LONGFOR paid back 7.1 billion in one go

Author | Cao Anxun

Editor | Zhou Zhiyu

More than a month after the epic new policy was implemented, the private real estate giant Longfor Group has released a series of positive signals.

On June 28, Longfor announced that it had cumulatively repurchased two batches of US dollar bonds from the open market, with a total principal amount of approximately USD 623 million. The maturity dates of these two USD bonds are September 2029 and January 2032, respectively.

On the same day, Longfor also redeemed in advance a RMB 2.65 billion CMBS, and the related bonds were delisted. The investor exercise date for this CMBS is June 2025. Roughly calculated, Longfor repaid approximately RMB 7.175 billion in one go.

Prior to this, the Longfor management also stated at the shareholders' meeting that they had repaid approximately HKD 1.6 billion of a HKD 9.45 billion syndicated loan due in January 2025, and will continue to orderly repay the remaining portion monthly.

Some industry insiders believe that Longfor is orderly reducing interest-bearing debts, further lowering the proportion of overseas debts, and optimizing the debt structure.

Longfor's recent large-scale early debt repayment not only relieved its own debt pressure but also increasingly convinced the market that Longfor has ample funds on hand, is adept at debt repayment, and has strong enough financing channels to ensure its safety in the coming years.

This is inseparable from Longfor's forward-looking risk control awareness, good credit ratings, and the confidence brought by the improvement in sales and operations.

Chen Xuping, Chairman of Longfor Group's Board of Directors, admitted at the shareholders' meeting that after the "517 New Policy," there has been a significant increase in sales in cities such as Shanghai, Suzhou, and Shenzhen. "There has been some positive feedback in market sentiment."

Data from Ke Rui shows that from January to May, Longfor achieved a total sales volume of RMB 40.99 billion, ranking 9th in the industry, making it one of the few private real estate companies that have stably remained in the industry's top ten in recent years.

In addition to its development business, as a real estate company known for its operational business, Longfor has also seen signs of recovery.

The announcement shows that from January to May, Longfor achieved operating income of approximately RMB 11.45 billion (including taxes), a year-on-year increase of about 10%. Among them, operating income was about RMB 6 billion (including taxes), and service income was about RMB 5.45 billion (including taxes).

Longfor's management revealed that the recovery of commercial investment business is particularly evident. By the end of May, the overall mall rental rate was 95.9%, with overall rental growth of 12% from January to May, overall daily foot traffic growth of 9% year-on-year, and same-store growth of 5%; after the new product upgrade, the rental rate of Longhu Crown Yu has exceeded 95%.

In addition, Longfor's Smart Life has accelerated its expansion this year, with a managed area of over 360 million square meters; Longfor Longzhizao has accumulated 90 commissioned projects, with a total construction area of over 16 million square meters.

As Longfor's second growth curve becomes increasingly strong, the management has also set new high expectations, aiming for commercial operation channels to maintain revenue and profit growth of over double digits in the future.

In fact, after achieving positive operating cash flow last year, Longfor embarked on a new chapter in its operational business. The management also stated at the 2023 performance meeting that in 2024, they will open 14 new malls, with over 100 commercial projects As of now, Longfor has opened 89 shopping malls.

Operating income has also provided an additional guarantee for Longfor's financial stability.

Longfor's management revealed that as of the end of May, the remaining publicly issued bonds due within the year amounted to only 4.5 billion yuan, and part of the debt due in 2025 will also be arranged for early repayment in 2024 to ensure the safety of short-term debt by the end of the year.

"The priority is to reduce short-term debt ahead of incremental investments, using positive operating cash flow to steadily reduce overall liabilities," said Longfor's management.

Looking ahead, Chen Xuping stated that the estimated real demand for new housing market is 9-10 billion square meters annually. The willingness of residents to purchase homes also needs a process of recovery, and confidence is crucial throughout the entire real estate recovery process. Longfor prioritizes debt security and aims to inject some confidence into the industry through its actions.

Guosen Securities pointed out that as a high-quality benchmark private enterprise, Longfor continues to strengthen its operational business and has the ability to navigate through the current downturn in real estate development.

Including Longfor, in the past month, there has been a faster gathering of warmth in the real estate industry.

Not only did China Merchants Shekou achieve sales of 10.02 billion yuan, Shanghai's luxury residential project Chenjia Jia Bai Dao garnered 6.2 billion yuan in sales within 2 hours of opening, and China State Construction's Pujiang Star achieved a strong sales of 4.9 billion yuan in a single day; leading real estate companies such as Poly Developments, China Merchants Shekou, China Resources Land, and Vanke have also obtained large amounts of financing, with loan amounts ranging from 10 billion yuan to 4.1 billion yuan.

The second-hand housing market in the four major first-tier cities has also seen a glimmer of hope, with varying degrees of increases in transaction volume and listing volume.

Li Daokui, Dean of the Institute of China's Economic Thought and Practice at Tsinghua University, predicted at the China Development High-Level Forum that property prices in first-tier cities are likely to bottom out this year.

Standard & Poor's recently uncommonly raised China Merchants' long-term issuer credit rating, indicating continued improvement in the real estate industry outlook.

Although the market has not yet reached a significantly favorable state, with the continuous accumulation of positive signals, Longfor, along with other striving real estate companies, is looking forward to the day when "the willows are bright and the flowers are dark."