The company logo is seen on the headquarters of China Evergrande Group in Shenzhen, Guangdong province, China September 26, 2021. REUTERS/Aly Song/File Photo Acquire Licensing Rights
HONG KONG, Nov 30 (Reuters) – China Evergrande Group (3333.HK), the world’s most indebted property developer, is seeking to avert a potentially imminent liquidation with a last-minute debt restructuring proposal, three people with direct knowledge of the matter said.
The defaulted company has until a Hong Kong court hearing on Monday to present a “concrete” revised debt restructuring proposal for offshore creditors, a judge said last month after its original plan had lapsed.
But the sources, who declined to be named as the talks are private, told Reuters that creditors were unlikely to accept Evergrande’s new proposal given low recovery prospects and growing concerns about the developer’s future.
With more than $300 billion in liabilities, Evergrande exemplifies a crisis in China’s property sector, which makes up one-quarter of the world’s second-biggest economy. The authorities have scrambled to support the sector as the troubles of embattled developers roiled global markets.
Guangzhou-based Evergrande, which defaulted on its offshore debt in late 2021, did not respond to a request for comment.
Ahead of the hearing when the Hong Kong High Court will rule on a liquidation petition, Evergrande this week offered to swap some debt held by offshore creditors into equity in the company and two Hong Kong-listed units, and repay the rest with non-tradeable “certificates” backed by offshore assets, two sources said.
The offshore assets include the developer’s minority stakes in other companies and its receivables, one of the two sources said, and the certificates would be redeemed by Evergrande when it successfully disposes of the assets. The plan is not expected to require regulatory approval, as Chinese regulators have banned the developer from issuing new bonds, he added.
The new proposal also offers creditors a 17.8% stake in Evergrande, in addition to an October offer, previously reported by Reuters, of 30% stakes in each of its two Hong Kong units – Evergrande Property Services Group (6666.HK) and Evergrande New Energy Vehicle Group (0708.HK) – the person said.
Many creditors were dissatisfied with the October terms as they implied a major haircut on investments, sources have said, forcing Evergrande to scramble to sweeten the deal in what could be its final attempt to avoid liquidation.
LIQUIDATION CHALLENGES
The spectre of a messy collapse of Evergrande has been a major concern for global investors as the Chinese economy sputters, with property sales slowing and hundreds of thousands of unfinished homes across the country.
Chinese authorities have announced a string of measures to revive the sector destabilised by the debt woes of giants like Evergrande and Country Garden (2007.HK).
Evergrande’s debt revamp hopes were derailed in late September when the company said billionaire founder Hui Ka Yan was under investigation for unspecified “illegal crimes”.
The developer was banned from issuing dollar bonds, a key part of the restructuring plan, and its flagship mainland unit was put under investigation by regulators.
If the Hong Kong court orders Evergrande’s liquidation, a provisional liquidator and then an official liquidator would be appointed to take control and arrange to sell the company’s assets to repay its debts.
In addition to shares of its two Hong Kong-listed units, this would include selling its onshore assets, which could face significant challenges, restructuring experts say.
A lawyer for an ad hoc group of key offshore bondholders told the Hong Kong court last month that the restructuring plan could have a higher recovery rate for creditors than liquidation, in which they would get back less than 3%.
Still, the group has nominated consultancy Alvarez & Marsal as its preferred liquidator, two other sources said, as creditors anticipate a potential liquidation of Evergrande, whose liabilities and assets are largely in mainland China.
Alvarez & Marsal did not immediately respond to request for comment.
Top Shine, an investor in Evergrande unit Fangchebao, filed the liquidation petition in June 2022 after it said the developer failed to honour an agreement to repurchase shares the investor had bought in the subsidiary.
Reporting by Clare Jim and Xie Yu in Hong Kong, Scott Murdoch in Sydney; Editing by Sumeet Chatterjee and William Mallard
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Apartments are illuminated inside residential buildings at the bank of Berlin-Spandauer-Schifffahrtskanal in Berlin, Germany, November 10, 2023. REUTERS/Lisi Niesner/File Photo Acquire Licensing Rights
BENGALURU, Nov 24 (Reuters) – German home prices will fall more than previously thought this year and next as high interest rates sap demand, according to analysts in a Reuters poll who expect the supply of affordable homes to worsen and ownership to decline in years ahead.
