2014-06-19

In Scamble for Cash, Coal Bosses Dump Real Estate

Last week I covered the story of a Shanxi coal boss dumping 100 apartments in Beijing: Shanxi Coal Boss Sells 100 Homes in Beijing; Central Government Work Unit Buys Them All.

Now there is a shock estimate from the China Center for Economic Research at Peking University: coal bosses could pull more than ¥10 billion yuan from the real estate market due to capital needs.

Shanxi and other coal boss investors tended to buy aggressively, purchasing entire floors or even entire buildings. They also didn't plan to sell: they held commercial properties to collect rent and protect the value of their capital.

SOHO China's Pan Shiyi has admitted up to half his customers are from Shanxi. In some projects, the proportion of Shanxi and Shaanxi customers may have exceeded 80%. In addition to these two provinces, Hebei and Inner Mongolia may have also figured prominently. Shanxi, Shaanxi, Hebei and Inner Mongolia all have ghost city/overbuilt cities and cities where GDP has declined. Beijing real estate has been a bright spot for investors who have probably watched their industry and even local economy fall on hard times.

Why are the coal bosses selling now? It could be due to Beijing's reform efforts. Recall this news from May: Coal Stocks Limit Up on Monday As State-Owned Miner Loses Access to Bank Loans; Coal Province Capital Q1 GDP Growth 0.1%. I linked to several articles in the piece and wrote:
Many coal stocks rallied 10% on Monday on the back of a market rescue plan from the Shanxi government and downsizing efforts. The rescue effort is market reforms though, which may not be good for all coal producers. On the other side is the news that banks have cut credit to a major state-owned coal miner, which is good news for private industry.

The short-term effect of market reform on the local economy is not positive for GDP growth, especially for areas that may have also built up real estate on expectations of strong natural resource sector growth.
No doubt the cooling property market is also heightening the desire to hold cash.


煤老板因资金链断裂集中抛楼 撤出资金或超百亿
Today, the coal bosses seem "Passing" in the funding strand breaks and the property market into the downstream channel of the dual pressures of partial withdrawal of funds from the property in order to ease their own pressure to become an important choice.

"According to our rough estimates, to ease the financial difficulties, the Shanxi coal bosses from Beijing and other places to withdraw funds or real estate market more than ten billion yuan." China Center for Economic Research at Peking University, a researcher told reporters.

Break the "store room" habit

It is worth noting that, in Beijing, similar to Yang Sanjun such a large purchase of real estate in the coal bosses are not uncommon. As the coal bosses capital strength has always been the focus of competition for developers target customers.

"In Beijing, Shanxi, Shaanxi coal bosses prefer to buy high-end residential, villas and commercial real estate. And once spotted a particular project, the developers will be on the development of other projects also have a preference, often the whole floor, the entire Building purchase. "Su Xin told reporters.

Su Xin analysis, Shanxi coal bosses have been in Beijing "store room" habits, many people only buy not sell. For them, the shops belonging to the security of the capital, you can increase the value of the majority for long-term holding, enjoy rents and asset appreciation, as long as the bank interest income than they can accept.

This is one of the most obvious example is Pan Shiyi, chairman of SOHO China's project. According to media surveys, since the establishment of SOHO China, most of its customers are derived from the energy investment dealers and other wealth groups, Hebei, Shaanxi, Shanxi, Inner Mongolia and other regions. In some of its projects, the proportion of customers Shanxi and Shaanxi, and even as high as 80%.

Pan has publicly admitted that half of the SOHO customers from Shanxi. Media has been exposed in Beijing has 41 suites of "room girls" Oi Gong in most real estate in Beijing Sanlitun from Pan Shiyi, SOHO, the number of up to ten thousand square meters.

"Although it is not easily sell their own real estate investment business owners in Beijing under such general, however, once the capital chain rupture crisis occurs, then sell property quick cash is undoubtedly ease the financial pressure on the channel." Su Xin explained, year Shenmu, Shaanxi and Inner Mongolia before, Erdos [0.00% funding research report] coal prices have suffered the collapse of the crisis, when more than two sets of real estate owned coal bosses had focused on selling their property to cash in Beijing.

"However, in recent years, with the tightening of market regulation, and prudent investment in Shanxi merchants, Shanxi coal bosses to invest in real estate is declining year by year." Su Xin told reporters.

He said that the first two years of the coal industry in the process of consolidation, the stock of bank loans did not fluctuate significantly, indicating that the majority of local funds or turnover in the province, did not suddenly flow into the outflow. The past two years, Beijing, Shanxi investment property from customers, not only did not increase, but there is a downward trend.

"After the integration of coal resources, coal prices have lost access to the private profiteering channels, so the investment in existing funds also tend to be cautious, even if it feels the most secure investments in real estate, is no longer as big bucks forthright manner as before." Beijing Merchants Alliance Liu, president, told reporters.

"For most of the money is quite strong Merchants, the past investment in real estate has conducted two rounds of asset allocation in this area is close to saturation, no need to invest more, buy a house waning power, while in recent years years, mergers and acquisitions, integration makes capital more focused, less emerging out of the rich, which resulted in the capital to invest in the real estate industry in Shanxi gradual decline. "advisory director Zhangying Guang Ling Chong, general manager of private capital has studied said.

He said that the withdrawal of the coal industry in Shanxi Merchants who will directly generate money into the industry cash flow. There are mining, the hotel has done, but most of them are taken by way of capital investment. Because the coal industry is extensive industries, which leads to the enterprise soft power is relatively weak, and therefore more of a way of using capital investment.

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