China’s property sector tragedies could cause difficulties for prestigious giant projects in London, New York, Sydney, and other top cities as the developers behind them scramble for cash, Reuters reported.
While China’s “debt-bomb” Evergrande has dominated the crisis, the risk to multi-trillion dollar global property markets comes from some of its competitors that have spent the last decade racing to build ever taller and grander skyscrapers, Reuters added.
An article on DailyMail in 2019 reported that Chinese investors behind some of London’s tallest skyscrapers are striving to turn it into a 24/7 leisure and business hub to boost its status as a global player after Brexit. Asia represents a huge amount of London’s office space, with 70% of the total investment in the City in the first half of 2018 coming out of the continent.
Shanghai-based Greenland Holdings, which cracks as many of China’s debt “red lines” as Evergrande, has just built Sydney’s tallest residential tower. It is on track to do the same in London and has projects worth billions of dollars in Brooklyn, Los Angeles, Paris, and Toronto.
The developer announces it stays committed to its flagship builds, including its long-delayed, 235 metre-high Spire London tower. Still, part of another major London site was put on the market earlier in the year, and other firms are hoisting for sale signs as well, Reuters reported.
Reuters also revealed that the Kaisa Group—the first Chinese property firm to default back in 2015, and Evergrande are trying to sell Hong Kong buildings to calm down cash thirst. Meanwhile, Oceanwide Holdings has just had what was supposed to be San Francisco’s tallest tower snatched by irritated creditors.
“As many Chinese firms overpaid for prime overseas sites in the scramble to secure them, the question is who will buy them?” said Omotunde Lawal, head of emerging-markets corporate debt at asset manager Barings which holds some Chinese property firms’ bonds. “Probably they are unlikely to get cost, so I think it depends on just how desperate they get.”
Another major firm in focus is Guangzhou R&F Properties, which required an emergency cash injection this month. It has two incomplete mega-projects in London, including one with a dozen skyscrapers next to the Thames and numerous builds in Australia, Canada, and the United States.
An R&F spokesperson in London said it remained “fully committed” to all its British projects. But with roughly $8 billion of debt to repay in the next 12 months, only $2 billion of freely available cash, and sales down nearly 30% year-on-year last month, major credit rating agencies say it will need to cash in some chips.
R&F, Greenland, Evergrande, and Kaisa have all refused to comment further on their finances. However, Oceanwide said last week it was “actively discussing” the situation of its San Francisco project with the creditors involved.