Second Largest Chinese Home Builder Looking To Raise Capital

In spite of concerns regarding the real estate market in China, analysts appear optimistic on the prospect of builders raising capital. While tightening banking regulations and the ongoing …

In spite of concerns regarding the real estate market in China, analysts appear optimistic on the prospect of builders raising capital. While tightening banking regulations and the ongoing economic downturn have made real estate a more difficult proposition, IPOs and expectations are on the rise. For more on this, see the following article from Property Wire.

The second largest residential property builder in China is looking to raise £1.6 billion for a major development program. Vanke will launch a new share offer in order to cash in on a rebounding property market, the company confirmed.

It aims to use $1.3 billion to finance 14 residential property projects, mostly in southern China.

While the government’s $585 billion stimulus package is driving a real estate recovery in the country and bolstering demand for homes, a recent clamp-down on bank lending is fueling concerns about tightening liquidity and unstable stock valuations.

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Already, the China Banking Regulatory Commission has said it will strictly enforce a rule on second-home mortgages, requiring down payments of 40% of a property’s value even though in practice that percentage has often been reduced to 30%. Regulators have already told state-controlled banks to better manage the quality of their loan books.

But Vanke believes its finances are sound. Revenue at the company during the first half of 2009 was $368 million, up from $301 million a year earlier. Net profit jumped 22% in the first half of 2009 and sales increased to $3 billion from $2.4 billion.

Analysts are also upbeat about the outlook. Morgan Stanley analysts said they were optimistic about the company’s prospects, saying that potential slower growth in home sales will be counteracted by an increase in property prices that has already started.

Vanke shouldn’t have trouble raising the funds.

In an initial public offering in July, China’s largest state-owned construction company, China State Construction Engineering, raised $7.3 billion from investors, some $1 billion more than it was expecting.

A raft of firms has been authorized to undertake IPOs since the China Securities Regulation Commission resumed public share sales last month after a 10-month hiatus.

Vanke’s capital-raising proposal is subject to approval from shareholders and the China Securities Regulation Commission. A special meeting for shareholders has been set for September 15.

Property developer Soho China is also looking to expand and is seeking new offices in Shanghai. Chairman Pan Shiyi said the company expects China’s property market to outperform the rest of the world. ‘The whole world economy isn’t good right now, but China is different from the US and Europe,’ he said.

This article has been republished from Property Wire. You can also view this article at
Property Wire, an international real estate news site.

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