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Analysis-China’s property woes put prestige global projects in play

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October 31, 2021

By Marc Jones and Tommy Wilkes

LONDON (Reuters) – China’s property sector woes could spell trouble for prestige mega-projects in London, New York, Sydney and other top cities as the developers behind them scramble for cash.

While China Evergrande Group’s struggles have dominated the crisis, the risk to multi-trillion dollar global property markets stems from some of its rivals that have spent the last decade competing to build ever taller and grander skyscrapers.

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Shanghai-based Greenland Holdings, which breaches as many of China’s debt “red lines” as Evergrande, has just built Sydney’s https://www.greenlandaustralia.com.au/en/greenland-centre tallest residential tower, has plans to do the same in London https://spirelondon.com and has billions of dollars worth of projects in Brooklyn, Los Angeles, Paris and Toronto.

The developer says it remains committed to its flagship builds including its long-delayed, 235 metre-high Spire London tower, but it put part of another major London site on the market earlier in the year and other firms are hoisting for sale signs too.

Evergrande and Kaisa Group, which was the first Chinese property firm to default back in 2015, are both trying to sell Hong Kong buildings to drum up desperately-needed cash., while Oceanwide Holdings has just had what was supposed to be San Francisco’s tallest tower seized by disgruntled creditors.

“I suspect, as with anything, if you’re running into liquidity issues you start to look to sell your investment properties,” said Omotunde Lawal, head of emerging-markets corporate debt at asset manager Barings, which holds some Chinese property firms’ bonds.

As many Chinese firms overpaid for prime overseas sites in the scramble to secure them, the question is who will buy them, Lawal added. “Probably they are unlikely to get cost, so I think it depends on just how desperate they get.”

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SIZABLE ASSET SALES

Guangzhou R&F Properties is another major firm in focus after it required an emergency cash injection this month. It has two giant unfinished developments in London, including one with a dozen skyscrapers next to the Thames https://www.thamescity.com, as well as numerous builds in Australia, Canada and the United States.

An R&F spokesperson in London said it remained “fully committed” to all its British projects.

But with nearly $8 billion of debt to repay in the next 12 months, only $2 billion of freely available cash and sales down nearly 30% year-on-year last month, major credit rating agencies say it will need to cash in some chips.

“R&F’s capacity to handle its near-term debt maturities will hinge on the execution of sizable asset sales,” S&P said, predicting that buildings, hotels and various stakes in projects could all be sold. Fitch meanwhile estimates R&F has 836 billion yuan ($130 billion) of assets that could potentially be sold.

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R&F, Greenland, Evergrande and Kaisa have all declined to comment further on their finances. Oceanwide said last week it was “actively discussing” the situation with its San Francisco project with the creditors involved.

SPENDING SPREE

Chinese developers went on a major international spending spree between 2013 and 2018, but the splurge has slowed abruptly since as Beijing has moved to curb firms’ excessive debts.

After pouring more than 28 billion pounds into London projects in 2018, they have spent 1.5 billion pounds in the first half of 2021, the lowest amount since 2012, data from Real Capital Analytics shows.

Figures from estate agents Knight Frank paint a similar picture in Australia, New York and other top north American cities, where Greenland, R&F and others big firms including Country Garden, Poly Property and China Vanke also spent tens of billions of dollars a year.

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Stephanie Hyde, UK chief executive of real estate firm Jones Lang LaSalle, which markets for R&F in London and another firm called Xinyuan which has just narrowly avoided default, told Reuters she wasn’t aware of any Chinese firms looking to sell-up due to strains back in China.

If they did decide to sell though, they were likely to find buyers relatively quickly she added, due to the flood of international investment money current circling global property markets like London where prices are now at a record high.

Chris Gore, a central London principal at real estate firm Avison Young, said he wasn’t aware of any sudden selling plans either, but that the pressure would grow on Chinese firms if the crisis at home continued.

