Minsheng Investment Sells Shanghai Project to Greenland for RMB 12B After Default

China Minsheng Investment Group (CMIG) has sold its 50 percent stake in a mixed-use project in Shanghai’s South Bund area to Greenland Group for RMB 12 billion ($1.77 billion), disposing of the high-profile site at an apparent loss as it scrambles for cash following a bond default.

CMIG, which is China’s largest privately owned investment group, is selling its remaining equity in the project along Dongjiadu Road in Huangpu district, according to accounts in the local press, just over two weeks after it missed a January 29th deadline to for a payment on a RMB 3 billion bond.

The reported sale would value the riverside project, which is approved for construction of 701,900 square metres (7.6 million square feet) of above ground gross floor area, at RMB 34,192 per square metre of built space, or about 3.5 percent less than CMIG paid to acquire the land for the project in 2014.

Neither Greenland Group, which is Shanghai’s largest developer, nor CMIG  had confirmed the transaction at the time of publication.

Parting with a South Bund Prize

Dongjiadu Blocks 13 & 15, which together cover 126,740 square metres were won at auction by a joint venture between CMIG and a subsidiary, together with Shanghai Bund Investment Group for a record-breaking RMB 24.85 billion in 2014. That purchase valued the land at approximately RMB 35404 per square metre of above-ground accommodation.

Under the terms of the joint venture, CMIG held 85 percent of the equity in the project, its Shanghai Jiadu Real Estate unit held another 10 percent and Shanghai Bund Investment Group, a vehicle of the local government held the remaining five percent.

CMIG’s vision was to invest RMB 60.4 billion to turn the mixed-use parcel into a “new urban financial landmark” including 65 percent office space, 18 percent residential and 17 percent for retail with another 437,500 square metres of below-ground GFA included in the project.

However, since the project broke ground in 2015, its development has barely progressed, and in 2017, CMIG sold 45 percent of the project to Shanghai-listed Anxin Trust, leaving the group with a 50 percent stake in the project.

Greenland Takes Over South Bund Project

According to Chinese business data provider, Tianyancha, China Minsheng Bund Real Estate Development Co, the company that holds the Dongjiadu project, amended the registered list of shareholders in the project on February 13 to replace CMIG and its subsidiary Shanghai Jiadu Real Estate with Shanghai-based Greenland Group. The project company’s legal representative was also changed to Greenland executive Xu Rongpu.

Local Chinese media, 21^st Century Business Herald, cited an unidentified source as saying Greenland China has acquired CMIC’s remaining 50 percent equity in the project for RMB 12 billion. The other five percent remains held by Shanghai Bund Investment Group.

CMIG Finances Frozen

Earlier this week, Shanghai’s Financial Court had frozen China Minsheng Investment Group’s stake in China Minsheng Bund Real Estate Development Co, following the firm’s bond default.

The investment giant missed a deadline on January 29 for a payment on a privately placed bond worth RMB 3 billion ($442 million). The company, with assets worth as much as RMB 310.9 billion as of the end of last September, faces more than RMB 10 billion in payments for maturing debts and interests this year, reported data provider WIND.

The company’s take in another project, China Minsheng Jiaye Investment Co was frozen the same day.

CMIG, which had 63 investors and RMB 310 billion ($45 billion) in assets as of June 2018, faced $34 billion in debt that same month – one of the biggest debt loads in the nation – after it had engaged in a series of acquisitions in the last two years.

According to a filing issued on Tuesday through the Shanghai Stock Exchange, the firm has stopped taking bids for three of its bonds “due to recent price volatilities.”

Earlier this week, CMIC appointed Charoen Pokphand Group vice chairman Yang Xiaoping as its new co-chairman, after corruption investigations into its previous chaiman, Dong Wenbiao, and other directors left a leadership gap that may have contributed to the firm’s recent default.

South Bund Projects Get New Owners

The Dongjiadu area, billed as the last piece of undeveloped land on the Bund, has seen a number of projects changing hands in recent months. In January, China Oceanwide Holdings, which has also run into credit issues, sold a 120,300 square meter site in the area, originally acquired in 2002, to Sunac China.

One of Shanghai’s earliest go-downs, and established well before Western banks built their financial palaces along the Bund some three kilometers north, Dongjiadu has remained a bustling trading and residential ghetto until the last 20 years when the city began demolishing much of the working class housing and dilapidated commercial buildings in the neighbourhood to make way for its South Bund redevelopment project.