Once-booming property prices in Europe’s largest economy have declined over 10% since they peaked last year as the European Central Bank hiked interest rates by 450 basis points in just 15 months, ending an about decade-long era of rock-bottom borrowing costs.
Those high interest rates and elevated living costs through soaring inflation in recent years have not only forced many households to choose renting over owning a home, it has also led to the worst crisis in the German property sector in decades.
With some German property developers filing for insolvency, construction activity has dropped over a third from a year ago.
The median view from the Nov. 15-23 Reuters poll of 14 property experts forecast average home prices to drop 8.0% this year and 2.8% next, steeper than the predicted 5.6% fall in 2023 and no growth in 2024 in an August survey.
“Higher interest rates forced about half of all potential buyers out of the housing market … and therefore will lead to price reductions in the German housing market in this and the next few years,” said Sebastian Schnejdar, senior real estate analyst at BayernLB.
“Moreover, there was a significant rise in the overheads for heating, electricity and communal fees, which have also increased the costs of housing for homeowners.”
That bleak outlook was despite the government recently announcing a 45 billion euro ($47 billion) support package for the property sector and measures to encourage house building, including tax incentives.
With overall economic activity expected to remain weak over the coming quarters, it could take a while for the property sector to recover.
The euro zone’s commercial property sector could also struggle for years, posing a threat to the banks and investors who financed it, the ECB said recently.
LAND OF TENANTS
Although 11 of 14 analysts who replied to an extra question said purchasing affordability for first-time homebuyers would improve over the coming year, 10 of 14 contributors said the supply of affordable homes would worsen over the coming 2-3 years.
Meanwhile, more are moving into rented homes, putting pressure on the market and rents are rising faster than salaries.
In the capital, Berlin, where cheap apartments were abundant as recently as a decade ago, the vacancy rate is less than 1%.
The median view of 12 property experts forecast average home rental prices to rise 4.0% or more until 2026.
Still, the proportion of home ownership to renters will decrease over the coming five years, according to 11 of 14 analysts. Three said it would increase.
“In the era of low interest rates, home ownership in Germany had become more popular but even if compared with most other European countries, Germany remains the land of tenants,” said Carsten Brzeski, global head of macro at ING.
“Looking ahead, the new (higher) interest rate environment will make it impossible for more people to buy property. As a result, the trend of the last decade from tenants to landlords is over. Moreover, immigration should push up the demand for rental properties.”
(For other stories from the Reuters quarterly housing market polls
Reporting by Indradip Ghosh; Polling by Purujit Arun, Rahul Trivedi and Sarupya Ganguly; Editing by Ross Finley and David Evans
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A view shows the logo of the European Central Bank (ECB) outside its headquarters in Frankfurt, Germany March 16, 2023. REUTERS/Heiko Becker/File Photo Acquire Licensing Rights
FRANKFURT, Nov 7 (Reuters) – Euro zone banks should factor in the risk of a further fall in property prices when they make provisions and plans about their capital, the European Central Bank’s chief supervisor Andrea Enria said on Tuesday.
The European property market has come under pressure from the ECB’s steepest and longest streak of increases in interest rates, which are now at record highs.
With real estate prices already falling in several countries, most notably Germany, where there had been a boom during the last decade of low interest rates, Enria told lenders to brace for more pain.
“The current higher interest rate environment could put further downward pressure on office and house prices, making it harder for commercial property owners and households to service their debt,” Enria told the European Parliament.
“Banks should account for these risks in their provisioning practices and capital planning.”
As the euro zone’s top banking supervisor the ECB sets capital requirements for banks, and has been known to push back on their plans to pay dividends or buy back shares.
Fuelled by low interest rates and massive ECB cash injections, billions were funnelled into property in the last decade, particularly in richer European countries such as Germany, France and the Netherlands.
A sudden surge in inflation over the past two years has forced the ECB to tighten the purse strings and put an end to the run in real estate prices, tipping developers into insolvency as bank financing dries up, deals freeze and prices fall.
Euro zone banks have been curbing access to credit, particularly mortgages, and demand from households and companies is also falling, ECB data shows.
Enria, an Italian, is set to step down as the chairman of the ECB’s Single Supervisory Board at the end of the year, when he will be replaced by Germany’s Claudia Buch.
Reporting By Francesco Canepa; Editing by Kirsten Donovan and Jan Harvey
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SYDNEY, Nov 6 (Reuters) – Private credit lenders are increasing their footprint in parts of the Australian commercial property market, providing alternatives for borrowers as banks scale back higher-risk lending amid a slowdown brought on by elevated interest rates.
