Evergrande strives to ensure the delivery of the building under the pressure of debt. Since this year, Evergrande has sold the equity of some real estate projects, and the trust company with the background of central enterprises has participated in the takeover.
two trusts take over Evergrande project
On February 25, China Evergrande (3333. HK) announced that it plans to sell the equity of four projects to Everbright trust and Minmetals trust. The trust institution will take over the operation and management of the project company and invest funds to the project company to ensure the subsequent development and construction of the project and the guaranteed delivery of the building. Evergrande has the right to repurchase the equity.
through this cooperation, Evergrande said that part of the early-stage investment of the recoverable project is about 1.95 billion yuan, and the debt involved in the project can be resolved by about 7.01 billion yuan. The recovered investment has a positive impact on the guaranteed delivery and debt resolution of other projects of Evergrande.
According to the agreement, Hengda will retain the financial supervision right and sales co pricing right of the project. After taking over the four projects, the trust institution shall be responsible for investing the funds required for development and construction into the relevant projects according to the actual needs. When the income of relevant projects is realized, the income will be used to repay the investment of the trust before and after taking over the project, and the surplus will be used to repay the early capital investment of Evergrande. The trust institution shall not actually participate in the profit distribution of the project as a shareholder.
After repaying the investment of the trust institution, Evergrande may exercise the right to require the trust institution to transfer 100% interests in relevant projects to Evergrande at zero consideration. If Evergrande chooses not to exercise the repurchase right, the relevant project company will continue to be managed by the trust, 5% of its annual distributable profits will be distributed to the trust, and the balance will be distributed to Evergrande.
Minmetals securities responded to this transaction by saying that after repeated demonstration, Minmetals trust believes that promoting the normal operation of the project by obtaining all the equity and management rights of the project company is the best solution to the problems of Evergrande project at present. For these real estate projects, Minmetals trust will take positive, positive and pragmatic measures to ensure the normal and stable operation of the project.
China Evergrande said that the company’s liquidity problems had a negative impact on the project development and progress. The cooperation between the company and the trust institution can ensure the normal operation of the project company and the development and construction of the project, ensure that the project can be delivered and certified on time, safeguard the legitimate rights and interests of property buyers, solve the problem of follow-up development funds of the project, promote the resumption of work and production of existing projects, and protect the legitimate rights and interests of creditors and property buyers.
the total consideration of the transaction project is 2.1 billion yuan
The four project companies sold this time were established in 2020, and the project sites are close to the first and second tier cities.
Specifically, Everbright trust will take over 10% equity and 279 million yuan debt of Chongqing Daichen Real Estate Development Co., Ltd., 9.87% equity and 500 million yuan debt of Dongguan Hongchuan Real Estate Development Co., Ltd., which correspond to Evergrande Daishan Huating and Dongguan Evergrande yuelongtai projects respectively. The total consideration of this transaction is 1.03 billion yuan, which can resolve the debt involved in the project of 2.77 billion yuan.
Minmetals trust will take over 9.23% equity and 240 million yuan debt of Foshan Shunde Yingqin Real Estate Development Co., Ltd., 10.97% equity and 640 million yuan debt of Nansha Hengrui and Nansha Hengchang respectively, which correspond to Foshan Bairui project and Guangshen international cultural tourism city project respectively. The total consideration of this transaction is 1.1 billion yuan, which can resolve the debt involved in the project of 4.24 billion yuan. After the sale, Nansha Hengrui and Nansha Hengchang are no longer subsidiaries of Evergrande.
According to public information, Evergrande Daishan Huating has a construction area of 372500 square meters and a planned number of 3717 households; Dongguan Evergrande yuelongtai has a construction area of 347800 square meters and a planned number of 3077 households. Foshan Bairui has a construction area of 592200 square meters and a planned number of 3797 households; Guangshen international cultural tourism city covers a construction area of 580000 square meters and is equipped with theme parks, commercial squares, resort hotels and other business forms.
The two trusts taken over have state-owned assets background. The final controllers of Everbright trust are Central Huijin and the Ministry of finance, and the final controllers of Minmetals trust are Minmetals Capital Company Limited(600390) , the state owned assets supervision and Administration Commission of Qinghai provincial government and Xining Bureau of industry and information technology.
Evergrande Baojiao building
Since this year, Evergrande has successively transferred equity of several real estate projects. In January, Evergrande transferred 100% equity of Kunming hengtuo Real Estate Co., Ltd. to Minmetals trust, with a capital contribution of 50 million yuan. In addition, Evergrande will also transfer the equity of Xuzhou haiyaqi Real Estate Co., Ltd. and Xuzhou Yutai Real Estate Co., Ltd. to Xuzhou Pansheng Real Estate Co., Ltd. under the state owned assets of Jiawang District, Xuzhou.
Evergrande does not get much net income from the sale of the project, and its main goal is to serve the “guaranteed delivery building”. Taking the announced project as an example, compared with the book value of the project at the end of 2021, Evergrande expects that the sale will bring a premium of 15.9028 million yuan, and the proceeds from the sale are mainly used for guaranteed delivery buildings and general working capital of other projects.
“Guaranteed delivery” is the primary task faced by Evergrande at present. Xu Jiayin once said at the mobilization meeting for the new year of guaranteed delivery building in 2022 that the goal of guaranteed delivery building of about 70 million square meters and about 600000 sets in 2022 is equivalent to nearly 50% of all guaranteed delivery building projects of the group to be completed this year,
Resuming work and production and promoting sales require a lot of money. Xu Jiayin said at the above-mentioned meeting that Evergrande’s current pre-sale regulatory capital is more than 50 billion, which can basically start the comprehensive resumption of work after the Spring Festival. After the resumption of work, the continuity of construction will be close to the sales uncollected amount of 80 billion and the marketable value of nearly 90 billion guaranteed delivery buildings. This 170 billion is the capital basis for sustainable guaranteed delivery buildings.
Xu Jiayin specifically mentioned the need to adopt various forms of cooperation. There is no fixed form. One is mature and the other is cooperative. In addition, the project cooperation can not only repay the debt, but also pay off the debt through resumption of work and production, normal construction, resumption of sales and operation. “It is not allowed to sell the company’s assets at a low price, otherwise it will be difficult to pay off the debt after the assets are sold at a low price”.
Evergrande’s debt risk was exposed last year. At the end of the year, Guangdong Province sent a government working group to China Evergrande, and China Evergrande also established a risk resolution Committee. At present, this work is still in progress.
