(Bloomberg) -- China’s top high-end developer Greentown China Holdings asked its staff to accelerate cash inflows “on all fronts” and speed up sales, according to memos seen by Bloomberg, amid escalating regulatory scrutiny of the sector.
The Hangzhou-based builder urged faster sales, redoubled efforts to collect accounts receivable and called for strict control over payments, according to the memos. Moves to speed up sales include shifting those originally scheduled in 2019 to this year, provided the projects are unhindered by pre-sales pricing restrictions.
Chinese developers have become more reliant than ever on their own project sales for funds after regulators moved to further restrict financing to the sector and escalated a campaign to cool property prices. That has left developers exposed to market swings and the whims of local officials, who can cap apartment prices when issuing pre-sales licences for new residential projects. Country Garden Holdings Co., China’s biggest developer, in April urged employees to quicken home sales while threatening fines or dismissals for those too slow in getting their projects to market.
Greentown will press ahead with its strategy to “sell early, sell more and sell fast,” the firm said in the memos. “Business will center around operational cash inflow from sales.”
Management of operational cash flow is a “normal move” that’s reiterated every six months, the company’s media representative said in an emailed reply. The company’s cash level is no less than 50 billion yuan ($7.5 billion) on average, at a “sufficient and safe” level, according to the email. Its credit position is ample for normal operational needs and can support growth, the company said.
The moves don’t signal the developer is in financial trouble. Greentown’s net-debt-to-equity, a gauge of leverage, was at 59 percent at the end of last year, below the 61 percent average of largest players, according to Bloomberg Intelligence. Yet, accelerating turnover is crucial for the firm, which saw an operating cash outflow of 11.3 billion yuan last year, the biggest since its 2006 listing, according to filings.
|Other measures to accelerate sales include: |
* To make “all efforts possible” to acquire pre-sales permits if projects are impacted by pre-sales pricing restrictions
* To reward sales crew for meeting sales targets ahead of plan
Read more: Chinese Developers Sink to 20-Month Low
Developer stocks extended a selloff on Monday in China, after weekend announcements of more local property control measures. A property index on the Shanghai stock exchange dropped as much as 3.3 percent to a 20-month low. The Hong Kong market, where Greentown trades, was closed for a public holiday on Monday.
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