Shimao Property Receives $2.2 Billion Credit Line

“The market is warming up, which will speed up our cash returns,” Xu told reporters in Shanghai on March 20. “Acquisitions are likely in the second half of this year as well, as some of the smaller builders face problems. We will also consider buying land.”

Shimao surged 8.6 percent extending this month’s gain to 47 percent as price cuts and government-directed lending help revive China’s property sales. The credit line is equal to almost 90 percent of the market value of Shimao, which had its debt rating cut to junk last year.

“It’s good that Shimao got the extra financing,” Lee Wee Liat, a senior analyst at Nomura International Hong Kong Ltd., said by phone today. “This will allow them to start on some of their projects that were put on hold in Beijing and Hangzhou.”

China’s economy is growing at its slowest pace in seven years and developers have cut home prices, leading values to drop by a record.

Property Transactions

The lower prices have boosted sales. Average daily property transactions in Shanghai rose 1.9 percent to 772 in the week ended March 14 from the preceding week, Orient Securities Co. said March 17.

Shimao rose 46 Hong Kong cents to HK$5.94 at 11:51 a.m. in Hong Kong trading, the biggest intraday gain in almost three weeks.

The developer’s $350 million 8 percent bonds maturing in 2016 have risen to 50.5 cents on the dollar today from a record low of 28.5 cents on Nov. 3, data compiled by Bloomberg show.

China’s housing market has bottomed out as falling interest rates, the government’s stimulus package and other measures are reviving demand, Jason Hui, vice president of Shimao and Xu’s son, said in Shanghai on Friday.

Xu was named the country’s ninth-richest person in October by Hurun Inc.’s China Rich List.

China’s economic growth slowed to 6.8 percent in the fourth quarter of last year from 13 percent in 2007 as the global recession cut demand for its exports. The Organization for Economic Cooperation and Development may cut its forecast for the nation’s growth this year to as little as 6 percent.

China Loans

To bolster support for its $585 billion stimulus package, the Chinese government pressed banks to increase lending, leading new loans to more than quadruple in February from a year earlier.

“Confidence is returning,” Hui said. Buyers, who shied away when Shimao cut prices by up to 20 percent at the end of 2008 are back after the builder raised prices by 5 percent from those levels, he said.

Shimao sold a villa at its Sheshan project, 30 kilometers (19 miles) southwest of Shanghai, for 250 million yuan, a record for a Chinese home, in November to a Hong Kong buyer, said Grace Gu, a sales superintendent at the development.

“We thought we would sell it at 300 million yuan,” Hui said of the 4,000-square-meter (43,000 square feet) home, which boasts a bowling alley, an underground wine cellar and access to a private islet. The property spans an area of more than 20,000 square meters.

Sales Forecast

Shimao’s revenue this year so far exceeded 3 billion yuan, excluding about 1 billion yuan of sales booked at its luxury Riviera Garden residential project, Hui said. The company is confident of posting sales of 17 billion yuan in 2009, beating its target of 15 billion yuan, he said. Revenue last year was 9.28 billion yuan, the company said in April.

Shimao’s sales in China in January and February rose 189 percent to 1.66 billion yuan from a year earlier, the developer said.

China Vanke Co., the country’s biggest developer by market value, said earlier this month sales rose 150 percent in February from a year earlier to 3.9 billion yuan after a 19 percent increase in January. It cut home prices by as much as 15 percent in 2008. Poly Real Estate Group Co., China’s second- biggest developer, said February sales almost tripled from a year earlier.

Agricultural Bank is charging Shimao the “basic” lending rate for the credit facility, with a discount of as much as 10 percent for some projects, Hui said. Shimao will use the facility for as many as 20 of its projects.

Shimao also has credit agreements with the Industrial & Commercial Bank of China Ltd., Bank of China Ltd. and China Construction Bank Corp., with most facilities lasting up to three years and with a borrowing cost at the benchmark rate of above 5 percent, Hui said.