Heavily-indebted Chinese developer CIFI looks to offload prized Shanghai commercial property assets after 1.5 billion yuan bond fails to take off

Chinese property developer CIFI Holdings is looking to sell its crown-jewel assets in Shanghai, including its headquarters, after its state-guaranteed yuan bond issuance hit a snag.

The developer has put three shopping centre and office complex projects, as well as an office project with two blocks, on the market, according to a brochure seen by the Post. It has also put Henderson CIFI Centre in Shanghai's Hongqiao district, which contains its headquarters, up for sale.

The developer, which announced it had defaulted on US$318 million in offshore debt on November 1 last year, is facing the maturity of 534 million yuan (US$76.67 million) in onshore interest and principal payments this year. And now it seems that a lack of progress with a bond issuance of up to 1.5 billion yuan is pushing it to offload prime assets.

Do you have questions about the biggest topics and trends from around the world? Get the answers with SCMP Knowledge, our new platform of curated content with explainers, FAQs, analyses and infographics brought to you by our award-winning team.

CIFI declined to comment on the asset sale as well as the bond issuance.

"Giving away such good-quality assets means the developer is really tight with its credit line," said Yan Yuejin, director of the Shanghai-based E-house China Research and Development Institute. "It is not a good time to offload commercial assets in China, unless the seller has no other choice."

The Shanghai-based developer started accepting investor interest for the bond in early January. It said on January 10 that it had received a credit enhancement letter issued by the state-owned China Bond Insurance Corporation offering to back the sale of bonds worth as much as 1.5 billion yuan.

CIFI successfully issued onshore bonds backed by state guarantees twice last year before defaulting on offshore notes in November.

The current issuance has, however, failed to take off after nearly two months, with China's onshore investors seemingly concerned about the developer's offshore bond default, according to sources close to the matter. The investors are concerned that the deal will fail, they added. CIFI will, however, make an effort to proceed with the bond issuance.

The developer is seeking 880 million yuan for its headquarters, which is in one of two towers at Henderson CIFI Centre, the sources said. The 15,695 square-metre office spread over nine floors is where the developer's most senior executives, including founder and chairman, billionaire Lin Zhong, sit.

CIFI is asking about 550 million yuan for the other tower. Henderson CIFI Centre yields a total of 25,000 square metres.

Other assets the developer is hoping to cash in on include Shanghai LCM, a shopping centre and office complex in the city's financial hub in Pudong district; the 78,000 square metre CIFI Tower commercial block near Shanghai's West Nanjing Road retail hub; and Shanghai Henderson CIFI The Roof, a commercial complex in Xintiandi district in the heart of the city.

The Roof, a 450,000 square metre complex designed by Pritzker Architecture Prize winner Jean Nouvel, is a social-media hit and is currently fully occupied by merchant and office tenants.

Whether CIFI can raise more capital through debt issuances will depend on how much farther Beijing is willing to go to help China's heavily-indebted property developers.

"Some of the measures [ introduced since November to help the property sector] could increase banks' capability to provide financing to developers and incentivise them to provide supplemental financing for unfinished projects," rating agency Moody's said in a research report on March 2.

"However, we do not expect banks to increase their exposure to developers significantly, especially to distressed ones."

Additional reporting by Peggy Sito

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2023 South China Morning Post Publishers Ltd. All rights reserved.

Copyright (c) 2023. South China Morning Post Publishers Ltd. All rights reserved.