Evergrande Shenzhen HQ Project Sold to State-Backed Group for $1B

A project once destined to become home base for China Evergrande Group in Shenzhen has been sold to a buyout group organised by the local government for RMB 7.54 billion ($1.05 billion) as the mainland builder continues to be stripped of assets.

With construction on the corporate HQ having halted since September of last year, Shenzhen Anhe No. 1 Real Estate Development Co bought the 10,377 square metre (111,697 square foot) site in Shenzhen Bay on Monday via an online tender organised by the Shenzhen Public Resources Trading Center, according to a public notice of the sale.

Behind Shenzhen Anhe No. 1, according to a report on Chinese news portal Sina, is a consortium comprising property giant China Vanke, state-owned firms and the trust division of Fuzhou-based Industrial Bank, with analysts pegging the move as part of a government-backed plan to sell down assets formerly held by the crumbling development giant.

“As the liquidity channel through home sales and lending remains shut, the only way to get cash is by offloading assets,” Gary Ng, economist for Asia Pacific at Natixis, said in response to Mingtiandi’s queries on Monday. “Evergrande will have no choice but to continue deleveraging and eventually shrinking its business size. Given everyone knows Evergrande is in trouble, it may not be able to sell assets without a discount all the time.”

An HQ That Never Was

Evergrande’s one-time dream home is being sold at a 36 percent markup from the RMB 5.55 billion that the developer paid to acquire the parcel in a government land sale in December 2017, which had given it the rights to build 289,200 square metres of commercial space with a 30-year land tenure.

Planned as a 71-storey skyscraper stretching 393.9 metres (1,292 feet), the supertall would have been the tallest in a set of 17 towers in Shenzhen Bay Super Headquarters City, where Vanke is also currently developing the 250-metre Vanke 3D City.

The site will be transferred to the winning bidders as is, which according to the Sina account, includes a partially completed foundation sunk some 42.40 metres into the ground, and a pit of potential liabilities as well. The tender for the project had first been announced two weeks ago.

Due to the 14-month suspension of construction, the Shenzhen Land and Mining Rights Trading Platform cautioned that the project carries the risk of missing its completion deadline and being identified by the government as idle land, as well as potential overdue fees, unpaid debts to suppliers and other hazards.

98 percent of the equity in the buyout consortium comes from Industrial Trust, the private lending unit of Shanghai-listed Industrial Bank, with Shenzhen Hengyu Industrial Development Co and Shenzhen Anju Jianye Investment Operation Co each holding 1 percent.

Anju Jianye has been identified as a bailout platform set up by the Shenzhen government earlier this year, with Vanke holding a 20 percent stake alongside state-backed players Talent Anju Group (40 percent), Shum Yip Group (20 percent) and Special Zone Construction Engineering Group (20 percent).

The project is located within Shenzhen Bay Super Headquarters Base, a government industrial zone along Shenzhen’s southern coast which local authorities aim to transform into a regional financial centre. Major Shenzhen government-linked firms including China Merchants Bank, and Vanke have established offices in the zone, as headed Jiangsu-based chemical firm Hengli Group .

Evergrande and Vanke did not issue a statement regarding the transaction.

Vanishing Assets

The auction of Evergrande’s headquarters in Shenzhen comes three months after lenders seized an office tower in Wan Chai district which had once served as its home base in Hong Kong.

Receivers appointed to sell the China Evergrande Centre on behalf of the developer’s creditors are said to still be seeking a buyer willing to pay in the neighbourhood of HK$9 billion ($1.15 billion) for the office block.

Earlier this month, Evergrande booked a $770 million loss after receivers appointed by other lenders sold a 223,000 square metre residential site formerly from the developer’s New Territories portfolio for just less than $637 million.

Then late last week, Evergrande said that it was reaching out to authorities in Wuhan after the local government there took back 11 projects which the developer had failed to make progress on.

Despite the torrent of asset seizures, the Chinese property giant was given some wiggle room on Monday after Hong Kong’s High Court reportedly adjourned a winding-up petition filed against the company until 20 March next year, giving it more time to firm up its debt restructuring plan.