Evergrande: crisis infects Hong Kong market as Midland, Centaline property agencies seek to recover sales commissions

Two Midland agencies are claiming US$5.6 million in unpaid commissions while Centaline is owed HK$200 million

Evergrande is rushing asset sales to raise cash and repay creditors as more debt repayments approach this month

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A man walks past a poster showing China Evergrande’s Emerald Bay property project in Hong Kong. Photo: EPA-EFE

Published: 4:45pm, 5 Oct 2021Updated: 11:33pm, 5 Oct 2021

China Evergrande’s debt crisis is starting to infect Hong Kong’s property market as a local real estate agency group sued to recover overdue commissions from two housing projects in the city. Another group is also considering a similar action.

Midland Realty International and Hong Kong Property Services (Agency) are claiming HK$43.45 million (US$5.6 million) from the Chinese developer for fees related to the sale of 398 flats at the Emerald Bay in Tuen Mun and The Vertex in Cheung Sha Wan, according to court filings on Monday. Shih Wing-ching, the founder of Centaline, said the firm is owed about HK$200 million.

The demand represents another headache for Evergrande, which is racing against the clock to sell assets and raise cash to pay creditors, after missing several deadlines last month to repay contractors, suppliers and onshore investors in its high-yield investment products.

Founder Hui Ka-yan is trying to prevent his business from collapsing under US$305 billion of liabilities after being shut out of the loan market under China’s “three red lines” leverage policy. The cash crunch is seen as a key test to China’s resolve to stem financial risks without causing a slump in a key engine of economic growth.

China Evergrande’s The Vertex residential project in Cheung Sha Wan pictured in August last year. Photo: Edmond So

Midland Realty sued Fortune Choice Development, the developer of Emerald Bay, saying it was owed HK$34.35 million in outstanding commissions. Both agencies also separately claimed HK$9.1 million from Twin City Holdings, the developer of The Vertex.

For its work, Midland said it only received HK$5.4 million for the sale of 337 units at Emerald Bay and HK$381,240 for the sale of 61 units at The Vertex, according to the writs. The commissions were due in full as of September 1, according to the court filings.