Country Garden Sells Melbourne Project to Frasers After Bond Default

Country Garden Holdings has agreed to sell an unfinished housing project near Melbourne, Australia to Singapore’s Frasers Property, market sources have confirmed to Mingtiandi, with the asset sale emerging during the same week that China’s largest developer formally defaulted on offshore debt for the first time.

Branded as Risland Australia down under, Country Garden had been marketing the remaining lots in the 366 hectare (904 acre) Windermere project in Victoria state since July, with the developer warning in early August that it expected a first-half loss which was later declared at around $6.7 billion.

Frasers is reported in the Australian Financial Review to have paid close to A$250 million ($158 million) for the remaining units in the 4,500-5,000 lot project, which remains largely unsold and still lacks sewer and other infrastructure after Country Garden had purchased the plot 36 kilometres (22.4 miles) southwest of central Melbourne for A$400 million (then $303.6 million) in 2017.

Media reports citing investors in Country Garden’s bonds indicated last week that the developer had missed a $15 million coupon payment on 18 October, with the company having announced to the Hong Kong stock exchange on 10 October that it had hired lawyers and other consultants to advise on its finances and liquidity, in a move that many analysts see as a prelude to a debt restructuring.

Selling Off Down Under

The deal gives Frasers two plots of land in Windermere measuring 170 hectares in total, which could yield 2,200 individual residential lots. The Australian Financial Review cited an A$800 million value for those lots upon sale.

Country Garden had set a record for the largest purchase of Melbourne site when it scooped up the plot at Black Forest Road in Wyndham Vale, which is now part of a suburban development project known as Mambourin.

That acquisition, which came at more than three times a pre-sale valuation of the project, was among a series of Australian purchases by Country Garden in the middle of the last decade, which also included spending A$80 million to buy a site in Sydney’s Wollondilly Shire in 2018. That project is now also said to be on the market.

Country Garden had also attempted to sell the Wollondilly project, located in the town of Cawdor, in 2019, having engaged Colliers and JLL to market the site, but failed to close a sale. Cushman & Wakefield represented the mainland developer in its successful sale of the Windermere project to Frasers. The Wollondilly project continues to be on the market.

Early last month, Frasers announced that it had received approval for the first major retail development in Mambourin, where the developer plans to build 7,200 square metres of shops at an investment of A$50 million. In declaring the Mambourin plan, Frasers said 2,400 people already live in the masterplanned community, with that number expected to grow to 4,000 by 2027.

Frasers’ Australian website shows the company marketing land and homes in Mambourin, with 115 units sold during the first half of 2023. The company had acquired the 115 hectare site for Mambourin in 2016. Frasers and Country Garden had not responded to inquiries from Mingtiandi by the time of publication, while Cushman & Wakefield representatives declined to comment.

Developer Heads for Restructuring

Country Garden’s offshore asset sale could be unwelcome news for its offshore creditors which are now seeking urgent talks with the developer after the bond default last week. The bondholders are said to be in the process of hiring advisors for a potential restructuring deal.

China Evergrande Group, which defaulted on $31.7 billion in offshore debt starting in 2021, this year sold off its luxury superyacht for a reported $32 million in a move seen as limiting the number of assets outside of China which could be seized by foreign creditors.

Evergrande also sold a Boeing jet last year for $100 million and two Gulfstream jets in 2021 for more than $50 million according to media accounts.

Country Garden has real estate projects in Australia, Thailand, Malaysia and India which could become targets for creditors in a restructuring struggle. In September of last year Evergrande creditors seized the developer’s Hong Kong headquarters, but have struggled to find a buyer for the 26-storey tower.

“The Company will actively pursue offshore liability management measures and develop a holistic solution in a fair and equitable manner to achieve a sustainable capital structure, while respecting the existing legal status and ranking in right of payment of all creditors,” Country Garden president and executive director Mo Bin said when the company announced this month that it had hired advisors.

During the first nine months of this year Country Garden’s contracted sales fell to just less than RMB 155 billion ($21.7 billion), which marked a decline of 43.9 percent from 2022 levels and represented a more than 65 percent drop from the same period two years ago.

Country Garden has $10.96 billion in offshore bonds and $5.81 billion in other non-RMB debt which creditors could demand immediate payment of in a cross-default scenario, Country Garden acknowledged in its statement.