Property developer Greentown China Holdings has grabbed headlines in recent days, in a time when Chinese real-estate companies would probably rather keep a low profile.
First, Song Weiping, founder of Greentown, last week directly disputed rumors that the company is on the verge of bankruptcy amid the chorus of pessimism over the sector.
Then over the weekend, local media said Mr. Song was getting a boost from Jack Ma, chairman of Chinese e-commerce giant Alibaba Group Holding, which like Greentown is based in Hangzhou. According to those reports, Mr. Ma encouraged his employees to buy property from Greentown. The company disputes those reports as well.
The flurry of attention comes as the company, like others in the sector, grapples with Beijing’s efforts to tame the property market. On Monday, Greentown said it is considering disposing of some of its property projects to boost cash flow.
On the bankruptcy rumors, Mr. Song decided to address them head-on. In an essay on the company’s website last week (in Chinese), he disputed the rumors but also took the opportunity to imagine the scenario that might unfold should any of Greentown’s peers collapse.
“On Nov. 1, a reporter called to ask me if Greentown is applying for bankruptcy… this is a cold joke,” wrote Mr. Song, whose firm develops high-end property. “Currently everything is within our control and we have confidence to pass this winter together with our peers. Greentown still has a long way to go before it declares bankruptcy.”
Concerns over the company’s fiscal health have mounted since September, when China’s banking regulator asked trust companies, key players in the nation’s shadow banking system, to submit details on how much they had lent to the Hong Kong-listed property developer.
The property market is showing signs of distress as Beijing’s nearly two-year-long property tightening campaign continue to bite. Sales are slowing and property prices are falling in some cities, intensifying pressure on property developers. Many luxury property developers such as Greentown have been hit.
With declining sales and tightened credit, some firms might collapse in the next couple of months, he wrote. “When that time comes, some developers will close down, some developers may run away, or perhaps, something even more tragic could happen,” said Mr. Song, adding that one should also consider what would happen to “our brothers in the downstream industry chain, from building material firms, construction worker and migrant workers waiting to bring money home for the lunar new year.”
He stopped short of criticizing the government’s stance on property tightening, and said that he is confident that the government will be able to “grasp the overall situation.”
On the Alibaba situation, both the e-commerce company and the property developer disputed the idea that Mr. Ma was trying to help Mr. Song.
An Alibaba spokesman said it sent a generic human-resource email to selected employees offering discounts of about 8% on Greentown apartments as a benefit for employees. He added that there was no language in it about saving Greentown, it didn’t come from Mr. Ma and it didn’t encourage employees to accept.
Greentown Chief Financial Officer Simon Fung said that the company is offering the discount to Alibaba employees but declined to reveal the minimum transaction volume.
“We have offered similar discounts on bulk purchases to other industrial associations as well,” Mr. Fung said, noting that one discounted project is priced at 18,000 yuan ($2,834) a square meter.
Source:blogs.wsj.com