd. for the
development of 726 flats in east Singapore as foreign Chinese
buyers have emerged as the top overseas buyers of residential
property in the city-state this year. Mainland builders are
accelerating projects abroad as people from the world’s most-populous country seek access to education, healthcare and
citizenship abroad, said London-based broker Savills Plc.
“Chinese developers have been looking offshore for funding
for many years now but there’s more impetus to do it now after
the government turned the credit taps off,” said James Macdonald, Shanghai-based head of research at Savills China.
“Being able to turn to overseas bond markets is important to
Chinese developers as these markets are not tied to government
policy and prices are dictated by the market.”
Property Curbs
Regulators across China have sought to clamp down on
property prices, tightening lending requirements and boosting
minimum down payments for additional home purchases in an effort
to reduce the risk of a bubble destabilizing the financial
system. The People’s Bank of China in June engineered a cash
crunch that saw short-term funding rates soar amid efforts to
curb loose lending practices that have undermined bank balance
sheets.
The yield on the government’s benchmark 10-year bonds added
three basis points to 4.22 percent and has jumped 64 basis
points this year. The yuan, which gained 2 percent so far in
2013, was little changed at 6.0968 per dollar.
“Overseas markets are attractive as there is less
government interference and stronger rule of law, which makes
them more transparent and predictable,” said Macdonald, adding
that currency diversification is another driving factor behind
investment abroad.
Global Push
Dalian Wanda Group Corp., founded by China’s richest man
Wang Jianlin, is constructing a luxury hotel and apartment
building in England. Its unit, Dalian Wanda Commercial
Properties Co., is considering selling a U.S. dollar bond and
met with investors in London this week, according to people
familiar with the matter.
Chinese and Hong Kong developers have sold close to $20
billion of debt in dollars this year, making up about 17 percent
of the market in Asia outside Japan. This compares to 11.2
percent last year.
Hong Kong-listed Evergrande Real Estate Group Ltd. is
marketing an addition to $1 billion of 2018 notes it sold last
month. The company will use the money for refinancing existing
debt, it said in a filing to Hong Kong’s stock exchange today.
Vanke is targeting foreign markets where Chinese buyers are
active, including San Francisco, New York, Boston and Singapore,
President Yu Liang said in August.
Deposits Boosted
The move comes as authorities in its home town of Shenzhen,
a city that borders Hong Kong, boosted minimum down payments for
second homes to 70 percent and reiterated a ban on loans for
anyone who owns two or more properties. Vanke’s shares dropped 1
percent to 9.11 yuan as of 10:02 a.m. in Shenzhen today and are
down 18 percent for the year.
The developer signed a deal with Tishman Speyer Properties
LP, owner of the Rockefeller Center, in February to develop two
residential towers in San Francisco. In April, a unit jointly
won a HK$3.43 billion ($442 million) bid for a site in Hong Kong
that it will build with New World Development Co., controlled by
the family of billionaire Cheng Yu-Tung, Hong Kong’s third-richest man.
Borrowing costs for companies in Singapore dollars reached
a four-month low of 3.087 percent on Oct. 30, according to HSBC
Holdings Plc indexes.
China Vanke’s U.S. dollar note sold in March pays about 266
basis points more than three-month dollar Libor, compared to its
Singapore dollar debenture which pays about 226 basis points
more than Libor. Third-quarter profit at the builder rose 18
percent to 1.6 billion yuan ($262 million), from a year earlier,
the company said in an Oct. 29 filing.
‘Immediate Benefit’
“Diversification of funding would be the obvious and
immediate benefit although in this case Vanke does have projects
in Singapore,” said Clifford Lee, head of fixed income at DBS
Group Holdings, who helped market the company’s notes and is the
top arranger for Singapore dollar bonds. “The Singapore dollar
market continues to show that it is relevant and open for
foreign issuers with a strong credit story.”
China’s home prices rose in all but one of 70 cities
surveyed in September as the government refrained from
introducing more nationwide property tightening policies that
would hinder economic growth. It was the fifth month in a row
that prices gained in 69 cities.
Gross domestic product will expand 7.6 percent this year,
according to the median estimate of 52 economists surveyed by
Bloomberg last month.
The note by Vanke, which holds long-term investment-grade
credit ratings from Moody’s Investors Service, Standard Poor’s
and Fitch Ratings Ltd., is only the third from a non-bank
affiliated Chinese company to be sold in Singapore.
Other Issues
Beijing-based waste treatment company Hankore Environment
Tech Group Ltd. sold S$50 million of 2015 debentures for a yield
of 7.5 percent in July, the data show. Central China Real Estate
Ltd. was the last Chinese real estate developer to sell
Singaporean debt. The firm sold S$175 million of bonds due 2016
in April 2012 at 10.75 percent, the highest coupon ever in the
Singaporean market.
“China Vanke’s deal seemed well supported by real-money
investors as there is a low supply of investment-grade Chinese
borrowers in the Singapore dollar market,” said Adeline Tan,
Singapore-based analyst at UOB Asset Management Ltd., which
managed S$41.5 billion at the end of August. “This may lead to
other Chinese companies coming to the market, especially if they
are interested in diversifying their debt profile.”
To contact the reporter on this story:
Tanya Angerer in Singapore at
tangerer@bloomberg.net
To contact the editor responsible for this story:
Katrina Nicholas at
knicholas2@bloomberg.net
China Vanke’s Development in Beijing
Tomohiro Ohsumi/Bloomberg
A worker enters a construction site in the Fun City apartment complex, developed by China Vanke Co., in the Fangshan district of Beijing. Vanke has teamed up with Keppel Land Ltd. for the development of 726 flats in east Singapore.
A worker enters a construction site in the Fun City apartment complex, developed by China Vanke Co., in the Fangshan district of Beijing. Vanke has teamed up with Keppel Land Ltd. for the development of 726 flats in east Singapore. Photographer: Tomohiro Ohsumi/Bloomberg
Singapore Condos for Mainland Rich Funded by Bonds: China Credit
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