Global investment firms with real estate holdings took a beating in markets on Monday as China Evergrande inched closer to missing interest payments on its debt. While global markets slumped, U.S. real estate stocks held their ground.
Blackstone Group, the world’s largest landlord, dropped about 7 percent, as did Apollo Global Management and eXp World Holdings. KKR fell 6 percent while the Carlyle Group slid almost 8 percent. The Real Estate Select Sector Index, which matches the stock price performance of publicly traded real estate companies in the S&P 500, fell about 0.6 percent as the Dow Jones Industrial Average ended the day 1.7 percent lower.
Some $4.7 billion of Evergrande bonds due in 2025 traded below 25 cents on the dollar, a decline from 80 cents as recently as May, the Financial Times reported.
More than a decade after the implosion of the U.S. market for residential mortgages, China faces a test of how it will deal with its own overleveraged real estate companies.
Oceanwide Holdings, China Vanke and Greenland have each crossed at least one of the “three red lines” set by Chinese regulators, who focused on varying measurements of leverage. Blackstone abandoned plans to purchase Chinese development firm Soho China earlier this month.
Yet investors have flocked to bonds sold by Chinese companies in international markets. A round of interest payments to Evergrande bondholders is set for Thursday.