The funds available for deals are growing as investors including pension funds, sovereign wealth and insurance firms look for meaty returns hard to find in today’s equity markets, especially in the beaten-down real estate sector.
Australian real estate specialist Qualitas (QAL.AX), whose backers include the Abu Dhabi Investment Authority, has nearly doubled funds under management to A$8 billion ($5.07 billion) since mid-2022, with roughly half the increase since this June.
U.S.-based PGIM Real Estate expects to deploy a further $1 billion in the country over the next few years, said its head of Australian real estate Steve Bulloch.
“Over the last 12 to 18 months we have seen a lot more institutional investor interest and many are seeing this as an attractive entry point to diversify their portfolios,” he said.
The moves are part of the steady growth of non-bank lenders in a market where four banks, Commonwealth Bank (CBA.AX), National Australia Bank (NAB.AX), Westpac (WBC.AX) and ANZ Group (ANZ.AX), still account for the bulk of all lending.
At roughly 5% of all financial assets in 2022, non-bank lenders are a minnow in Australia compared to the International Monetary Fund’s estimate of 50% globally.
But non-bank lending has been growing, reaching more than A$600 billion in assets last year, including lenders focused on retail credit. Lenders are expanding into residential and commercial construction as banks slow lending or exit, a March report from the Reserve Bank of Australia (RBA) said.
JUICY RETURNS
Investors can expect returns from 9% to 11% with the added security of loans pledged against real assets like condos or warehouses, often with a 30% to 40% equity buffer, said Paul Notaras, executive director at Barings Real Estate Australia.
The juicy returns mean higher costs for borrowers, with the RBA in March putting the spread over a major bank loan at about 200 basis points for business loans of all types.
Yet non-bank lenders are a welcome source of credit at a time when banks have slowed lending to sections of the property sector historically seen as high risk like construction, Notaras said.
Some 2,213 construction firms filed for insolvency last financial year, the highest on records going back to 2013, as builders are sandwiched between higher costs and fixed-price contracts.
New commercial property lending by the four major banks has averaged 1% growth per quarter since June 2022, levels last seen during the pandemic, data from the prudential regulator shows, with exposure to offices and residential contracting.
More prudential scrutiny and less risk appetite has led major banks to prioritise blue-chip property companies, Qualitas co-founder Andrew Schwartz said.
“The traditional financiers have pulled back their loan-to-value ratios, narrowed the type of borrower that they’re wanting to deal with, it’s generally harder and you’re more likely to fall into the alternatives sector.”
For build-to-rent residential projects, banks hesitate to lend more than 40% to 45% against a project’s value, while private lenders could go as high as 65%, Barings’ Notaras said.
Bonds are out of reach for many unrated mid-market borrowers and property-related bond issuance is at record lows, with A$299 million raised the year to September, about a tenth of the decade average, according to Dealogic data.
STILL CHOOSY
Even for alternative lenders, the most beleaguered segments, such as office and retail, remain tough propositions as higher rates slash prices and home working and online shopping scramble the outlook for rental growth.
Instead, financiers are drawn to companies building for Australia’s chronically undersupplied residential market, especially in the budding build-to-rent sector, and the resilient market for warehouses and industrial property.
A A$1.45 billion partnership between Qualitas and the Abu Dhabi Investment Authority will focus on the residential sector.
“We’ve had more office financing proposals presented to us than I can ever remember and I can only assume it’s because the banks don’t want to do them and big institutions have too much,” said Qualitas’ Schwartz.
“We say office, interesting but less compelling.”
($1 = 1.5815 Australian dollars)
Reporting by Lewis Jackson in Sydney and Rae Wee in Singapore; Editing by Jamie Freed
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The tail fin of a parked Scandinavian Airlines (SAS) airplane is seen on the tarmac at Copenhagen Airport Kastrup in Copenhagen, Denmark, July 3, 2022. REUTERS/Andrew Kelly/File Photo Acquire Licensing Rights
Nov 4 (Reuters) – Scandinavian airline SAS (SAS.ST) secured an investment agreement with a consortium for restructuring aid of 13.2 billion Swedish crowns ($1.21 billion), with a loan from Castlelake replacing its previous debtor-in-possession financing by Apollo Global Management (APO.N), the carrier said on Saturday.