“If they needed to sell and could sell for a profit, then I think they would just sell,” Gore said. “There wouldn’t be a problem if a few wanted to sell, but if they all suddenly wanted to exit at the same time, they couldn’t.”

($1 = 0.7263 pounds)

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($1 = 6.4050 Chinese yuan renminbi)

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

Chinese property stocks come crashing down https://tmsnrt.rs/3Cwknfh

Monthly Land Sales in Mainland China (billions of yuan) https://tmsnrt.rs/3uGApQv

China’s most indebted property companies https://tmsnrt.rs/3u2Onfv

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^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

(Additional reporting by Clare Jim in Hong Kong; Editing by David Evans)

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Arnault-backed group launches second SPAC listing

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December 7, 2021

By Emma-Victoria Farr

LONDON (Reuters) – France’s richest man Bernard Arnault and former UniCredit head Jean Pierre Mustier will publicly list a second blank cheque vehicle in Amsterdam, raising 200 million euros ($226 million), the bookrunners on the deal said.

Earlier this year, the duo raised half a billion euros from their special purpose acquisition company (SPAC), Pegasus Acquisition Company Europe B.V., which is searching for takeover targets in the financial sector.

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On Tuesday, the same group of backers announced they would list a second vehicle with a similar focus, Pegasus Entrepreneurial Acquisition Company Europe, in Amsterdam.

SPACs are listed on a stock exchange by a group of entrepreneurs, who use the money raised to target a private company – allowing the target to get a stock market listing without the arduous process of launching a public listing.

Mustier is working with former Bank of America banker Diego De Giorgi and entrepreneur and investor Pierre Cuilleret in launching the 200 million euro listing.

Several SPACs have listed in Amsterdam, potentially boosting the Dutch financial capital’s credentials as a hub for fast-growing companies. London has only hosted one major SPAC in 2021, after updating its rules to make them easier.

Pegasus is backed by institutional sponsors Tikehau Capital and Financière Agache and by sponsors De Giorgi, Cuilleret and Mustier. Citi, Goldman Sachs and BNP Paribas are the bookrunners on the deal.

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($1 = 0.8860 euros)

(Reporting by Emma-Victoria Farr; editing by John O’Donnell and Louise Heavens)

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Bulls back in charge as Omicron worries wane

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December 7, 2021

By Marc Jones

LONDON (Reuters) – Waning Omicron COVID-19 variant worries and a timely booster shot of Chinese stimulus lifted world stock markets and oil on Tuesday and left traders offloading safe-haven currencies and bonds again.

The FTSEurofirst 300 index was on track for its first back-to-back run of plus 1% gains since February while Asia saw record bounces from some of China’s biggest firms such as Alibaba and Baidu. [.SS][.EU]

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The risk-on mood also helped the dollar climb against safe haven currencies such as the Japanese yen,, which had lost 0.6% overnight, as the confidence-sensitive Australian dollar also found buyers. [FRX/]

Safe-harbour government bonds went the other way with yields – which move inverse to bond prices – up 2.5% on Germany’s benchmark 10-year Bund after falling to a three-month low on Monday. [GVD/EUR]

Reports in South Africa said Omicron cases there had only shown mild symptoms and the top U.S. infectious disease official, Anthony Fauci, told CNN “it does not look like there’s a great degree of severity” so far.

“Good news relating to the severity of Omicron should be taken with a pinch of salt. Faster transmission could offset the benefits of milder symptoms,” researchers at ING said in a note. “More broadly, it is still early days, even if markets are starting to display Omicron fatigue.”

The gains also came after China’s central bank on Monday injected its second shot of stimulus since July by cutting the amount of cash that banks must hold in reserve.

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There was still uncertainty about its property sector as Evergrande teetered on the brink of default again but data showing much stronger import growth was “a positive sign on the strength of domestic demand”, RBC analyst Adam Cole said.

Elsewhere, Australia’s S&P/ASX200 rose 0.95%, while Japan’s Nikkei advanced 2.1% as risk-on sentiment pushed markets higher.

