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.

Judging from the pre-disclosure of the semi-annual report performance of real estate enterprises, the overall performance of the real estate industry has further declined, and the industry is still in the process of bottoming out. Huatai Securities believes that in the process of bottoming, it is difficult to see the inflection point in the overall performance of real estate companies during the year. However, it is worth noting that the transaction volume of second-hand houses in first-tier cities has stood on the boom and bust line since March, and the second-hand housing prices in the north showed signs of stopping falling in June.

1 Real estate development investment completion

From January to June, the national real estate development investment of 5,252.9 billion yuan, down 10.1% year-on-year (calculated on a comparable caliber, see Note 6); of which, residential investment of 3,988.3 billion yuan, down 10.4%.

From January to June, the housing construction area of real estate development enterprises was 69,681.8 million square meters, a year-on-year decline of 12.0%. Among them, residential construction area of 4874.37 million square meters, down 12.5%. New housing construction area of 380.23 million square meters, down 23.7%. Of which, residential new construction area of 277.48 million square meters, down 23.6%. Housing completion area of 265.19 million square meters, down 21.8%. Among them, the completed residential area was 192.59 million square meters, down 21.7%.

2 new commercial real estate sales and pending sales situation

From January to June, the sales area of newly-built commercial properties was 479.16 million square meters, down 19.0% year-on-year, of which the sales area of residential properties was down 21.9%. Sales of newly-built commercial real estate amounted to RMB 4,713.3 billion, down 25.0%, of which residential sales fell 26.9%.

At the end of June, the unsold area of commercial properties was 738.94 million square meters, up 15.2% year-on-year. Among them, the area of residential properties for sale increased by 23.5%.

3 real estate development enterprises in place of funds

From January to June, real estate development enterprises in place of funds 5353.8 billion yuan, down 22.6% year-on-year. Among them, domestic loans of 820.7 billion yuan, down 6.6%; the use of foreign capital of 1.3 billion yuan, down 51.7%; self-financing 188.62 billion yuan, down 9.1%; deposits and advance receipts of 1,599.9 billion yuan, down 34.1%; personal mortgage loans of 774.9 billion yuan, a decline of 37.7%.

4 real estate development boom index

In June, the Real Estate Development Prosperity Index (referred to as the “National Housing Prosperity Index”) was 92.11 percent.

Citychamp Datong announced that the company intends to transfer the assets and liabilities related to the real estate development business held by the company to the company’s controlling shareholder (or affiliated company designated by the actual controller).

The Securities Times reporter combed that recently, a number of listed real estate companies such as Huayuan Real Estate, Midea Real Estate, Gree Real Estate, and Guancheng Datong have sold real estate development business assets.

Industry insiders interviewed by reporters believe that the tide of “check-out” of listed companies has risen, and the real estate market has continued to adjust deeply in recent years, and the real estate development business has become a drag on the performance of listed companies. In order to alleviate the pressure on operating performance, a number of listed companies sold and divested their real estate development businesses and transformed them into asset-light business companies, while Citychamp Datong completely sold their real estate-related businesses and completely transformed into manufacturing enterprises.