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Evergrande Reacquires Five Large Projects of New World with RMB 20.4 Billion

 Date:2015.12.30   Publisher:Evergrande Group

On December 29, Evergrande Real Estate (HK.3333) announced that it would acquire five super large projects of New World and Chow Tai Fook which are located in Chengdu, Guiyang, Qingdao, Shanghai and Beijing, with a total floor area of 8.51 million square meters and a total amount of RMB 20.4 billion.

15% of advance payment for acquisition of five large projects

According to the announcement, the acquisition prices for the five super large projects are far lower than the market level, with big discounts offered.

Among them, Chengdu project is acquired at a total price of RMB 2 billion, with a total floor area of 3.04 million square meters and a floor price of RMB 943/square meter for property to be developed, compared to the floor price of RMB 1,600/square meter for the surrounding land transaction price in 2015.

Guiyang project, a super large project covering an area of 3,229 Mu, is acquired at a total price of RMB 5.3 billion, with a total floor area of 4.07 million square meters and a floor price of RMB 1,068/square meter for property to be developed, far lower than the floor price of RMB 2,233/square meter for the surrounding land transaction price in 2012.

Beijing projects is acquired at a total price of RMB 7.6 billion, with a total floor area of 400,000 square meters and another covering area of about 700,000 square meters of standard golf course which has been completed and in mature operation, and a floor price of RMB 22,404/square meter for the unsold property, much cheaper compared to the floor price of RMB 43,400/square meter for the surrounding ordinary residential land transaction price in September 2015.

Whereas Shanghai project is acquired at a total price of RMB 3.5 billion, with a total floor area of 380,000 square meters and a floor price of RMB 7,790/square meter for property to be developed, also lower than the surrounding land transaction price in January 2015.

Qingdao project is acquired at a total price of RMB 2 billion, with a total floor area of 620,000 square meters and a floor price of RMB 2,505/square meter for property to be developed, compared to the floor price of RMB 3,338/square meter for the surrounding same project land transaction price in May 2015.

According to the announcement, Evergrande, by purchasing the Perpetual Bond with no fixed maturity date through New World and Chow Tai Fook, has paid about 50% of the total acquisition price for the five large projects; for the remaining 50% totaling about RMB 10 billion, Evergrande only needs to pay approximately 30% totaling RMB 2.9 billion to completely acquire these projects. This means that the advance payment for the acquisition of the five large projects of New World and Chow Tai Fook accounts for only about 15% of the RMB 20.4 billion of the total acquisition price, very favorable terms of payment.

Good project profitability prospects

The highly advantageous conditions for the sale offer the projects acquired by Evergrande above good market prospects.

“Take Chengdu project as an example, the project is located in the national level of Chengdu Tianfu New Area, with the floor price of less than RMB 1,000/square meter, whereas the basic selling price for the similar competing products of the current project is between RMB 6,400 and RMB 7,700/square meter, thus the investment return rate of the project acquired by Evergrande will be more than 20%. The situation is similar to other projects and more than 20% of investment return has become inevitable.” A market researcher said.

The researcher added that since the Hong Kong enterprises acquired the lands at early stage, and therefore, usually acquired the core blocks of the regions. For example, Beijing project is located in the core of the Central Villa District, which is 10 minutes driving to the CBD and accepted as the international luxury villas district with the most mature development, the most complete ancillary facility, the most recognition and brand effect; and Shanghai project adjacent to the Dianshan Lake scenic area is the low-density residential land much less available on the market; whereas Qingdao project with forefront seascape is rare on the market.

Acquisition of Hong Kong enterprise assets with RMB 60.2 billion

Earlier this month, Evergrande acquired four projects of New World located in Haikou, Huizhou and Wuhan with a total amount of RMB 13.5 billion. With the addition of the five projects with a total amount of RMB 20.4 billion this time, Evergrande acquires nine projects of New World with a total amount of RMB 33.9 billion a total floor area of 12 million square meters.

With the addition of Chinese estates’ MassMutual Tower project, Sino Land, C C Land and other Hong Kong tycoons’ projects, Evergrande has acquired 15 large projects of Hong Kong enterprises this year, with a total floor area of 17 million square meters and a total involving amount of RMB 60.2 billion.

Insiders said that Evergrande acquires at one fling more than a dozen of super large projects of Hong Kong Leading enterprises recently, not only showing the powerful strength of Evergrande but also the strong development momentum of the Chinese mainland economy. As the most active part of China's economy, Evergrande, and other leading private enterprises show their world leading level in the industry, the strong potential of China's economy and the trend of healthy and upward development.

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