BY ERIN BRADY ON 1/4/22
A Chinese real estate developer is being ordered to demolish one of its largest complexes.
Evergrande Group was ordered to demolish a 39-building resort complex on Ocean Flower Island, an artificial archipelago off the coast of Danzhou. The developer did not release an explanation as to why the complex is being demolished, although Danzhou's government claimed that the complex violated urban planning law.
In 2021, Beijing began tightening restrictions on developers. The move was touted as one that would help rein in corporate debt and was implemented as part of the Chinese government's ongoing priority to reduce financial risk.
The Ocean Flower Island demolition is the newest headache that Evergrande has faced over the past few years. It has the dubious distinction of being the most indebted developer in the entire global real estate industry with around $310 billion in debt.
It is not immediately clear how much more debt the company will accumulate due to the demolition on Ocean Flower Island, nor has a timeline for the demolition been announced. Evergrande's buildings are the only ones being demolished on the island.
A Chinese real estate developer is being ordered to demolish one of its largest complexes.
Evergrande Group was ordered to demolish a 39-building resort complex on Ocean Flower Island, an artificial archipelago off the coast of Danzhou. The developer did not release an explanation as to why the complex is being demolished, although Danzhou's government claimed that the complex violated urban planning law.
In 2021, Beijing began tightening restrictions on developers. The move was touted as one that would help rein in corporate debt and was implemented as part of the Chinese government's ongoing priority to reduce financial risk.
The Ocean Flower Island demolition is the newest headache that Evergrande has faced over the past few years. It has the dubious distinction of being the most indebted developer in the entire global real estate industry with around $310 billion in debt.
It is not immediately clear how much more debt the company will accumulate due to the demolition on Ocean Flower Island, nor has a timeline for the demolition been announced. Evergrande's buildings are the only ones being demolished on the island.
Evergrande Group was ordered to demolish a 39-building resort complex on Ocean Flower Island, an artificial archipelago off the coast of Danzhou, China. Above, Evergrande headquarters in Shenzhen, southeastern China, on September 14, 2021.
PHOTO BY NOEL CELIS/AFP VIA GETTY IMAGES
Evergrande's struggle to comply with tighter official restrictions on use of borrowed money by China's real estate industry have prompted fears of a possible default and financial crisis. Chinese regulators have tried to reassure investors that any potential impact on financial markets can be contained.
Economists say Beijing can keep Chinese lending markets functioning normally in the event of an Evergrande default, which looks increasingly likely. However, they say Chinese leaders want to avoid sending the wrong signal by arranging a bailout at a time when they are trying to force companies to reduce surging debt levels.
Evergrande asked Monday for trading of its shares in Hong Kong to be suspended. Trading resumed following Tuesday's announcement, gaining 7.6 percent.
Evergrande warned last month it might run out of cash to keep up with debt payments and other obligations.
Evergrande's struggle to comply with tighter official restrictions on use of borrowed money by China's real estate industry have prompted fears of a possible default and financial crisis. Chinese regulators have tried to reassure investors that any potential impact on financial markets can be contained.
Economists say Beijing can keep Chinese lending markets functioning normally in the event of an Evergrande default, which looks increasingly likely. However, they say Chinese leaders want to avoid sending the wrong signal by arranging a bailout at a time when they are trying to force companies to reduce surging debt levels.
Evergrande asked Monday for trading of its shares in Hong Kong to be suspended. Trading resumed following Tuesday's announcement, gaining 7.6 percent.
Evergrande warned last month it might run out of cash to keep up with debt payments and other obligations.
The company says it has 2.3 trillion yuan ($350 billion) in assets and 2 trillion yuan ($310 billion in debt), but it has struggled to sell assets fast enough to keep up payments to bondholders. Construction of some projects was temporarily suspended after contractors complained they weren't being paid.
Tuesday's announcement said buyers in 20210 signed contracts to purchase property worth a total of 442 billion yuan ($70 billion).
The government will organize demolition if the company fails to act.
The Hainan government ordered an investigation last year of Ocean Flower Island, a complex of hotels, an amusement park and other facilities, according to news reports. They said some building permissions were revoked and fines of 215 million yuan ($34 million) were imposed for planning and construction violations.
The Associated Press contributed to this report.
Evergrande Group's $310 billion debt will grow due to the company being ordered to demolish a 39-building complex. Above, a worker pushes a cart in front of a sign showing Evergrande's China operation at a housing complex owned by the property developer in Beijing on December 8, 2021.
PHOTO BY NOEL CELIS/AFP VIA GETTY IMAGES
Grace Kay
Tue, January 4, 2022
Getty
Evergrande was ordered to demolish 39 buildings on its man-made island.
The embattled real estate developer has poured nearly $13 billion into its Ocean Flower Island.
Take a look at the flower-shaped archipelago that has everything from theme parks to hot springs.
Evergrande, an embattled Chinese real estate developer, confirmed on Tuesday that it was ordered to tear down 39 buildings on its man-made island in China's southern Hainan province, according to a report from The Wall Street Journal.
Chinese authorities in the province have given the company 10 days to demolish the buildings, according to a notice that was obtained by The Journal and dated December 30. The developer has 60 days to file a potential appeal. The South China Morning Post cited media reports on Monday that an illegally obtained permit had been revoked by the provincial government which required the buildings to be dismantled.
An Evergrande spokesperson did not respond to a request for comment and Insider could not reach Hainan provincial authorities for comment.
Over the past 12 years, Evergrande has invested nearly $13 billion into the artificial archipelago or group of islands known as "Ocean Flower Island," The Journal reported. The potential demolition of its 39 buildings on the island represents one of many setbacks that the world's most indebted developer has faced over the past year. Evergrande is currently struggling to repay over $300 billion in liabilities.
The cluster of man-made islands were designed to emulate the shape of a peony and made up of three flower-shaped islets. The center of the cluster was constructed as a major business and tourism hub.
ShutterStoc
The project was over a decade in the making and opened in late 2020 as the world's largest man-made tourism island, spanning 1,980 acres. The Ocean Flower development is the largest project since Dubai opened its man-made archipelago, Palm Island, in 2009
Palm Island in DubaiShutterStock
The Ocean Flower project encompasses houses and hotels, as well as business and tourist opportunities, including a roughly 1.1 million square foot convention center built to resemble giant blooming peonies.
Getty
Ocean Flower Island, also known as "Haihua" in Chinese, has attracted over 5.5 million tourists since it opened, according to China's stateside publication, South China Morning Post. Last month, local Chinese government said the development was harming the marine environment, including causing mass damage to coral reefs.
The center of the archipelago has 28 major business hubs.
Getty
The complex offers an array of museums, as well as several amusement parks, including a fairy-tale world and water park.
ShutterStock
It also has several more relaxing options for tourists, including a botanical garden and hot springs.
Getty
While many of the tourist and business options are located at the center of the archipelago, housing makes up the outskirts of the structure. According to a 2019 construction plan from the Danzhou government that was obtained by South China Morning Post the maximum total population of the three islands was estimated at over 200,000.
The stateside publication reported that Evergrande told residents of the island where 60,567 apartments had been delivered to buyers that the demolition will not impact residential structures.
No comments:
Post a Comment