United International expects LVGEM China to prudently expand its operating scale after increasing its stake in the Baishizhou project

Viewpoint Network News: On January 20, United International confirmed the international long-term issuer rating of "BB-" of LVGEM (China) Real Estate Investment Co., Ltd., with a stable outlook. In addition, United International also confirmed that the premium unsecured DOLLAR notes issued by LVGEM, that is, the coupon rate of 12.0%, the US$470 million senior unsecured notes due 2023 are rated "BB-".

According to United International, the rating reflects LVGEM China's above-average gross margin track record, professional management experience in the old city renovation industry and the advantages of focusing on the Greater Bay Area, including the Baishizhou project, which marks the largest old city redevelopment project in Shenzhen to date. However, the rating is subject to the size of its contract sales, general liquidity and basic financing channels, as well as dependence on a limited number of developments, and therefore a concentration risk, while the outlook is stable reflecting United International's expectation that IT will prudently expand its operating scale after it increases its stake in the Baishizhou development project.

In addition, United International said that if LVGEM China Properties' financial leverage level as measured by the EBITDA interest coverage ratio continues to grow below 2 times, or the debt/capital ratio continues to rise to 70%, and/or its liquidity and operating conditions deteriorate, i.e. its net cash flow from operating activities, the amount of contracted sales, and/or revenue continue to decline significantly, LVGEM's credit rating will be considered.

It is also reported that if LVGEM China Land significantly increases its operating scale and the financial leverage level measured by debt/capital continues to be less than 60% or the EBITDA interest coverage ratio continues to be higher than 4 times, it will consider upgrading its credit rating.

Regarding the Baishizhou project mentioned by United International in the rating, according to the report released by Viewpoint New Media yesterday, on January 19, LVGEM (China) Real Estate Investment Co., Ltd. issued an announcement that the 01-08 plot of the first phase of shenzhen Baishizhou Urban Renewal Project has obtained a construction project planning permit and a construction project construction permit, and named it "LVGEM Baishizhou Jingting".

According to the data, the 01-08 plot of the first phase of the Baishizhou Urban Renewal Project is named "LVGEM Baishizhou Jingting", with a total construction area of 456,600 square meters and a gross construction area of 314,600 square meters, of which 257,000 square meters are residential and apartment, 53,400 square meters are commercial, and 4,165 square meters are other. There is a planned 5-tower building, of which 2 business apartments (1 26-storey and 1 59-storey) and 3 super high-rise residences, all of which are 74-storey. LVGEM China Properties is making every effort to expedite the construction process of the project and ensure that it will be launched to market as planned.

It is understood that the old change of Baishizhou is divided into 4 phases of rolling development, and the development cycle is 8-10 years. In August 2020, LVGEM acquired a total of 80% of the equity of the project, confirmed as the main body of the first phase of development in April 2021, obtained the approval of the first phase of the project land and the construction land planning permit in July 2021, and "supplemented the land price" in the fourth quarter of 2021. The project will be pre-sold in phase I by the end of 2022 or early 2023.

This article originated from the viewpoint real estate network