On July 16, Huayuan Real Estate Co., Ltd (600743.SH) released a progress announcement on the planning of major asset reorganization, in which Huayuan Real Estate intends to transfer assets and liabilities related to real estate development business held by the Company to its controlling shareholder, Beijing Huayuan Group Co. (“Huayuan Group”), the controlling shareholder of Huayuan Real Estate. Most of the auditing and appraisal work for this transaction has been completed.
According to the announcement, the transaction is to be conducted in cash, does not involve the issuance of shares and will not result in a change of control of the Company.
The counterparty of the Transaction is Huayuan Group, the controlling shareholder of Huayuan Real Estate, and the Transaction constitutes a connected transaction in accordance with the relevant provisions of the Rules Governing the Listing of Stocks on the Shanghai Stock Exchange and No. 5 – Transactions and Connected Transactions of the Guidelines for Self-Regulation of Listed Companies on the Shanghai Stock Exchange. After preliminary study and calculation, the transaction constitutes a major asset reorganization as stipulated in the Administrative Measures for Major Asset Reorganization of Listed Companies.
According to Huayuan Real Estate, in order to better respond to market changes, improve the company’s risk-resistant ability and realize the strategic transformation of the company into a comprehensive urban operation service provider, the company intends to coordinate relevant resources, continue to expand and strengthen its existing business in core competitive areas, such as construction agency, and purchase quality synergistic assets, such as hotel operation, property management and commercial management, in the future, by way of business and asset consolidation, so as to continue to improve the quality of assets and strengthen sustainable operation ability of the company. In addition, COSCO Real Estate will continue to strengthen its existing businesses in the area of agency construction. In addition, with the strong support from its controlling shareholder, COSCO Real Estate will also make full use of its brand and reputation advantages to strengthen business collaboration and asset integration, so as to further enhance the Company’s sustainable operating ability and profitability.
According to the progress of the Transaction, as at the date of disclosure of this announcement, most of the on-site work in respect of the audit and valuation involved in the Transaction has been completed. The parties involved in the transaction have not yet signed the formal transaction documents, and Huayuan Real Estate will fulfill the relevant decision-making and approval procedures and information disclosure obligations in strict accordance with the provisions of relevant laws and regulations in accordance with the progress of the transaction.
It is worth mentioning that recently there have been a number of listed real estate enterprises announced divestment or sale of real estate business.
July 11, Guancheng Datsun (600067.SH) announced that it intends to hold the assets and liabilities related to real estate development business transferred to the company’s controlling shareholder, the transaction is intended to use cash payment, does not involve the issuance of shares, does not affect the company’s shareholding structure, will optimize the company’s assets and liabilities structure, to achieve the company’s business transformation.
Prior to this, the United States Property Holdings Limited (03990.HK) announced on June 23, the company will carry out equity restructuring, will be wholly owned real estate development business property rights line from the listed company restructuring to the controlling shareholder. Gree Real Estate (600185.SH) announced that, based on the company’s gradual exit from the real estate development business to achieve the overall strategic considerations of the transformation of the main business, the listed company intends to set out the assets and liabilities held in Shanghai, Chongqing, Sanya and other places related to real estate development business corresponding to the assets and liabilities and listed companies related to external debt, and the Zhuhai City, Duty-Free Enterprises Group Ltd. is placed in no less than 51% of the equity.
Liu Shui, director of enterprise research of China Index Research Institute, pointed out that in recent years, the real estate market has continued to deepen the adjustment, and the real estate development business has become a drag on the performance of listed companies. 2023, the average net profit of Shanghai and Shenzhen and mainland listed real estate companies in Hong Kong dropped by 38.2% and 29.6% year-on-year, and about 42.9% of the listed real estate companies in Shanghai and Shenzhen suffered losses, and about 63.5% of the listed real estate companies in Hong Kong on the mainland suffered losses. About 42.9% of the listed real estate enterprises in Shanghai and Shenzhen incurred losses, and about 63.5% of the listed real estate enterprises in Hong Kong on the mainland incurred losses. The number of loss-making enterprises increased significantly compared with that of the previous year, of which 9 listed real estate enterprises incurred losses of more than RMB 10 billion and 49 listed real estate enterprises incurred losses for two consecutive years. According to the latest regulations, if a listed company suffers losses for three consecutive years, it may be subject to ST (special treatment) measures. In order to reduce the pressure on operating performance, many listed companies divested their real estate development business, or sold their real estate development business to their controlling shareholders, and only retained their light asset businesses such as asset management, property management and project construction management, transforming themselves into light asset business companies.