Continuing its recent buying spree, Evergrande Real Estate Group has made yet another major purchase, snatching a key Shenzen land parcel in an all-cash deal valued at over RMB 2 billion ($306 million).
Evergrande, China’s largest developer by assets, has agreed to acquire the land from a subsidiary of Hong Kong-based manufacturer Kingboard Chemical Holdings, according to a statement to the Hong Kong stock exchange.
The mainland developer, which is controlled by billionaire Xu Jiayin, has been among China’s most aggressive acquirers of development projects in the last year. The deal also extends Evergrande’s string of acquisitions from Hong Kong companies, after previously picking up projects from Joseph Lau’s Chinese Estates and Evergo, as well as from New World Development.
Evergrande Gets Longhua Commercial Site
Evergrande’s new site is located on the west side of Fu Long Road, Longhua New District in Shenzhen. The land is approximately 85,748 square meters, and has land use rights of 50 years commencing from January, 2016. The district, which is close to Hong Kong and home to many tech companies has been a centre for development in recent years.
Kingboard, a Hong Kong-based chemical manufacturer also is active in residential and commercial development on the mainland, and the fifty-year land use rights on the Longhua plot would typically indicated a commercial development, with residential projects routinely being granted 70-year terms by the government.
Evergrande acquired the land by purchasing 100 percent of the equity in Kingboard Digital Development (Shenzhen) Co., Ltd from Kingboard Chemical and its subsidiary, Kingboard Laminates. The Hong Kong manufacturer owns and operates the 27-storey Zhan Wan Digital Plaza office tower in Guangzhou.
One More Hong Kong Developer Sells to Evergrande
At the close of last year, Evergrande made a big splash by acquiring seven mainland projects from Hong Kong’s New World Group for a total of RMB 20.4 billion ($3.15 billion). The Guangzhou-based developer also picked up a project in Chongqing from a consortium of three Hong Kong developers in October, including Joseph Lau’s Chinese Estates, and spent HK$6.5 billion ($839 million) in July to buy three development projects in Chengdu, Sichuan province from Chinese Estates subsidiary Evergo Holdings (China).
This string of Hong Kong-related deals continues Evergrande’s debt-fueled acquisitions that had totalled more than $9.7 billion in the 10 months that ended on April 30th. That buying splurge has led some real estate observers to worry that the developer, which had RMB 297 billion ($45.8 billion) in debts at the end of last year, is digging itself into a financial hole, potentially leading to cascading financial problems if the mainland economy takes a dramatic dip.
A report issued last month by Singapore-based CreditInsights raised concerns that an Evergrande default could “wreak havoc among the banks and cause social unrest among its employees and customers.”