January 14, 2015 / 9:30 AM / 5 years ago

Business as usual for Kaisa in Shenzhen despite sales block

SHENZHEN, Jan 14 (Reuters) - As creditors circle troubled Chinese property developer Kaisa Group, it’s business as usual at the company’s sales office and housing projects in the southern city of Shenzhen.

In a northern suburb, construction workers in yellow hats at the Kaisa City Plaza development could be seen renovating flats on Tuesday, while agents at the firm’s downtown sales office were going about their jobs as normal, despite the prospect of a debt default hanging over the developer.

There was little sign of the problems that began in December, when Kaisa said the local government had blocked sales of unsold units at several of its projects in Shenzhen.

Nor was there evidence that the company, which could become the first Chinese property company to default on its offshore debt, was slowing down construction work after the sudden departure of a string of senior executives and a missed coupon payment on one of its bonds.

Sales staff told Reuters that projects are expected to be completed on schedule and the group is operating normally, while construction workers said they were unaware that sales had been blocked by the authorities.

The company’s customers though, are starting to worry.

One buyer, Fang Shangxiang, said he had pumped 600,000 yuan ($96,863) of his life savings into a 30 percent deposit on a two million yuan flat at the Yuefeng Garden project, one of the developments where sales have been blocked.

“I don’t think the firm will go bankrupt but there may be a long delay before we get it,” he said on a visit to Kaisa’s sales office.

Fang, an employee of technology giant Huawei which is located in the same Longgang district, said he plans to live in the flat with his wife and young son.

“I thought it wasn’t a bad company. I didn’t expect this to happen ... I hope the (Shenzhen) government will do something to protect me and my family.”

People who had bought flats at Kaisa City Plaza called on authorities to protect them in the event the company defaults on its debts and can’t complete the development.

“We urge the government to protect the rights of the home buyers,” read rows of blue banners held up by dozens of protesters in the marble lobby of the development on Tuesday evening.

One banner hinted at rumours of a political power struggle going all the way to the top of China’s corridors of power as part of the reason for the company’s difficulties and the sudden departure of the company’s former chairman Kwok Ying Shing.

“Xi (Jinping), hurting the innocent is infringing upon our bottom line,” another banner read.

WHAT SALES BLOCK?

In Longgang, phase one of a mid-to-high-end development appeared close to completion, with interior decoration and renovation work ongoing ahead of the expected completion dates of the units later this year.

The project is one of two in the district where sales have been blocked, but estate agents were still selling units there, albeit at a sizeable discount.

Kaisa Yuefeng Garden was offering discounts of around 13 percent after authorities blocked sales, an agent said.

Interested parties could buy units by placing a 50,000 yuan deposit, which could be refunded, and paying the remainder once the block was removed.

“One of my clients bought a unit because Kaisa told him the block would be removed within a few days. But after a few weeks waiting he decided to refund and he got the money back with no trouble,” the agent said.

This relative calm on the ground in Shenzhen is in sharp contrast to the anxiety gripping many of its investors, which escalated after Kaisa warned it may default on its debt after it failed to repay a $51.3 million loan to HSBC on Dec. 31.

At least 28 court filings were made against Kaisa and its subsidiaries between Jan. 6 and Jan. 9 in Shenzhen, where Kaisa has most of its assets, according to records in the city’s Intermediate People’s Court, involving 17 financial groups.

Officials at the Shenzhen court, including the legal officer in charge of the case, Huang Weina, declined to comment on the case when visited by Reuters.

Around 60 percent has been wiped off the face value of Kaisa’s outstanding bonds in the dollar and offshore yuan markets, while its shares remain suspended. ($1 = 6.1943 Chinese yuan renminbi) (Additional reporting by Saikat Chatterjee; Editing by Anne Marie Roantree and Rachel Armstrong)

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