MSCI’s main Asia ex-Japan benchmark has lost about 5% so far this year, with Hong Kong markets figuring among the big losers, while Indian and Taiwan stocks outperformed.

Shares in embattled developer Evergrande edged up 1.7% after hitting a record low on Monday as markets waited to see if the real estate giant has paid $82.5 million with a 30-day grace period coming to an end.

Elsewhere, markets were supported by gains on Wall Street, where economically sensitive stocks outperformed.

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“While epidemiologists have rightly warned against premature conclusions on Omicron, markets arguably surmised that last week’s brutal sell-off ought to have been milder,” Vishnu Varathan, head of economics and strategy at Mizuho Bank, said in a note.

“After all, early assessments of Omicron cases have been declared mild, spurring half-full relief.”

Also supporting the dollar in FX markets was the expectation the Federal Reserve will accelerate the tapering of its bond-buying programme when it meets next week in response to a tightening labour market.

Oil prices jumped another 2% to $74.60 a barrel, adding to a near 5% rebound the day before as concerns about the impact of Omicron on global fuel demand eased. [O/R]

Copper prices also ticked higher while gold was steady at $1,778.5 per ounce on expectations U.S. consumer price data due later this week will show inflation quickening.

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(Additional reporting by Anshuman Daga in Singapore; Editing by Nick Macfie)

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Exclusive: EU antitrust regulator seeks input on Microsoft’s $16 billion Nuance deal

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December 7, 2021

By Paresh Dave

(Reuters) – EU’s antitrust regulator is taking a deeper look into Microsoft Corp’s $16 billion deal for transcription technology company Nuance Communications Inc, asking customers and competitors to draw up a list of concerns, according to a questionnaire from last month seen by Reuters.

The previously unreported outreach is the most extensive by an antitrust authority since the companies announced the acquisition in April, according to a person familiar with the matter.

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Microsoft declined to comment, and Nuance did not respond to a request for comment.

After minimal review, the U.S. Department of Justice in June and the Australian Competition Commission in October said they would not contest the deal. The companies filed for approval from the European Commission’s competition bureau last month, and the regulator has until Dec. 21 to clear the deal or open a bigger investigation.

The companies had expected to close the deal by the end of this year, but said last month the timeline could slip to early next year.

The questionnaire asks whether Microsoft and Nuance are competitors and whether a tie-up could affect clients and rivals, including whether Microsoft could favor Nuance over competing services.

Nuance primarily sells transcription technology that is popular among doctors and call centers that want to automate note-talking. Analysts view the deal as bolstering Microsoft’s presence in the healthcare market, and bringing it new voice and medical data to train artificial intelligence offerings in health, speech and biometric security.

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Like other big tech companies, Microsoft for years has grown its business through acquisitions, such as in advertising and video gaming. But in the last decade, Microsoft has avoided the target that recently has dogged its competitors Alphabet Inc’s Google, Facebook Inc, Apple Inc and Amazon.com Inc, all of which are facing antitrust lawsuits and investigations on numerous issues.

Steven Weber, a University of California Berkeley professor studying the intersection of technology and health care, said possible concerns about the pending deal could include Microsoft forcing its Office suite on Nuance customers by bundling them together.

Nuance has said it serves 77% of U.S. hospitals.

A key to its success has been has ensuring in deals with customers that it could use their data to advance its voice recognition systems, according to former chief executive Paul Ricci and another former employee.

For instance, a Nuance contract with Augusta University Medical Center, obtained by Reuters this year through a public records request, reads, “Customer shall provide Nuance access to voice and text data…and grants Nuance a perpetual, royalty-free license to copy, use and analyze such data for speech recognition research.”

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Big cloud vendors such as Amazon and Microsoft typically do not have unfettered access to customers’ data for research and development. But the opportunity to acquire those relationships and data explains Microsoft’s interest in Nuance, the former employees said.

Other providers of health transcription technologies include 3M Co and Philips.

(Reporting by Paresh Dave; Editing by Kenneth Li and David Gregorio)

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