China

Large Real Estate Developers Expect to Accelerate Acquisitions in 2014

This article was originally published on June 24, 2014 at 12:10 am EST

Summary:

  • China’s large real estate developers expect to accelerate acquisitions in 2014, according to yicai.com.
  • The article suggests that smaller developers have liquidity issues and many large real estate developers, including state-owned companies, are actively talking to those developers about acquisitions.

Why It Matters:

  • Most Chinese developers operate with high leverage, especially smaller firms. According to a report from local brokerage firm Centaline Property Agency, the average debt to asset ratio for real estate companies has hit 77%, an historical high. As banks are tightening credit to real estate developers and smaller firms lack alternative financing channels, most smaller developers are now facing severe liquidity problems.
  • According to a report from Tsinghua University, acquisition activities in the first quarter of 2014 increased 71% over the same period last year and the total value of acquisition activities in the real estate industry reached US$ 5.5 billion. Large real estate developers include China Vanke (CH: 000002), Poly Real Estate Group (CH: 600048) and China Merchants Property (CH: 000024).