The field of non-performing asset disposal has become a new "gold rush pool".

In recent years, the decline in housing prices has led to a continuous drop in the value of real estate, which is a major asset class. This, in turn, has triggered debt risks for some enterprises and the formation of non - performing assets due to the depreciation of collateral.

According to the statistical data of the National Administration of Financial Regulation, from 2020 to 2024, the cumulative scale of non - performing assets disposed of each year exceeded 3 trillion yuan.

The formation of these non - performing assets not only affects the asset quality of financial institutions but also poses a threat to their stable operation and sustainable development.

On the other hand, as the scale of non - performing assets rises and the demands of owners increase, the trading services for non - performing assets have become more active. Participating in the assessment and trading of non - performing assets has become an important business category in the market and shows signs of becoming a "small emerging trend" in the market.

Some real estate enterprises that have encountered risks even set up a new company outside the listed company system to enter the non - performing asset track.

Analyzed at the root, the formation of non - performing assets can mainly be traced back to

"In China, commercial banks classify loans into five categories according to the risk level of credit assets: normal, special mention, sub - standard, doubtful, and loss. Among them, sub - standard, doubtful, and loss loans are collectively referred to as non - performing loans, which constitute an important part of the non - performing assets of financial institutions. In addition, other financial institutions such as trust companies, securities companies, fund companies, and insurance companies may also form non - performing assets for various reasons (such as investment failures and poor management) when using their own funds for investment, further increasing the total amount of financial non - performing assets." Han Jing, a senior director of the Valuation and Advisory Department at JLL, said. "As the number of corporate debt default events increases, the scale of non - performing assets of financial institutions such as banks and trusts may further expand. However, for some investors, this provides an opportunity."

Currently, the owners of non - performing assets in the market also show a diversified trend. Taking the transactions participated in by JLL as an example, the owners include financial institutions such as banks, trusts, and AMCs, as well as real estate enterprises facing debt risks.

Xiong Jianping, the director of the Valuation and Advisory Services Department in China at JLL, explained: "The formation of non - performing assets is ultimately due to the incoordination between the short - term capital turnover needs of enterprises and the macro - economic cycle. Therefore, through strategies such as acquisition, management, and disposal, non - performing assets have the opportunity to activate new value; after the underlying assets are separated from bonds and debts, they also have the potential to transform into investment products worthy of investors' attention. Enterprises are expected to get out of the operational dilemma, improve their financial situation, and ultimately achieve risk management and asset optimization through value reshaping."

"Non - performing assets are not 'negative assets'," Han Jing said. In the assessment process, the situation of the underlying assets and the debt situation of the enterprise entity are usually considered separately.

For example, in a project participated in by JLL, a real estate enterprise was unable to repay interest due to credit risks or short - term cash - flow problems, thus forming non - performing assets.

"This requires us to rationally separate the creditor's rights and equity from their underlying assets to discover the high - quality part of the non - performing assets. From the perspective of the quality of the underlying assets, we should broaden the definition of non - performing assets and focus more on the 'non - negative assets' among them." Han Jing revealed that as the market's perception of non - performing assets has gradually become more rational and mature, since last year, the discount range that can be negotiated in some non - performing asset transactions has shown a narrowing trend to a certain extent.

In the field of non - performing asset disposal, judging from the market information that has been reported, the active property types in transactions include shopping centers and office buildings in first - and second - tier cities, which are projects with stable cash flows. In addition, the activity of long - term rental apartment assets is also relatively high.

It is reported that currently, non - performing asset disposal is still mainly concentrated in first - and second - tier cities, but it has also begun to spread to third - tier cities. However, the disposal of non - performing assets in third - tier cities is restricted by market demand in terms of asset categories, etc., and the requirements for risk assessment are higher.

"When assessing assets, we always follow the basic principles of 'three aspects' and 'five ratios', which is a well - known assessment framework. However, in the field of non - performing assets, we also need to pay special attention to a key indicator - the comprehensive realization rate." Han Jing said. In addition, the stability of current cash flows, the realizability of future cash flows, the maturity and stability of assets, and operational capabilities are all aspects that need to be key - evaluated.

Based on the experience of institutions such as JLL, the focus of valuation also varies at different stages of non - performing asset management. In the acquisition stage, the core of the assessment lies in the principal discount rate, that is, the discount range between the asset acquisition price and its nominal value. Appraisers need to conduct in - depth analyses of the debtor's repayment ability, repayment willingness, and the quality of relevant collateral. In the management stage, it is necessary to dynamically track the value changes of assets, comprehensively considering market price fluctuations, the operating conditions of the assets themselves, and external factors that may affect recovery. In the disposal stage, appraisers need to conduct the latest valuation of the collateral according to market dynamics and, combined with the realization discount rates of different disposal methods (such as auctions, debt - to - equity swaps, transfers, etc.), predict the asset recovery amount to ensure the efficiency and rationality of asset disposal.