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WSJ says it's time to sell newly hamstrung, debt-burdened Greenland (a red flag in Brooklyn?)

Sell Greenland! No, Not That One, the Wall Street Journal's Mike Bird wrote yesterday, offering a caution about Greenland Holdings Corp. (aka Greenland Holding Group or Greenland Holdings Group), the giant real-estate company and main owner of Atlantic Yards/Pacific Park.

He writes notes that, despite growing property prices in China, and Shanghai-based Greenland celebrating a Forbes rank for fastest revenue growth, there are reasons to worry.

Indeed, as I wrote last month, growth in revenue itself does not indicate fiscal health, and Greenland's bond rating was still junk, indicating risks.

Also, as I wrote in January citing Fortune magazine, as opposed to Forbes, that "Greenland's growth trajectory seems significantly less dramatic, instead something of a seesaw, related to the sometimes volatile real estate business and domestic economy."

Reasons for doubt

Bird notes that, while the central government has taken steps to reduce borrowing costs, it omitted mortgage lending, thus raising risks for property developer. He also suggests that, with Shanghai's municipal government as the single largest shareholder--here's my analysis, with Greenland publicly owned but essentially state controlled--that raises risks:
The ordinary business of property development may well be difficult enough in the coming years without such political questions—to which investors will never receive adequate answers—hanging over them.
Bird also cites setbacks for Greenland in London and offers this pithy summary, "Previous ambitious U.S. investments also have floundered."

A red flag in Brooklyn?

That, I assume, refers to slower-than-expected progress in Los Angeles (Metropolis) and Brooklyn (Atlantic Yards/Pacific Park), as well as a pullback from plans in San Francisco and Los Angeles.

Still, Greenland has made progress with Atlantic Yards/Pacific Park, albeit by bringing in new investors, the firms TF Cornerstone and The Brodsky Organization, on four sites.

We should not be surprised at more changes; indeed, given the investments by the latter two firms, they may own/control more of the project going forward than legacy developer Forest City (now part of Brookfield), thus casting a cloud on the name, established in 2014, Greenland Forest City Partners.

That said, the future's unclear. Greenland could narrow its focus while continuing to meet obligations and benchmarks with Atlantic Yards/Pacific Park, or it could ultimately pull back, either because of new corporate guidelines or goals or even--who knows?--because trade tension with China makes the presence of Chinese companies in the United States less tenable.

Questions of debt

Bird notes that, while Greenland has cut debt in half, from a stratospheric figure, it has doubled "unearned revenues," which refers to properties bought by customers but not yet delivered. That leaves Greenland with a dangerously high figure of debt to assets of 89%, a bit higher than even some other large developers.

Given the likelihood Greenland's revenue won't rise as rapidly, that causes problems, albeit not as dramatic ones as a default on dollar-denominated debt, Bird points out. That makes Greenland a dangerous investment for stock buyers.

So we must wonder if/how the next fiscal wave that hits Greenland has any ripples in Brooklyn. Stay tuned.

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