Amidst the deep downturn in the Chinese real estate industry, a large number of distressed assets related to real estate are flooding into the foreclosure market on an unprecedented scale. Recently, a total of 11.3 billion yuan (RMB) worth of non-performing debts under the Evergrande Group were centralized for transfer. However, despite the surge in asset supply, many auction items and debt packages are still facing the dilemma of few bidders and frequent failures to sell.
On June 9th, as reported by China Real Estate Network, the non-performing debts of 12 affiliated companies under the Evergrande Group were collectively listed for sale with a total debt amount of 11.3 billion yuan. The holders of these 12 distressed assets are all from the Beijing branch of the Great Wall Assets, involving 12 projects in 9 cities including Beijing, Guangzhou, Tianjin, Chengdu, Zhengzhou, Nanchang, etc., with collaterals such as land, ongoing construction projects, and real estate.
The asset quality of the 12 projects under the “Evergrande Group” varies, with some projects in normal sales process, some with collateral assets being undeveloped land and properties, and some assets located in rural areas.
This centralized transfer is one of the larger-scale debt listing disposals of Evergrande Group since it got into the debt crisis.
On the same day, another report indicated that the total debt of 1.4 billion yuan for the FuSheng Qianlong Plaza project that went through failed foreclosure auctions in November 2023 and January 2024, will also be disposed of, with the holder being the Shanghai branch of the Great Wall Assets.
The profound adjustment in the mainland real estate industry has led to a large number of companies defaulting on debts, resulting in many real estate assets being sold through forced auctions. However, in the current market downturn, despite the emergence of a large number of non-performing debt packages with real estate and land as core collaterals, there are few buyers in the market.
Some projects that were once highly anticipated and intended to be “landmark buildings” are now desperate to find buyers due to the debt crisis faced by the development enterprises. Additionally, influenced by factors such as rising unemployment and decreased household incomes, there have been many cases of defaults in both personal mortgage loans and operating loans, further exacerbating the surge of distressed real estate assets on the supply side.
Specific cases demonstrate that the disposal of foreclosed assets still faces challenges. A few days ago, the under-construction project of Evergrande Royal Peninsula in Donghan Town, Fuqing City, was listed on the Ali Auctions platform. The project has been idle since July 2021, with an assessed value of 228.7 million yuan, a starting price of 160 million yuan, and scheduled auction date of July 5th. However, as of now, there have been no bidders. Previously, some properties in Zone B of the project had been auctioned multiple times, all resulting in no bids.
The disposal speed of assets under the “Qianbao Group” is also accelerating. On June 6th, core assets of the “Qianbao Group” in Nanjing—Jiangbei Fuzhong Smart City and Yulong Tengfei Industrial Park (Qianbao Building) were also listed for judicial auction with a starting total price of 1.06 billion yuan, with the auction expected to start on July 9th. However, as of now, there have been no bidders as well.
Data from the China Banking and Insurance Regulatory Commission shows that since 2020, financial institutions in the banking industry have disposed of non-performing assets of around 30 trillion yuan annually over the years; last year, a total of 38 trillion yuan of non-performing assets were disposed of, reaching a record high.
This also indirectly confirms the huge scale of non-performing assets in the market and the pressure of disposal.