Chinese property tycoon loses $1 billion in Evergrande panic

HONG KONG, China: An electronic board shows the Hang Seng index after it tumbled more than four percent in the morning session, in Hong Kong yesterday. – AFP

BEIJING/HONG KONG: The boss of a Shanghai-based property developer lost more than a billion dollars yesterday, as fears over the potential collapse of Chinese real estate giant Evergrande sent panic across Hong Kong trading floors. Zhang Yuanlin, chairman of Sinic Holdings Group, saw his net worth drop from $1.3 billion yesterday morning to $250.7 million by the afternoon, according to Forbes, when his firm was forced to halt trading in Hong Kong following an 87 percent slump in its share price.

Zhang was featured on Forbes’ Billionaires list of the world’s richest people this year and made his fortune in high-rise apartments-now highly vulnerable as the possible collapse of teetering property giant China Evergrande sparks panic. Sinic saw a sudden sell-off and massive increase in trading volume on its shares in the hours prior to its suspension, which comes just weeks before it must pay a 9.5 percent $246 million bond due on October 18, according to Bloomberg. A spokesperson for Sinic did not respond to AFP’s request for comment.

The firm is one of many seeing fortunes wiped over investor fears that Evergrande-one of China’s biggest developers-will default on upcoming interest payments this week as it wallows in debts of more than $300 billion. With the property sector estimated to account for more than a quarter of China’s GDP, there are concerns of a spillover into the domestic and global economy.

The crisis has even triggered rare protests outside the company’s offices by investors and suppliers demanding their money-some of whom claim they are owed as much as $1 million. Anxious investors, employees and suppliers describe a scramble inside teetering Chinese property giant Evergrande, in a crisis that has shaken public trust as it struggles to tide over a liquidity crunch. The once-mighty Evergrande Group has long been the face of Chinese real estate, surfing a decades-long property boom to expand into more than 280 Chinese cities as it peddled home-ownership dreams.

But it is now smothered by a $300 billion liabilities burden that has crushed its credit rating, share prices and reputation among a once-adoring public. Throughout last week, the concourse outside Evergrande’s mirrored offices in the southeastern city of Shenzhen was occupied by unpaid contractors, angry sales agents and investors-scenes echoed across a country where prolonged protest is rarely tolerated. Now, as default appears all but inevitable, fears are abounding of a contagion within the Chinese property market-and far beyond.

‘Severe punishment’
In an apparent response to rumors that riled investors, the company on Saturday vowed “severe punishment” for six managers found to have redeemed their investment products ahead of maturity dates. It has also offered property and parking spaces instead of cash repayments of its debts. Investors have given the plan a frosty reception, citing a collapse in faith. “What I want is cash,” said an investor who identified himself only by his surname Feng. “I’m not considering this plan.” AFP has reached out to Evergrande repeatedly in recent days, but the firm has declined to comment.

Disgruntled Evergrande staff told AFP they were pushed to ramp up sales of financial products promising generous returns-or to invest more themselves. Rates of return ranged from seven to nine percent, according to staff and advertisements seen by AFP. “They wildly encouraged us to boost performance, giving us rewards,” said an Evergrande Wealth sales consultant on condition of anonymity.

But she claimed it became impossible to reach managers in early September, when the company started facing trouble making repayments-triggering alarm. “Many clients put all their assets and retirement funds into Evergrande because they trusted (chairman Xu Jiayin) would be at the wheel and nothing would go wrong,” she said.

Another employee surnamed Huang who bought financial products added: “Ahead of the maturity date, they asked us to put in more money instead of collecting repayment.” She and her relatives collectively put in 1.5 million yuan ($230,000), enticed by promises of higher interest. “Now we’ve lost everything,” she told AFP in Shenzhen. Sales tactics, according to several suppliers, involved pressure on business partners as well.

Big promises also accompanied a residential-retail-entertainment development in the eastern Suzhou city that now has hundreds of investors fearing for their nesteggs. The Evergrande Cultural Tourism City was to include apartments, a theme park and a commercial quarter made to resemble an old European village. But homebuyers jammed the unfinished site ahead of completion, thrown into a frenzy by the firm’s financial troubles. One investor who asked to remain anonymous said buyers were initially persuaded to grant sales staff authority to sign documents in their names, reassured by the firm’s reputation.

But what followed were changing schedules for flat deliveries, financial terms slipped in without notice, and bills for property management fees for apartments that were nowhere near complete. “I was dumbfounded,” she said. “The whole story shows that lenders and other suppliers of capital have not done their job in exerting proper checks and balances on Evergrande,” University of Hong Kong professor Zhiwu Chen said. Once a symbol of its might, Evergrande’s Shenzhen headquarters is now a besieged barometer of the wide swathe of potential collateral damage, with investors, suppliers and other partners holding daily vigil. – AFP


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