The winning bidder consortium which also includes Air France-KLM (AIRF.PA), Lind Invest ApS and the Danish state, increased its proposed investment by $25.26 million.
In October, the company said Castlelake would take a stake of about 32%, while Air France-KLM’s will be around 20% and the Danish state will hold about 26%, adding that total investments in the reorganized SAS would amount to $1.16 billion.
The airline’s credit agreement for $505.25 million with Castlelake will be used to refinance its loans, increase liquidity and support its exit from voluntary restructuring proceedings, according to the statement.
Air France confirmed the increased restructuring aid financing.
SAS’s chief executive, Anko van der Werff, said: “By entering into this investment agreement, SAS is taking the next step in its Chapter 11 process in the U.S.”
The company now seeks U.S. Court approval of the investment agreement and the new debtor-in-possession financing as soon as possible in November.
In August of last year, the Scandinavian airline entered into an agreement with U.S.-based investment fund Apollo Global to raise $700 million of fresh financing.
Scandinavia’s biggest carrier filed for bankruptcy protection in the United States in mid-2022 after years of struggling with high costs coupled with low customer demand brought on by the pandemic.
Castlelake and Lind Invest did not immediately respond to a request for comment.
($1 = 10.8856 Swedish crowns)
Reporting by Gursimran Kaur in Bengaluru
Editing by Emelia Sithole-Matarise, Philippa Fletcher, Ira Iosebashvili and Matthew Lewis
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[1/4]View of the construction site of the Elbtower building, owned by Rene Benko’s Signa and a Commerzbank subsidiary, in Hamburg Germany, November 2, 2023. REUTERS/Fabian Bimmer Acquire Licensing Rights
FRANKFURT, Nov 3 (Reuters) – Construction of one of Germany’s tallest buildings has suddenly halted midway after the developer stopped paying its builder, yet another ominous sign for the nation’s troubled property sector.
Signa, the Austrian property giant and an owner of New York’s Chrysler Building, had been making steady progress this year on the planned 64-story Elbtower skyscraper in Hamburg.
But Signa, founded by René Benko, has fallen behind on its payments to its builder, Lupp, an executive of the construction firm said.
“Our construction activities at Elbtower have been temporarily suspended due to outstanding payments from the developer,” Matthias Kaufmann, who oversees Lupp’s finances, said in an email to Reuters.
Signa didn’t respond to requests for comment. The city of Hamburg and a minority investor, the real-estate subsidiary of Germany’s Commerzbank (CBKG.DE), confirmed the stoppage.
The interruption raises questions about the future of the tower, with an estimated value of 1.3 billion euros ($1.38 billion) upon completion. It has also prompted warnings from city officials, and is another indicator of troubles hitting the property sector in Europe’s largest economy.
The real-estate sector was a bedrock of Germany’s livelihood for years, accounting for roughly a fifth of output and one in 10 jobs. Fuelled by low interest rates, billions were funnelled into property, which was viewed as stable and safe.
Now a sharp rise in rates and building costs has put an end to the run, tipping developers into insolvency as bank financing dries up, deals freeze and prices fall.
Commerz Real, the Commerzbank subsidiary, said talks were ongoing with Signa and Lupp to “find a common solution” and it expected building to resume.
Elbtower is in the HafenCity district that is also home to a new concert hall, the Elbphilharmonie. Tenants are to include a Nobu hotel and restaurant, the risk advisor Aon (AON.N), and a local bank.
Timo Herzberg, CEO of Signa Real Estate, hosted viewers just weeks ago to the site as the shell of the building neared 100 metres (330 feet) high.
“The distinctive concrete pillars now give an increasingly clear idea of the shape that Hamburg’s future landmark will have once it is completed,” he posted on LinkedIn.
Karen Pein, Hamburg’s senator for city development and housing, warned that Signa needed to stick to agreed milestones or face consequences.
A contract “allows the City of Hamburg to dismantle the construction work performed to date, sell it to a third party for completion, or complete the construction itself,” she said in a statement.
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LONDON, Nov 3 (Reuters) – The troubles faced by co-working titan WeWork (WE.N) are darkening the outlook for the world’s largest business hubs, where rising office vacancies are already heaping pressure on investors set to refinance big-ticket mortgages next year.
Media reports on Wednesday suggested the New-York listed flexible workspace provider – once privately valued at $47 billion – was weighing a petition for bankruptcy next week.
