Fitch Ratings on Jan. 14 revised its outlook on Landsea Green Properties Co. Ltd.'s long-term issuer default rating to stable from positive, citing an expectation of higher leverage in the next one to three years.
The homebuilder faces constant land replenishment needs given its short land-bank life and slower growth in nonproperty development businesses, Fitch said, while affirming the company's long-term issuer default rating at B.
The rating agency estimates that the leverage of Landsea Group Co. Ltd., which owns a 50.1% stake in Landsea Green Properties, increased to roughly 45% in 2019 as a result of land replenishment pressure and capital expenditure needed to grow its long-term rental-apartment business.
Fitch expects Landsea Group's EBITDA margin, excluding capitalized interest from cost of sales, to remain at a healthy level of around 18% to 20% during the next one to three years. It also expects Landsea Green Properties' land bank in China and the U.S. to maintain strong profitability and annual contracted sales of above 12 billion Chinese yuan.
However, Landsea Group's interest in growing its long-term rental-apartment business could pressure its leverage, the rating agency added.
As of Jan. 13, US$1 was equivalent to 6.89 Chinese yuan.