What brought down Country Garden？

Country Garden is on the verge of default, or in fact it has.

Its default is surprising, and at the same time, it also puts forward a new warning to the real estate industry.

What I care about is not whether I can save Country Garden, but why it has evolved to this stage. Just a month ago, both media reports and Country Garden’s own publicity were still emphasizing its own security and operational safety. Almost suddenly, since late July, the style of painting has changed.

Last July, the TD tide broke out all over the country. It’s been one year now, and Country Garden has survived for a whole year, but it still hasn’t survived.

It’s too difficult to tell why Country Garden didn’t make it. Only the boss knows the financial situation of the enterprise accurately. I can’t make it clear, but I can only express my opinion based on public information.

First of all, Country Garden is not my favorite enterprise type, and old fans all know this. I like the housing enterprises with simple model, steady style, disciplined actions and transparent corporate governance, which are easy to predict. I once commented on Evergrande and Sunac, but I don’t come here now.

Previously, I commented that Evergrande was too speculative, and made the big mistake of arrogance and conceit of the management. It spent 70 billion yuan on new energy sources, and felt that it could achieve No.1 I couldn’t understand it. Therefore, I don’t envy Evergrande’s "5 years and 10 times".

As for Sunac, I personally like the true nature of my grandson, which began in 2004 and continues to this day. But from the perspective of the company’s steady development, Sunac seems to me.Too "greedy for cheap goods"In addition, it is obvious in the reorganization of Kaisa, the acquisition of LeTV and the takeover of Wang Jianlin.

Therefore, in the judgment of the company, I personally dare not bet heavily. Buy 1000 shares and 2000 shares as a job, but I dare not bet heavily.

I don’t like Country Garden. It has nothing to do with all the above aspects. It is purely his business model. I don’t think much of it.Real estate business in small cities in the third and fourth linesIt’s as simple as that. But in other aspects, I think that Boss Yang has done a good job, including the corporate governance system, perhaps the tacit understanding of Shunde enterprises. Midea and Country Garden have set an example, and over time, there will be good continuity. Moreover, Lao Yang has always emphasized that he is a farmer entrepreneur and has done a lot of charity.(especially schools)I appreciate all these.

However, these so-called "problems" can be said to exist in any industry. Individual investment can only find their own "suitable enterprises", but the success of enterprises is difficult to predict, and all kinds of enterprises are likely to succeed. Like today’s real estate collapse, there must be deep-seated common problems in the industry.

Frankly speaking, there are some things I don’t like about Country Garden, but looking at this round of major adjustment,Country Garden didn’t make any big mistakes.In the development of the company, Country Garden just did what mainstream real estate enterprises are doing, and it didn’t have too crazy diversification-it just expanded a robot in the construction field, didn’t do too many acquisitions, and the management didn’t show excessive conceit.

Country Garden’s debt reduction is also closely followed by Vanke. Until March this year, the 2022 annual report disclosed by Country Garden still showed that the cash held by the company was enough to cover short-term debts-the available cash was 147.55 billion, the cash short-term debt ratio was 1.6 times, and the net debt ratio was 40%.

In fact, these indicators are not much worse than Vanke’s, and they are not bad in top50 real estate enterprises. For a real estate enterprise that is the first in the universe, it is already very good to stabilize such achievements, but the outcome of the two is different.

one

First, Country Garden was dragged down by Baojiaolou.

I think this isdirect factor. Country Garden, which is similar to Vanke’s net debt ratio, has a large amount of property delivery, so,Its cash dissipation is faster.Until it dries up.

Last year, Country Garden delivered about 700,000 sets of buildings, and there was no overdue delivery. In 2022, the total number of houses delivered by TOP50 developers was about 4 million, with Country Garden accounting for 17.5%, more than double that of the second Vanke. Vanke delivered 340,000 sets last year, Evergrande delivered 301,000 sets, Poly delivered 259,000 sets, Sunac China and China Resources Land each delivered more than 180,000 sets, and Longhu delivered about 110,000 sets.

The Country Garden family is almost equal to Vanke+Evergrande+Sunac.

In the first half of this year, Country Garden delivered 278,000 sets, ranking first in the industry, and there was no overdue delivery. Or more than twice the second place: second place, Sunac, 118,000 sets; Third place, Poly, 114,000 sets.

I don’t have any objection to "guaranteeing the delivery of the building", which is the most basic obligation of the developer. I’m just saying the fact that,The essence of Baojiaolou is to improve the creditor’s rights priority of buyers.After the industry liquidity crisis, developers will owe a lot of debts, such as the debts of financial institutions, trust bonds, suppliers, government land sales and property delivery to buyers.(The money was paid, but the house was not paid)….. Everyone will give priority to protecting their own interests. Finally, the state has determined that "guaranteeing the delivery of the building" is the first place, and others will be put aside first.

However, if you owe a lot of money, and there is one party that must be guaranteed first, it means that you may not be able to repay some foreign debts on time, as simple as that. Country Garden guarantees 700,000 suites, which is an astronomical scale. At the same time, the market in the first half of this year is much worse than expected, and the speed of outlet pipe is much faster than that of inlet pipe.Cash flow soon ran out.