Backed by Japan’s SoftBank, WeWork aimed to revolutionise the office market by taking long leases on large properties and renting the space to multiple smaller businesses on more flexible, shorter arrangements.
But like other landlords, it has struggled to persuade some customers since the pandemic to swap working from home for the office at its 650-plus locations worldwide – a trend that has shaken confidence in the sector.
Global office vacancies are expected to climb, hurting rental prospects in cities like New York and London, eight industry executives, investors, lenders and analysts said.
Some leveraged property investors could struggle to earn enough rental income to service rising debt costs, they said.
“The loss of any tenant, especially during a time of relatively slow office leasing, will have a negative impact on office building cashflows and values,” said Moody’s Analytics’ Commercial Real Estate Industry Practice Lead, Jeffrey Havsy.
“This will add to the negative sentiment in the marketplace and make financing harder, especially those buildings that need to refinance in the next 12-18 months,” he said.
A WeWork spokesperson told Reuters the firm was in talks with landlords to address “high-cost and inflexible lease terms” and was striving to remain in the majority of its locations and markets.
The number and volume of real estate loans due for refinancing in 2024 is unclear because many deals are struck privately between borrower and lender, Ed Daubeney, co-head, debt and structured finance, EMEA, at real estate services firm Jones Lang LaSalle, told Reuters.
Analysts estimate the global commercial property lending market is around $2 trillion in size, roughly split 50:50 between banks and alternative lenders in the United States and 85:15 in Europe.
Several experts contacted by Reuters predicted a year of reckoning for property investors and lenders in 2024, with time running out for those turning a blind eye to assets that would be in breach of key lending terms if revalued today.
The value of all global real estate – residential, commercial, and agricultural land – was $379.7 trillion in 2022, Savills said in a report in September, down 2.8% on 2021.
TRANSACTION SLUMP
Real-estate loan refinancings have already been complicated by a plunge in transactions, which are crucial in tracking changes in asset values.
MSCI’s Capital Trends report for Europe showed third quarter volumes down 57% on 2022 levels – the lowest since 2010.
What’s more, the gap between what investors believe assets are worth and what prospective buyers are willing to pay is between 20% and 35% in core office markets – “far worse than the height of the global financial crisis”, MSCI said.
MSCI said prices in Europe’s two largest office markets, Britain and Germany, would have to fall another 13%-15% to bring market liquidity back to its long-run average.
Global lenders to UK real estate holding and development companies, which supplied credit risk assessments to data provider Credit Benchmark in October, said those firms were now 9% more likely to default than they estimated 12 months ago.
U.S. industrial and office real estate investment trusts (REITs) were seen 35.8% more likely to default, versus expectations a year ago.
RE-LETTING
WeWork has 3.25 million square feet of space in central London, with a total annual rent roll of 192 million pounds ($234 million), Jefferies said in a September note. Its biggest U.S. markets are New York and California, where it operates 49 and 42 sites respectively, according to WeWork’s website.
Industry sources said some of its most popular locations could be taken over by rivals at similar rental rates, minimising cashflow issues for landlords.
But flexible workspace demand in Britain is still 11% below pre-pandemic levels, the Instant Group’s 2023 State of the UK Flex Market report in September showed.
Lenders might view the WeWork debacle as a cautionary tale, sources said, potentially requiring borrowers to inject more equity into their properties to reduce the loan-to-value ratio.
But such a request could be problematic if the quantum and duration of rental income remain uncertain.
London office vacancies have surged to a 30-year high, Jefferies also said in September, with average lease lengths on central London offices sliding to six years from 11.6 years a decade ago, according to BNP Paribas Real Estate.
UK property company Helical said it was working on “next steps” for the space at one London property let to WeWork, after recouping rent it had failed to pay via a short-term licence arrangement.
Under-occupied urban offices are not only generating lower than expected rental income for owners but some are also ageing rapidly in a world increasingly sensitive to carbon consumption.
“We’re at a massive turning point in the real estate investment market globally,” Jose Pellicer, head of real estate strategy at M&G Real Estate, said.
“For the last 20 years, property yields have been higher than financing costs. But a far bigger percentage of a property return is going to have to come from growth in the 2020s.”
