Fitch Ratings has affirmed China Resources Land Ltd's (CRL) Long-Term Issuer Default Rating at 'BBB+'.

The Outlook is Stable. Fitch has also affirmed the Chinese homebuilder's foreign-currency senior unsecured debt ratings at 'BBB+'.

CRL's ratings are supported by the company's stable financial profile, with low leverage and strong financial flexibility demonstrated by its sufficient liquidity and continuous funding access under challenging market conditions. The ratings are also supported by CRL's sustained strong market position in Tier 1 and 2 cities and a high quality, expanding investment-property (IP) portfolio with healthy recurring interest coverage.

Key Rating Drivers

Healthy Financial Profile: We expect a slight rise in leverage - measured by net debt/net property assets - to 25%-30% in 2022, driven by weaker contracted sales proceeds and continuous capex requirements for the IP business. CRL's leverage was maintained at 24%-25% in 2019-2021, well below the 35% level at which we would consider negative rating action.

Strong Funding Access: CRL also has sufficient liquidity with an unrestricted cash-to-short-term debt ratio of 1.7x at-end 2021. CRL had committed undrawn bank facilities of CNY21.7 billion at end-2021. CRL's borrowing cost is one of the lowest among Chinese homebuilders, as its weighted-average borrowing cost fell to 3.71% in 2021, from 4.08% in 2020. We expect CRL's average funding cost to increase for its offshore bank borrowings, but it is likely to maintain a relatively low funding cost among its investment grade-rated peers.

Stabilising Development-Property (DP) Operations: CRL's 7M22 total contracted sales fell 20.6% yoy to CNY149.1 billion, better than the 30%-40% drop of 'BBB+' peers. Its July sales rose 22% yoy to CNY28 billion. We expect full-year sales to decline 12% yoy, as 2H22 sales may rise by a low single-digit percentage due to a lower base. We expect CRL's EBITDA margin, which fell to 21% in 2021 from 25% in 2020, to remain under pressure in 2022 in light of the weak property market conditions.

Quality Land Bank: We expect CRL to maintain its prudent land acquisition strategy in Tier 1 and 2 cities as well as strong satellite Tier 3 cities and to retain its healthy leverage levels. CRL had a total land bank gross floor area of 68.7 million sq m, or around 49 million sq m on an attributable basis, at end-2021. Around 70% of its DP land bank is in first- and second-tier cities. We estimate its land bank is sufficient for the next three years of development.

Slower Rental Income Growth: We expect CRL's rental income from IPs to be flattish in 2022 due to rental relief as a result of the pandemic. CRL's income from IPs, excluding hotels, rose by 36% yoy in 2021, driven by a 38% increase in same-store rental income for its shopping mall business and continued strong occupancy rates. Rental income from IPs and hotels fully covered the company's interest expense and dividends for the first time in 2021.

CRL is one of China's leading shopping mall operators, with 54 malls in operation across the country at end-2021, most of which are in Tier 1 and 2 cities. CRL also owned and operated 23 office buildings and 14 hotels as of end-2021.

Significant IP Expansion Plans: CRL plans to increase the number of shopping malls it operates to 98 by 2025. This will further solidify its market leadership, but will require significant investment in the next few years. Fitch expects the capex for IP to remain high at around CNY20 billion per year and result in large negative free cash flows (FCF) in 2022-2024.

No Uplift from Parent: CRL's rating is based on its Standalone Credit Profile (SCP) and does not incorporate any uplift from its parent, China Resources (Holdings) Limited, which has a limited record of supporting the subsidiary. CRL's financial profile has been strong and its does not need financial support from the parent. Most of CRL's land bank has been acquired through public channels. Fitch assesses the legal, strategic and operational support incentives as weak under our Parent and Subsidiary Linkage Rating Criteria.

Derivation Summary

CRL's scale of CNY316 billion in total contracted sales in 2021 with a nationwide presence gives it similar product and market diversification as other leading homebuilders rated 'BBB+', including China Overseas Land & Investment Limited (COLI; A-/Stable, SCP: bbb+), China Vanke Co., Ltd. (BBB+/Stable) and Poly Developments and Holdings Group Co., Ltd. (BBB+/Stable, SCP: bbb/stable).

CRL has a smaller contracted sales scale than COLI, but a much stronger IP portfolio that generates stable recurring income. This provides CRL with better protection from business cycles and contributes to stronger debt-servicing ability than COLI. Both COLI and CRL have low leverage with net debt/net property assets of around 24% at end-2021.

The asset quality of CRL's IP business, with assets of more than USD30 billion and IP EBITDA of USD1.5 billion, is comparable with that of 'A' rated Hong Kong landlords, such as Link Real Estate Investment Trust (A/Stable) and Swire Properties Limited (A/Stable). However, the credit profile of CRL's IP business is constrained by the large capex requirements and negative FCF in the next few years.

Key Assumptions

Fitch's Key Assumptions Within Our Rating Case for the Issuer

Total contracted sales of CNY270 billion-300 billion per year in 2022-2024

EBITDA margin of around 20% in 2022-2024 (2021: 22%)

IP revenue growth of -1% in 2022, 11% in 2023 and 13% in 2024

IP capex of CNY22 billion in 2022, CNY15 billion in 2023 and CNY13 billion in 2024


Factors that could, individually or collectively, lead to positive rating action/upgrade:

Sustained neutral-to-positive FCF on a consolidated basis

Net debt/net property assets sustained below 30%

IP assets/net property assets sustained above 45% (2021: 48%)

Factors that could, individually or collectively, lead to negative rating action/downgrade:

Net debt/net property assets above 35% for a sustained period (2021: 24%)

Best/Worst Case Rating Scenario

International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit

Liquidity and Debt Structure

Ample Liquidity: CRL's reported cash of CNY91.5 billion at end-2021, excluding regulated pre-sale funds of CNY15.2 billion, was more than sufficient to meet its short-term debt maturities of CNY54.5 billion. CRL had committed undrawn bank facilities of CNY21.7 billion at end-2021.

Issuer Profile

CRL is one of China's largest city-centre mall operators. It is also one of the country's leading homebuilders, with CNY285 billion in total contracted sales in 2020.


The principal sources of information used in the analysis are described in the Applicable Criteria.

ESG Considerations

Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit

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