[NanFang Daily] Evergrande Overcomes Money Shortage

Source: NanFang Daily Reporter: Hao Wang

Jiayin Xu (Picture by Hao Wang)

The half-year sale of more than 10 billion Yuan finally helps Evergrande Real Estate Group run into the first group of Chinese enterprises of real estate. On July 10th, international super stars Jackie Chan and Bingbing Fan were invited to the opening ceremony of Guangzhou Hengda Garden Hotel to highlight Evergrande s first high-end hotel. Many representatives from international investment banks, famous celebrities from Hong Kong and distinguished guests from more than 100 media through the country were also invited to join the great party.

Jiayin Xu, chairman of the board of directors of Evergrande, said to the journalists in good mood that they had survived the two winters successfully. Their yearly goal of sales is set at 30 billion Yuan and the 1500 square meters of as-built area probably makes Evergrande the domestic developer with the largest size of building. However, Xu made no clear statement about their relaunch of going public, which was talked about a lot by people.

Yearly Sales Goal up to 30 Billion

According to the latest statistics on the sales of domestic enterprises of real estate by Ke Er Rui China, the sum of signed sales agreements of Evergrande has reached 11.2 billion for the first half of this year. There are only 7 enterprises of real estate such as Vanke and Poly that have gained more than 10 billion Yuan in sales. What is worthy mentioning is that Evergrande is the only one of them that has not gone public.

As said by Jin Huan, vice general manager of Ke Er Rui Guangzhou, products of 22 projects of Evergrande in 12 cities throughout the country were on sale in the first half of the year and 6 of the projects ranked top 20 on the national list of sales area of unit project as indicated in CRIC system. In its major market in Southern China, Evergrande has gained 5.5 billion Yuan in half a year and the turnovers of its three major projects in Guangdong have been in the leading position within the same district.

As for the surprising amount of sale of Evergrande, Jin Huan believed that Evergrande mainly sells middle-end products and markets mainly in the provincial cities in the middle and western parts of China. Therefore its products are attractive to the local customers. On the other hand, Evergrande is one of the developers that make great adjustment in prices. They have boosted the sales through high performance and price ratio.

Interviewed by journalists, Jiayin Xu said they had reached their historical new high in the first half of year with 12.7 billion Yuan of total sum of sales and 10.06 million square meters of as-built area.

Xu also disclosed to the journalists that the modified yearly goal of Evergrande is 30 billion Yuan of total area of sales and 15 million square meters of as-built area. It is said that the products of 8 projects of Evergrande are expected to be on sale apart from those of the 25 projects that are being on sale in the second half of year.

Evergrande Worrying not about Money Now

Up to June 30th, the asset-liability ratio of Evergrande is 71% as indicated in relevant data, which is relatively low in domestic industry of real estate. Jiayin Xu said that the cash balance is 4.8 billion Yuan and the number will reach 8.1 billion in total through money collected in succession. Informed of that data, some insider said the Evergrande now worries not about money problems any more, compared with its difficulty in the middle of last year.

Evergrande has made a miracle as successfully souring out of the V-shape inversion in one year with the help of hot market of real estate and good marketing strategy. Xu publicly announced on last Friday that Evergrande had successfully passed the two winters . The first one of the mentioned two winters means Evergrande s failure in going public at the beginning of last year, which interrupted its financing plan of 12 billion Yuan and caused it a money gap of more than 10 billion Yuan.

The second means the overall depression and stagnation in sales of the whole Chinese industry of real estate.

Encountering the two winters , as said by Jiayin Xu, they did not choose to sell the unfinished projects or the un-built projects (selling the products in advance at low prices), but dealt with the situation through private placement stock right finances, adjusting the schedule of the projects, sales promotion and tightening financial management. Especially in last June, Yutong Zheng and Kuwait Investment Authority joined them as new shareholders bringing in 600 million USD, which was the biggest finance obtained by domestic enterprise of real estate last year.

Purchasing Proper Lands but Never in Beijing or Shanghai

Interviewed by journalists, Jiayin Xu said the goals of Evergrande for the second half of year included 5 million square meters of newly-built area, 4.78 million square meters of newly-increased area for sale and about 50 million square meters of reserve lands. The current lands reserved by Evergrande is 46 million square meters. Therefore the increase to 50 million square meters means that Evergrande is expected to purchase land after one year
Of all the real estate enterprises, only Country Garden can compete with Evergrande in reserved lands of about 50 million square meters. Although many people worry that too many reserved lands may become the burden of an enterprise, Jiayin Xu thinks that they are ideal for them considering the yearly development rate of 8 million square meters and their long term strategy. To ensure the needs for the development of the next 6 years, 50 million square meters of reserved lands are adequate.

After making the land of Guangzhou Juan Ma Factory as Land King, Evergrande nearly buy no more lands in the land markets. Xu showed more interests in second hand lands. He further disclosed that most of the reserved lands of Evergrande are the large lands on the edges of second-line or third-line cities with the average unit price of 467 Yuan per square meter, which is fairly cheap.

Xu expressed that they will probably not join the auction of Land Kings of each city or purchase extremely expensive lands in Beijing or Shanghai. Their targets lie in the more developed second-line cities, where the near-city lands are of low prices but with great expectations in urban planning.

Going Public

Going Public is Listed in the Three-Year Plan of Evergrande

With the overall booming of real estate industry, relaunch of IPO of the domestic real estate enterprises become focus again, in which Evergrande is the focus of that focus. As told by an insider of Evergrande, Jiayin Xu had listed going public in the fifth Three-Year Plan of Evergrande during a internal meeting in last April.

The shareholders of foreign investment banks who are pursuing short-term arbitrage all eagerly expect the going public of Evergrande. It is said that Merrill Lynch, the biggest shareholder of Evergrande, will distribute many fund managers to review many projects of Evergrande, which is thus called Reverse Road Show.

I don t know what will happen next too, was the answer of Xu about that. He expressed that restart IPO was easy in fact if every condition is ripe. Xia Haijun, president of Evergrande, told the journalists that both the investment banks and Everg