The general manager of the Brand Planning Department of Guangzhou Evergrande Real Estate Group revealed that China Vanke Co., Ltd. (000002) had purchased properties from Shanghai Evergrande Group Co., Ltd., not Guangzhou Evergrande.

Shanghai Evergrande Group is not an affiliate of Guangzhou Evergrande Real Estate Group, but rather a local property developer in Shanghai with a two-year contract with China Vanke.

In fact, Shanghai Evergrande Group's housing business had already been acquired by China Vanke as early as 2007. On 8 Jan 2007, China Vanke signed a contract with Shanghai Evergrande Group and Shanghai Jixin Real Estate Development Co., Ltd. to purchase five properties with a total area of 304,000 sq. meters from the two companies for RMB 1.29 bln.

The source also confirmed that Guangzhou Evergrande had sound sales records and stable cash flow, as well as a stock of excellent low-cost properties. With such conditions, Guangzhou Evergrande has little incentive to be involved in any possible acquisition.

Wang Yajun, Deputy General Manager of the Brand Marketing Center at Guangzhou Evergrande, said that in Oct 2008, Guangzhou Evergrande sold housing included in 18 projects for a total of RMB 4.8 bln. It has plans to promote 11 more projects in Chinese cities with strong market demand. Although Merrill Lynch Securities, one of the private equity shareholders of Guangzhou Evergrande, has been acquired by Bank of America, its injected capital is still secure and Guangzhou Evergrande has not abandoned its listing plans.

However, despite its alleged sound financial status, selling so many properties in such a short time only demonstrates Guangzhou Evergrande's desperate need for cash. It has been reported that Guangzhou Evergrande has RMB 11.13 bln in outstanding bank loans, approximately USD 1 bln in loans from institutional investors and at least RMB 2.5 bln in defaulted land transfer rents. Furthermore, the majority of its 45.80 mln sq. meters of land reserves are yet to be developed.


Source: National Business News

Date: 21 Oct 2008

CN01/BJ/JL/NK/MM