Not even the star power of Jackie Chan could save Evergrande Spring
With debt obligations sitting at RMB 381.3 billion ($57 billion) as of the end of June, Evergrande Group has dumped its money-losing agribusiness, dairy and spring water divisions as Xu Jiayin’s dreams of branching out from real estate into consumer goods appear to be running out of gas.
The Guangzhou-based property development group unloaded the trio of companies recently for RMB 2.7 billion ($404 million) according to a statement this week to the Hong Kong Stock Exchange. Xu, also known by his Cantonese name Hui Ka-yan, set up the businesses two years ago in a search for new revenue sources in the midst of China’s then-real estate slump.
In the announcement, Evergrande contended that offloading the businesses would allow it to better focus on its real estate interests. China’s second-largest developer achieved RMB 233 billion ($34.9 billion) in property sales during the first eight months of this year, according to numbers cited in the China Daily. The homebuilder has since raised its sales targets for the year after the higher than expected sales.
Evergrande Getting Back to What It Knows
With home prices in China’s tier one cities continuing to increase, and this trend spilling over into tier two centres, Evergrande felt the time was right to refocus on their core business after getting involved with everything from hospitals to Hong Kong magazines during the real estate market downturn.
Already one of China’s wealthiest tycoons, in the past 12 months Xu has refocused his acquisitions on real estate. In May, Evergrande purchased a land parcel in Shenzhen’s Longhua New District in an all-cash deal valued at more than RMB 2 billion ($306 million).
That land purchase followed the heavily indebted developer’s decision late last year to spend RMB 20.4 billion ($3.15 billion) to acquire seven mainland projects from Hong Kong’s New World Group,T as well as Evergrande’s record-breaking $1.61 billion purchase of an office building in Hong Kong last November.
Most recently, Evergrande waded into the China Vanke saga acquiring a five percent stake in the embattled developer for RMB 9.97 billion ($1.5 billion).
No Thirst For Real Estate Branded Bottled Water
Xu Jiayin’s water company never took off like he envisioned
Despite its grand aims, Evergrande targeted RMB 30 billion in annual revenues by 2016 when it first launched its water brand in 2014, it never quite quenched the thirst of the public.
There was an attempt to list Xu’s Evergrande Spring water company on China’s New Third Board in the middle of 2015 but those plans were later shelved. At the time, it was revealed the brand had lost more than RMB 3.2 billion ($479.2 million) since the developer started the business at the beginning of 2014.
Those wanting one last sip of Evergrande Spring before it dries up do not have to rush. As part of the sale, the joint venture buying the business will be allowed to use the name and trademark of the brand for five more years.
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