Hengda Real Estate sells owning stakes for $55b

Kailong Real Estate and Hengda Real Estate, both being subsidiaries of Evergrande Group, have sold controlling stakes in Hengda Real Estate to third-party investors for RMB365.19 billion ($55 billion), representing approximately 14.11 percent.

The investors include Shandong Highway Group, Suning Electrical Appliances Group, Shenzhen Amer, Jiayu Investment, Guangzhou Yehoo, Ding Xiang Sichuan, which acquired a 5.67 percent stake, 4.7 percent stake, 1.82 percent stake, 1.82 percent stake, 1.18 percent stake, and 1.18 percent stake, respectively.

Earlier this year, Evergrande Group commenced its strategic transition, which proposed to firmly implement changes to the Evergrande Group’s development strategy and model. In its development strategy, Evergrande Group will shift from pursuing ‘‘scale’’ to pursuing ‘‘scale + profitability’’ and in its development model, it will change from the past high-debt, high-leverage, high-turnover and low-cost (‘‘three-high and one-low’’) development model to ‘‘three-low and one high’’ model, i.e. low-debt, low-leverage, low-cost and high-turnover model. Benefiting from the three rounds of capital increase, the net debt ratio of Hengda Real Estate will be reduced significantly and its capital structure will be further improved. The capital and financial costs are expected to continue to decline. At the same time, Evergrande Group will continue to strengthen internal management and increase operation efficiencies to further reduce administrative and sales cost ratios, and continuously improve product quality and value, to deliver high-quality growth, which will lay the foundation for accomplishing the performance undertaking and the continuous development of Evergrande Group.

Hengda Real Estate will remain a non-wholly owned subsidiary of Evergrande Group.

In a separate release, Suning and Hengda Real Estate have also signed a strategic deal to collaborate in a number of areas including commercial property development, infrastructure supply chain, financial services, smart home devices and property sales.

The Suning investment is also part of Hong Kong–listed Evergrande’s efforts to draw new investors into its real estate subsidiary.

Suning aims to add 5,000 retail stores and community service centers closer to neighborhoods by the end of 2018 to provide value-added delivery and after-sales service.