Developers’ Negative Contagion to Property Management Sector

As an implication of the physical market weakness we view that there is likely negative contagion from the developers' liquidity stress at the expense of the property management sector. That is, a situation arising where the developers may raise liquidity or enhance credit for financing via the property management companies, or PMCs. Hypothetically, these may include the direct sale of entire/part stakes of equity holdings in related PMCs to third parties; sale of common founder stakes in PMCs for equity injection to developers; potential indirect sale with loan or bond issues encompassing conversion option to PMC stakes; interrelated deals with divestments to PMCs to raise cash; or in a worst-case scenario, interrelated loans by the related PMCs to the developers, given the lack of access to capital markets.