($1 = 0.9407 euros)
($1 = 0.8214 pounds)
Reporting by Sinead Cruise
Editing by Elisa Martinuzzi and Mark Potter
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Customers use ATMs at a Citibank branch in the Jackson Heights neighborhood of the Queens borough of New York City, U.S. October 11, 2020. REUTERS/Nick Zieminski/File Photo Acquire Licensing Rights
NEW YORK, Oct 13 (Reuters) – Citigroup’s (C.N) profit was broadly steady in the third quarter, fueled by rising interest payments and surging investment banking fees.
The bank’s net income rose to $3.5 billion from a year ago, it reported on Friday, while earnings per share remained stable at $1.63, exceeding the consensus estimate of $1.21 by analysts polled by LSEG.
Revenue at Citi’s institutional clients group that houses its Wall Street operations increased 12% from a year ago, fueled by a jump in investment banking fees. The gains were a bright spot after several quarters of depressed dealmaking.
Citi’s overall revenue climbed 9% to $20.1 billion.
The third largest U.S. lender set aside more money to cover potential bad loans, even though delinquency levels were still low compared to historical levels.
CEO Jane Fraser announced a sweeping reorganization last month that will disband ICG and give her more direct oversight over the company’s businesses. The new structure is not yet reflected in the third-quarter results.
Expenses rose due to rising costs and investments in control systems. The expenses included severance payments for employees who were laid off during the sale of its international businesses.
Citi has not yet announced the expected headcount reduction and expected savings with the reorganization that will reduce management layers and prompt layoffs across its businesses.
Fraser has said there was “no room for bystanders” as the bank embarked on its biggest overhaul in almost two decades. The changes are being rolled out at a time of economic uncertainty that has weighed on some of Citi’s key businesses like trading.
Rivals Wells Fargo (WFC.N) and JPMorgan Chase (JPM.N) also reported higher quarterly profits on Friday, boosted by a rise interest payments.
Reporting by Manya Saini in Bengaluru and Tatiana Bautzer in New York; Editing by Lananh Nguyen and Arun Koyyur
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[1/3]Construction sites are photographed in Frankfurt, Germany, July 19, 2023. Germany’s property sector is in stress, underscoring a major change of fortune for real estate in Europe’s largest economy after an end to the era of cheap money. REUTERS/Kai Pfaffenbach/File Photo Acquire Licensing Rights
FRANKFURT, Oct. 13 (Reuters) – German Chancellor Olaf Scholz is facing fresh demands to stem a property crisis in Europe’s largest economy after a recent summit aimed at rescuing the sector disbanded in acrimony.
The nation’s ailing building industry will present the chancellor with a new set of proposed measures this month to cushion the worst property crisis in a generation, two people involved in the preparations said.
In a letter, the contents of which have been described to Reuters, one of the country’s top building groups will ask for support to prevent mass layoffs and stimulate building activity.
Wolfgang Schubert-Raab, president of the ZDB industry association that represents 35,000 building firms, told Reuters he planned to send the proposals to the chancellor and his ministers for finance, economy and housing.
The industry’s demands reflect alarm that Germany is being sucked further into a global property rout that has been most acutely felt in China.
There is also concern that the government is dragging its feet after a contentious industry meeting with the chancellor on Sept. 25.
“We can’t afford to lose more time,” Schubert-Raab said.
The real estate sector was a bedrock of Germany’s economy for years, accounting for roughly a fifth of output and one in 10 jobs. Fuelled by low interest rates, billions were funnelled into property, which was viewed as stable and safe.
Now a sharp rise in rates has put an end to the run, tipping developers into insolvency as deals freeze and prices fall. The number of people employed in the building sector has begun to drop for the first time in a decade.
The slump is part of a broader malaise with the International Monetary Fund this week projecting that Germany’s economy will be the only major country’s to contract this year, and by more than previously forecast.
Four people who were at Scholz’s meeting of property industry chiefs and regional leaders in the chancellery told Reuters they felt they were given little chance to have a say in support measures they believed moved in the right direction but overall fell short.
“Building is all but impossible, financially,” Nicole Razavi, a regional politician representing state ministers, told Scholz at the closed door meeting, according to an account of the gathering.
Razavi criticised the government for “ambushing” those present at the summit by announcing measures – such as the scrapping of stricter building standards – before they had been discussed.
A spokesperson for the chancellery said there was “a great deal of agreement” with the federal government’s proposals.
Now, industry leaders like Schubert-Raab are considering their next steps.
