On April 21, Landsea Green Management, a Hong Kong-listed company under Landsea, announced that in view of the current liquidity pressure, the company failed to pay the relevant amount of the 2022 notes on April 20, and the unpaid principal amounted to US$96.14 million. This could trigger a request for accelerated repayment by creditors.
Default after rollover
At present, Landsea Green Management only has this US dollar bond. The bond was listed on the Singapore Exchange in 2022 with a coupon rate of 10.75% per annum, payable semi-annually. New Notes have previously been issued through an Exchange Offer with a maturity date set for 20 October 2024.
"Due to the slowdown in the mainland real estate market since the second half of 2021, Landsea Green Management Co., Ltd.'s real estate development business in China has experienced a continuous decline, resulting in a significant decrease in the number of pre-sales and pre-sale proceeds in 2022 and 2023. In the announcement, Landsea said, "The Group's business operations are normal, and we will continue to strive to ensure the delivery of properties, accelerate the sale of properties and the stability of business operations." ”
As for the follow-up arrangements, Landsea Green Management said that it is discussing with the noteholders and will continue to closely monitor the situation and consider all possible actions, including but not limited to formulating a comprehensive liability management solution for the Group's relevant debts and engaging financial and legal advisers to assist the Company in carrying out relevant work.
The risk of recovery of construction fees + pressure on its own sales
Landsea Green Management is one of the main initiators of the "Green Supply Chain Action for China's Real Estate Industry". By 2023, it has ranked first in the real estate sector in the CITI index for green supply chain and the CATI index for corporate climate action for seven consecutive years, and the first green three-star buildings in nine cities, including Shanghai, Nanjing and Hangzhou, were built by Landsea.
In 2001, Tian Ming "left" from the system to found Landsea in Nanjing, and his years of work experience in public institutions and government departments have accumulated rich network resources for Tian Ming. At that time, it was a golden age for the development of the real estate industry, and Landsea's early development was almost a smooth road.
In 2013, Landsea Group's first listing platform, Landsea Real Estate, was born through the backdoor of Hong Kong stocks.
In 2022, Landsea Real Estate was renamed "Landsea Green Management Co., Ltd.", referred to as "Landsea Green Management", because the average equity ratio of the Group's real estate development projects has been declining year by year, and the transformation from the traditional asset-heavy real estate development model to the asset-light model has been basically completed.
Under the "wailing" of the real estate industry at that time, agent construction was indeed a hot track. However, Landsea, which plays the dual role of agent builder and developer, still cannot escape the pain of the industry. Since May 2022, international rating agencies such as Standard & Poor's and Moody's have downgraded Landsea Properties' rating to negative, and the liquidity assessment is weak.
Landsea Green Management's asset-light business accounts for a significant proportion, while the scale of its development business is relatively small. The overall decline in the industry has led to a significant reduction in pre-sales and proceeds, which has exacerbated the company's liquidity pressure. At the same time, the poor sales performance of the partners in the asset-light construction project led to the delay in the payment of some expenses, which affected the company's cash flow. The data shows that the other receivables of Langshi Green Management are 2.449 billion yuan, which not only occupies a large amount of funds, but also has a certain recovery risk.
According to the 2023 financial report, the annual revenue was 9.04 billion yuan, a year-on-year decrease of 35.52%, the net loss attributable to the parent was 861 million yuan, the net assets were 2.072 billion yuan, a decrease of 23.06% from the beginning of the year, the total assets were 19.354 billion yuan, and the asset-liability ratio was 89.29%.
Heavy positions in the United States are sold at a discount
In addition to developing real estate business in China, Landsea has made a bold move to focus on the U.S. real estate market, with the goal of becoming one of the top 10 builders in the U.S.
In 2020, Landsea Real Estate successfully spun off Landsea Homes and listed on the NASDAQ in the United States. After the spin-off, Landsea Homes has a market value of US$341 million, or more than RMB 2.1 billion, while the market value of its parent company Landsea Real Estate is only HK$1.6 billion, or about RMB 1.34 billion.
At the same time, Landsea's investment direction has also begun to tilt towards the United States with great fanfare. In 2021 and the first half of 2022, the company's revenue in the United States accounted for 80.65% and 77.45% of the group's total revenue, respectively.
According to the analysis of industry insiders, the layout of real estate in two completely different regions of China and the United States at the same time is related to cognitive and management deviations, and it is difficult to control the market trend in all aspects, which may be the internal factor that makes Landsea enter a dilemma.
In the cold winter of real estate, Landsea had to sell its children in China to survive.
In 2022, Landsea Green Management successively sold 100% of the equity of Nanjing Xinbeisheng Investment Management Co., Ltd., 10.7% of the equity of LandseaHomes, 50% of the equity of Shanghai Rongmao Commercial Management Co., Ltd., and 100% of the equity of Shanghai Langsong Industrial Co., Ltd.
In 2023, Landsea will also sell the entire equity of "Nanjing Landsea Residence Commercial Management Company" to a third party for 85.5 million yuan, that is, it will sell its popular "Nanjing Landsea Residence" project.
However, even so, the company's paper funds still cannot cover short-term debt. As a result, the dollar bond was rolled over, and now, there is a substantial default.