Multiple distressed real estate companies "turning losses into profits" | Real Estate Trend Watch

Recently, multiple distressed real estate developers have released their 2025 performance outlooks one after another, and turned to debt restructuring to achieve a turnaround to profitability. Even though these companies have excluded the impact of restructuring gains, their operating performance has not yet improved to the point of fully reversing losses. However, industry insiders believe that turning losses into profits in the financial statements still sends positive signals. To truly restore “blood-making” capacity and achieve sustainable operations, though, companies still need to take concrete measures.

Recently, Country Garden released insider information and a profit forecast. In the announcement, Country Garden said it achieved a turnaround to profitability, expecting to record a net profit of approximately CNY 1 billion to CNY 2.2 billion in 2025, while it recorded a loss of approximately CNY 35.145 billion in the same period of 2024. Jiazhao Industry Group released its 2025 profit forecast, expecting to record a parent-attributable net profit of no less than CNY 50 billion in 2025, turning losses into profits compared with the net loss of CNY 28.5 billion in the same period of 2024. Agile also pointed out in its announcement that it expects the company will turn from loss to profit in 2025, with parent-attributable net profit of CNY 17 billion to CNY 19 billion, compared with a loss of CNY 7.076 billion in the prior-year period. Regarding the turnaround to profitability, Agile explained that this was mainly attributable to gains of approximately CNY 40 billion generated from the overseas debt restructuring it completed in 2025.

Behind these real estate developers’ “turnaround,” lies the “contribution” of debt restructuring. Taking Country Garden as an example: previously, all nine onshore debt restructuring plans with a cumulative scale of approximately CNY 13.77 billion were approved. Overseas debt restructuring plans involving a scale of approximately USD 17.7 billion also officially came into effect on December 30, 2025. The overall debt-reduction scale is estimated to be nearly CNY 90 billion. After the restructuring, the new debt financing cost drops sharply to 1% to 2.5%, giving Country Garden a key window to go forward with lighter burdens over the next five years.

Liu Shui, general director of enterprise research at the China Index Academy, said that in debt restructuring, the difference arises when the book value of restructured debts exceeds the repayment cash, the fair value of non-cash assets, or the book value of the restructured debts after restructuring. This difference must be recognized in current-period profit in one go, forming “debt restructuring gains.” According to these companies’ performance outlooks, their turnaround to profitability is mainly due to gains from debt restructuring; after excluding debt restructuring gains, they are all still in a loss position.

On the operational front, these companies will still face pressure in the short term. Liu Shui emphasized that completing debt restructuring does not mean the company has truly “made it ashore.” If sales remain sluggish and operations fail to improve, there is still a risk that cash flow could break again. Therefore, companies must treat debt restructuring as a new starting point, not an endpoint. This primarily addresses short-term liquidity risks and buys valuable time to repair the balance sheet. However, to truly restore its “blood-making” capacity and achieve sustainable operations, companies still need to take practical measures. The core task is to accelerate collection on sales and revitalize existing assets. Companies also need to adjust their business structure, focus on core-advantage businesses, strengthen refined management, and shift to a development model that places greater emphasis on asset quality, operational stability, and financial security. In addition, companies’ own efforts also need support from improvements in the external environment.

A review by the reporter found that distressed real estate developers are seeking solutions, and most are choosing to start with lighter-asset businesses. Recently, the “Digital New Shore · Hongmeng Launch” Guangzhou Baiyun District Kaiyuan Hongmeng Industry Innovation Conference was held. As one of the first batch of core partners for full-area smart ecology, Country Garden officially signed an ecological cooperation framework agreement with Baiyun District’s government services and data management bureau. It is reported that Country Garden will integrate the core resources and capabilities from its delegated management, construction and technology, property services, and other business segments, and deeply integrate into the “smart city” development plan of Baiyun District.

Bai Wenxi, vice chairman of the China Enterprise Capital Alliance, said that the “turnaround to profitability on paper” by distressed real estate developers is only bleeding control at the financial level. True rebirth requires completing three major transitions: from accounting restoration to operational restoration, and quickly achieving positive operating cash flow; from debt restructuring to business model reconstruction, moving away from high leverage and high turnover, and building a sustainable business model with light assets and strong operations; from preserving delivery of homes to preserving credit, rebuilding market trust, and restoring normal financing and sales capabilities.

Proofread by: Tao Qian

(Editor-in-charge: Dong Pingping)

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