Among measures the ZDB will propose is an expanded state-subsidised “Kurzarbeit” furlough scheme that would protect hundreds of thousands of workers whose jobs could be at risk.
The business association is also calling for more generous terms for state-backed home loans for families, and demanding that the chancellor hold another meeting of government officials and industry in December.
“We have to talk because it’s urgent,” Schubert-Raab said.
Weakness in commercial real estate in the United States as offices remain empty after the pandemic and the struggle of major property developers in China have focused global attention on the sector.
Germany, where the population has grown rapidly as millions migrate to the country, is missing its goal of building 400,000 apartments a year as construction permits nosedive, leading the industry to warn of impending social strife.
Francesco Fedele, chief executive of BF.direkt, a property financing consultant, expects insolvencies in the sector in Germany to double before the market bottoms out in the middle of next year and called measures so far as “just for show”.
“This is not the big bang that the industry, and many, many citizens are waiting for,” he said.
Editing by Kirsten Donovan
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China Evergrande Group’s logo is seen on its headquarters in Shenzhen, Guangdong province, China, Sept. 26, 2021. REUTERS/Aly Song/File Photo Acquire Licensing Rights
HONG KONG, Sept 25 (Reuters) – China Evergrande Group’s latest trouble in firming up a long-pending debt restructuring plan led to a sell-off in its and peers’ shares on Monday, as worries resurfaced about the crisis-hit property sector after a brief respite.
Evergrande, the world’s most indebted property developer, which has become the poster child of China’s property crisis, has been working to get its creditors’ approval for a debt restructuring plan after having defaulted in 2021.
Under the plan unveiled in March this year, Evergrande (3333.HK) proposed options to offshore creditors including swapping their current debt holdings into new notes with maturities of 10 to 12 years.
In an unexpected development, the embattled developer said late on Sunday it was unable to issue new debt due to an ongoing investigation into its main domestic subsidiary, Hengda Real Estate Group Co Ltd.
Hengda said last month it was being investigated by China’s securities regulator for suspected violation over the disclosure of information.
Shares in Evergrande plunged as much as 24% on Monday, while Hong Kong’s Hang Seng mainland property sector index (.HSMPI) was trading 3.7% lower.
“Its debt restructuring plan is now stuck and can’t go any further,” said Steven Leung, sales director at UOB Kay Hian in Hong Kong. “Other options, such as converting the debt into shares of other listed units, are also seen not workable now.”
Evergrande’s offshore debt restructuring involves a total of $31.7 billion, which includes bonds, collateral and repurchase obligations, potentially making it one of the world’s biggest such exercises.
The developer’s latest woes reverse a brief respite for the Chinese property sector, which accounts for roughly a quarter of the economy, on the back of Beijing’s support measures and two other major developers forged debt deals with their creditors.
“Concern over the financial health (of developers) still clouds the property sector, especially those smaller property developers with high gearing but very few property projects on hand,” Leung said.
WINDING UP PETITION
A string of leading Chinese developers have defaulted on their offshore debt obligations since the property sector was hit by an unprecedented liquidity crisis in 2021 after regulators reined in a debt-fuelled building boom.
Many of the defaulted developers have been trying to get their offshore creditors’ approval for debt restructuring plans to avoid a messy collapse or being forced into liquidation proceedings.
Not many of those plans have succeeded.
Developer China Oceanwide Holdings Ltd (0715.HK), which has failed to meet its debt obligations, said in an exchange filing on Monday that a Bermuda court has ordered the winding up of the company and has appointed joint provisional liquidators.
The latest roadblock in Evergrande’s debt restructuring plan opens a new front for the developer just a week after police detained some staff at its wealth management unit, sending its shares slumping.
Earlier this month, Evergrande said it had delayed making a decision on offshore debt restructuring from September to next month to allow holders of its debt more time to consider its proposal.
Evergrande needs approval from more than 75% of the holders of each debt class to approve the plan.
The Evergrande development comes as leading developers such as Country Garden (2007.HK) scramble to avoid a default, keeping home-buyer sentiment depressed despite Beijing’s raft of support measures to prop up the sector and spur property demand.
As of the end of August, the combined floor area of unsold homes stood at 648 million square metres (7 billion square feet), the latest data from the National Bureau of Statistics (NBS) show.
Reporting by Donny Kwok, Writing by Anne Marie Roantree and Sumeet Chatterjee; Editing by Lincoln Feast and Sam Holmes
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