Evergrande crisis: China’s most indebted developer sells Crystal City in Hangzhou as banks close in to seize its deposits

China Evergrande Group sold its interest in Crystal City in Hangzhou, for 3.66 billion yuan in cash to two state-owned builders
Proceeds from the sale will go towards paying 920.7 million yuan of construction costs in Hangzhou, leaving Evergrande with a one-time gain of 216 million yuan

China Evergrande Group

Pearl Liu

Published: 1:55pm, 30 Mar 2022

Why you can trust SCMP

China Evergrande Group sold a project from the country’s second-largest real estate portfolio, notching a much needed win in its asset disposal plan as banks closed in to seize its deposits amid US$300 billion in total liabilities.

The developer sold its interest in Crystal City, a mixed residential and commercial development in the Zhejiang provincial capital of Hangzhou, for 3.66 billion yuan (US$575.45 million) in cash, Evergrande said in a filing to the Hong Kong exchange.

Proceeds from the sale will go towards paying 920.7 million yuan of outstanding construction costs in Hangzhou including Crystal City, leaving Evergrande with a one-time gain of 216 million yuan, the company said.

Liquidity issues had prevented Evergrande from developing Crystal City, forcing it into the disposal, the company said, underscoring its ongoing overhaul to shed its myriad businesses from water bottling to electric vehicles, real estate to even a football team. The Guangzhou-based developer promised last week to roll out its restructuring plan by the end of July.

Is Evergrande too big to fail?

Evergrande had been struggling to sell its assets, including its waterfront headquarters building in Hong Kong, suffering two setbacks in a week last October as interested buyers balked at overlapping financial ties between its units.

Yuexiu Property dropped its US$1.5 billion bid to buy Evergrande Center on the Wan Chai waterfront on October 15, while a US$2.58 billion sale of the majority stake in Evergrande Property Services to Hopson Development Holdings Limited was scrapped five days later.

Crystal City was snapped up by Zhejiang Zhejian Real Estate Group and Zhejiang Construction Engineering Group. State-owned construction companies and developers had similarly been picking off choice assets from the portfolios of Evergrande and other highly leveraged property companies as they struggle to repay banks, investors, suppliers and contractors.

Evergrande Fairyland, a theme park in the Nansha district of the Guangdong provincial capital of Guangzhou, was taken over on January 26 by the China Minmetals Group’s Minmetals International Trust, according to the business data search platform Tianyancha.

Minmetals Trust, a unit of China’s largest commodities trader, separately paid Evergrande 80 million yuan in January for the equity interest in a residential project in Dongguan and another one in southwestern China’s Yunnan provincial capital of Kunming.

Hong Kong developers hunt for bargains as China firms fall on hard times

However, the world’s most indebted developer is far from out of the woods.

Evergrande still carries US$22.7 billion in offshore debts, including bonds, private financing loans and project loans. It delayed the release of its 2021 financial results last week due to ongoing audit work.

Meanwhile, banks were closing in on Evergrande, seizing 13.4 billion yuan in deposits from its property services unit Evergrande Property Services Group. The money was pledged as security for third-party guarantees, Evergrande said after its investigation into the seizure, without elaborating.

Trading in the shares of Evergrande and Evergrande Property Services have been suspended since last Monday. Shares of its unit China Evergrande New Energy Vehicle Group resumed trading on Wednesday and edged up by 14.5 per cent.