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[Chengdu Commercial Daily] Intending to Absorb Cash as Quickly as Possible, Evergrande Promotes Sales at a 15% Discount in 25 Cities Such as Chengdu

 Date:2010.05.06   Publisher:Evergrande Group

Chengdu Commercial Daily 2010-5-6 Liu Xun

◎    As of April 30, Evergrande Group's cash balance reached 20.99 billion HKD.

◎    Evergrande said that the nation-wide favorable measures is to further increase cash at hand, expand market share and speed up the integration and expansion

◎    The industry thought that the measures taken by Evergrande would be the largest discount action led by the developer in the history in mainland real estate market.

While most developers are wandering and hesitating between "slowing down building promotion and waiting to see" and "quick sale", Evergrande Real Estate (3333.HK) announced yesterday that sales at 8.5 fold favorable price will be implemented on 57 projects in 25 cities. For the company listed in Hong Kong Stock Exchange with about 21 billion cash balance showed by the current report, such large promotional rate and size was interpreted by corporate management as "seek stability and development", "expand market share" and "accelerate integration. "

Yesterday, Evergrande Real Estate Group held a press conference and announced that it would immediately launch a round of nationwide promotion activities and "guidance" has been given by the Group to branch offices in 25 cities all over China, that is, "overall 15% discount". Industry insiders commented that the measures taken by Evergrande would be the largest discount action led by the developer in the history in mainland real estate market.

It is known that the three on-sale projects of Evergrande Greenery, Evergrande City and Evergrande Golden World etc. in Chengdu of Evergrande Real Estate will soon join the preferential activity.

Denying that Preferential Activities are Caused by Bank Policy Tightening

In fact, during May 1 holiday, Evergrande Real Estate has launched a wave of preferential promotions in Chengdu. The measures such as multiple discount, old bringing new policies and free management fees based on 5% discount in many projects have made agreement sales amount of Evergrande Chengdu office break through 30 million yuan during the three days in long holiday.

Recently, the PBC announced to raise RMB deposit reserve ratio of deposit-taking financial institutions by 0.5%. The reporter interviewed part of the industry insiders on site at the Spring Fair yesterday and most of them thought that after the introduction of pre-control policy, many developers still choose to extend opening for sale which is comparatively safe to leave them time to judge the property market trends. After a further rise on deposit reserve ratio, the developers will be forced off the fence. However, Evergrande people pointed out that the preferential measures have little relation with whether banks tighten loan release.

Ma Jianhua, marketing leader of Evergrande Real Estate Chengdu Office pointed out that Evergrande mainly focused on the development in second and third tier cities with lower price increase, is the first and largest developer into such areas in mainland China, subject to small impact from policy. Over the years, group takes stable and healthy development as business purposes, to avoid competing with other developers to push up the building prices in first-tier cities and high risk. He said "Our financing channel and financing structures are relatively wider, besides sufficient cash, we just want to be a little more stable in development."

The industry insiders thought that, in addition to preferential measures, a series of recent moves of Evergrande in the capital market also showed the financial integration with its production and intention to further expand the size of the company. On April 14, Evergrande Real Estate Group and Chinese Estates Holdings Ltd. (0127.HK) both announced that Evergrande planned to issue an additional 600 million U.S. dollars of high-interest debt to Chinese Estates and its chairman Joseph Lau, with an annual interest rate up to 13%. According to the report of Hong Kong media, internal staff of Chinese Estates Holdings Ltd. said that "This investment is the most important bet in boss (Joseph Lau) life." Industry insiders generally thought that the move of Xu Jiayin, in fact, was to reserve capital for future development before the new policy and plan ahead for future development.

Abundant Cash   Evergrande Wanted to Take Advantage of the New Policy to Accelerate Expansion at Early Time

Evergrande Real Estate Group presented to reporters the 2010 April Sales Brief that in April, the group achieved contract sales amount of 3.74 billion yuan (RMB, the same below) and contract sales area of 578,000 square meters, with average sales contract price at 6,467 yuan per square meter. April contract sales growth by 55.9% compared with that of the same period in 2009, and the sales area grew by 17.8% compared with that of the same period, average sales price increased by 32.4% compared with that of the same period. January-April, 2010, Evergrande realized accumulated contract sales amount of 12.13 billion yuan, accumulated contract sales area of 1.893 million square meters, average contract sales price at 6,408 yuan per square meter; January-April sales contract amount increased by 120.3 % compared with that of the same period in 2009, the sales area increased by 60.4% compared with that of the same period in 2009, average sales price increased by 37.3% compared with the same period of 2009. After March, the group contract sales refreshed the records of the same period once again.

It is disclosed by Evergrande that up to April 30, Group cash balance amounted to 20.99 billion HKD, cash is sufficient and no "price dive" issue existed to run goods quickly. A top management of Evergrande Chengdu office told the reporter that "Chairman Xu Jiayin required stable and healthy operation for the corporation after the new policy was released. He thought the price should be a smooth and stable, Evergrande would not hold the buildings and would not push up price. This is the constant strategy for Evergrande.

Evergrande is one of the largest real estate enterprises with largest land reserve in China. Its current land reserve all over China has exceeded 50 million square meters. Management of Evergrande Real Estate Group explained that the Evergrande holding 20.99 billlion HKD in cash and implementing 15% discount preferential activities all over China is to further enhance the holding of cash, to expand market share and accelerate integration and expansion. He said "Cash is king. This is an opportunity for us to accelerate the integration after the new deal just came out."

It is reported that in addition to the three items on sale, Evergrande Chengdu company still has three to four reserved items in Dayi etc., which have not showed up in public, will be launched within this year.

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