Media reports can also confirm our speculation:

"Some insiders in Country Garden also revealed to CBN that the internal liquidity tension of the company had already begun in May and June, mainly reflected in the slowdown of external payment, which is said to beThe boss asked for full delivery and suspended part of the payment’. "

two

Since the TD tide in July last year, the state has established the policy of "two guarantees"-ensuring the delivery of buildings and ensuring people’s livelihood.(Later, it became three guarantees, plus "guarantee stability"). This process has done a lot of relief work for real estate enterprises, such as "three arrows" and "financial 16 articles" and so on.

In this process, we should point out that Country Garden is the key guarantee and support of the policy."Demonstration of private enterprises".

In May 2022, Country Garden, together with Longhu and Midea Real Estate, was selected by the regulatory authorities as a "demonstration" for issuing bonds.(people)Housing enterprises. "

After the "Financial Article 16" was issued, Country Garden signed a strategic cooperation agreement with ICBC, Bank of China and Postal Savings Bank on November 24 last year, and obtained comprehensive credit support of over 150 billion yuan.

In 2022, Country Garden issued bonds, ABS, winning tickets, convertible bonds and other direct financing of nearly 10 billion, completed three equity financing of 11.5 billion Hong Kong dollars, and obtained more than 300 billion intentional comprehensive credits from more than 10 banks.

At the end of January this year, Country Garden was approved to register and issue 20 billion yuan of medium-term notes.

It is not that there is no support, but that the policy has been supporting Country Garden. The major shareholder was not idle, and provided HK$ 5.055 billion interest-free mortgage-free loans.

Everyone’s problem is the same, and they are all "living beyond their means". It is only a matter of time before cash flow is used up.

three

There is no good way to deal with the crisis that Country Garden is facing today. Its problems are the same as those of Evergrande at the beginning. Once a default occurs, it will be immediately."loss of credit". It’s even harder to save yourself.

It says above that once you break the contract, you will break your promise to anyone who breaks it. If you can’t pay the property, the small owners will protest, you can’t pay off your foreign debt, and you will be run by creditors. Moreover, it will immediately trigger a domino effect, and other creditors will come to claim their own interests, including local governments will carry out stricter fund supervision, or banks will lend money, or creditors will apply for property preservation. In short, at this time, enterprises, like banks, are caught in a run tide. Let’s repeat the story that happened to other giants last year.

For buyers, based on professionalism and poor information, they may be the most frightened. Therefore, the predictable phenomenon is thatThe property in Country Garden will soon be very difficult to sell.. Once many housing enterprises are in danger, they must be managed. For example, Kaisa’s plate in Futian, Anju Group to the platform endorsement, consumers dare to buy.

If it goes that far, it will be more terrible. There are too many projects in Country Garden. I’m afraid that no peer or local city has the ability to take over this thunder.

So, in my opinion, some viewpoints are relished."The project is guaranteed, but the subject is not guaranteed"In fact, it is self-contradictory. Developers are finished, how can you expect others to trust your property?

"Saving" or "not saving" housing enterprises has always been full of controversy. The view of "not saving" holds that developers must die and cannot be saved. Why should you let everyone take money out to save when you make money? The view of "rescue" holds that it is necessary to learn from the lessons of the "Fannie Mae and Freddie Mac" and "Lehman Crisis" in the United States in order to avoid greater national losses.

Frankly speaking, I don’t care about this "save or not". What I care about is logic and fact.

Logically, I personally have always advocated letting the market compete for the survival of the fittest, but we can’t double the standard before and after.Again, let go of the price, since developers are allowed to compete for life and death, let them die on the battlefield. You can’t say that you stuck him again and wouldn’t let him reduce the price.(Say "malicious" as soon as the price is reduced)And said it had a problem and could not be saved. This logic is contradictory.

But when you say this, many people can’t sit still. They said: "Developers can die at will, but house prices cannot fall. If you fall into negative equity, it will lead to a systemic crisis. Do you know how serious it is? "

This idea is wonderful, the developers are dead, and the house price can still stand it. Even if the new site can maintain the surface price, the second-hand house will still fall in a big mess. This is a very simple logic, two sides of an organic whole.

In fact, my judgment is very clear. In the end, real estate or real estate enterprises that are in danger are not a question of whether they should be saved, but have no choice but to stabilize the whole industry.When I first dumped a Evergrande, I said it was a "Lehman moment" in the real estate industry. Many people thought that I was alarmist. How could Evergrande compare with Lehman? Today, I don’t think there is any need to prove it, and I generously admit that this is a "T-crisis".

Saving or not is no longer a matter of value, but there is no choice, and there will be no choice in the end. If you look closely, it is already the case now. Although everyone is shouting the policy of "dry thunder and no rain", is it "saving" to look back at the main lines? Just pull out the radish and bring it out of the mud, swaying and hesitating all the way, not so crisp and neat.

There is no need to waste saliva on this issue. The problem of economics will always be the "second best choice" of two evils. There is no perfect option. Stabilizing real estate is not to make it "rise" again, but to avoid greater costs.

The only question now is, what can be done to stabilize it? In my opinion, it’s very difficult. The problem now is not real estate at all.

I think of a remark made by Zi Gong about Zhou Wang: "It’s better to be poor than poor. It is based on the gentleman’s evil living in the dirty, and all the evils in the world are returned. " Real estate "has accumulated evil" for a long time, which leads everyone to dislike real estate and think that this industry is guilty and should die, but can it afford such a big "evil in the world"?

This article comes from WeChat WeChat official account:Jurassic (ID: New Jurassic), author: Zhu Luoji