Lately, the Evergrande Group, one of China’s biggest property developers, has been in the news for all the wrong reasons. Shares of its Hong Kong listed company have been on a roller coaster ride after a letter the company allegedly wrote to the government of Guangdong Province surfaced recently, suggesting the company was desperate for cash and heavily in debt. While the company insists the letter was fabricated, it’s notable that its debt load now tops $120 billion.
Making sense of Evergrande is not easy. It’s a property company that builds as many as 600,000 homes a year. But it also does a lot more.1Evergrande has also formed a giant soccer academy and at one time invested in bottled water, before divesting of that business. About five years ago, the company spun off a smaller unit called the Evergrande Health Industry Group (0708.HK). That firm, which is also a Hong Kong listed company, manages homes for the elderly, and has formed a partnership with Harvard’s teaching hospital, Brigham and Women’s (See our profile of American hospital deals in China). More recently, the company changed the name and focus of the spinoff. It is now known as the China Evergrande New Energy Vehicle Group — and it promises to deliver health care and electric vehicles to the market.2Last year, it formed joint ventures with PRC-controlled State Grid and Swiss automobile manufacturer Koenigsegg, and a subsidiary unveiled six models of electric vehicles in August. All of which makes clear a simple point: Evergrande has ambitions in areas that have little or nothing to do with its main business: selling apartments. 3Evergrande is also trying to spinoff another unit, that deals with property management, with yet another Hong Kong listing. And it is seeking a dual listing on the Shanghai STAR market for its New Energy Vehicle Group.
This week, The Wire delves into Evergrande’s ownership, assets, and debt to see how China’s second largest real estate developer (by sales) is faring — and who’s winning and losing alongside it.4Vanke is China’s largest property developer.
Debt & Assets
As Evergrande (3333.HK) has grown explosively in the last decade, so have its debts. The company has racked up massive debts over the past decade, according to recent reports, and is struggling to finance its operations.
The Wire charted its assets and debt since 2008, when Evergrande debuted as a listed company on the Hong Kong Stock Exchange. While the company has taken on large amounts of debt to expand its property footprint throughout the country, the size of that debt has now ballooned, making it one of China’s most indebted non financial firms.
Data: Evergrande annual reports
A report released at the end of June shows the company’s debt at $124 billion, up from $118 billion at the end of last year. (Assets grew to $340 billion, up from $327 billion.) The company pledged to halve its debt by 2022, but so far it’s debt has continued to climb.
Data: Evergrande annual reports
But Evergrande’s revenue has not kept pace with its asset growth or its debt. Revenue last year grew a relatively small $3.7 billion, particularly following a $22.3 billion jump from 2017 to 2018.
Shareholders
Evergrande is controlled by its founder and chairman, Xu Jiayin (who also goes by a Hong Kong name Hui Ka Yan). Despite bringing in global investors ahead of his IPO in 2008, Xu and his wife, Ding Yumei, own more than three-quarters of the company’s shares, through two offshore companies: Xin Xin (BVI) Limited, and Even Honour Holdings Limited.
The next largest shareholder, Hong Kong listed Chinese Estates Holdings, a property and investment firm, owns 6 percent; with another 2.4 percent held by the executive chairman of Chinese Estates — Hoi-wan Chan. Other major stakeholders include more than a dozen American and European asset management firms, including BlackRock, Vanguard and Credit Suisse.
Data: S&P
Just looking at the ownership of Evergrande doesn’t give a sense of every player in the company’s orbit. Other stakeholders in Evergrande’s subsidiaries and joint ventures, such as Chinese Suning and German Hofer Powertrain, are also significant players in the company’s revenue streams.
Check out the full ownership chart below to see the international investors who have claimed small portions of Evergrande’s shares.
| Evergrande’s Shareholders | ||
|---|---|---|
| Owner | Ownership Share | Description |
| Hui Ka Yan | 77.793% | Founder and executive chairman of Evergrande’s board |
| Chinese Estates Holdings Limited | 6.283% | Chinese Estates Holdings owns and operates properties in Hong Kong, China, and the U.K. |
| Hoi-wan Chan | 2.418% | Hoi-wan Chan runs Chinese Estates Holdings and is married to Hong Kong billionaire Joseph Lau, who formerly served as the company’s executive chairman |
| The Vanguard Group, Inc. | 0.718% | U.S. asset manager |
| BlackRock, Inc. | 0.428% | U.S. global investment company |
| Dimensional Fund Advisors L.P. | 0.291% | U.S.-based investment firm |
| Strong Access Limited | 0.281% | Hong Kong-based corporation, incorporated in the British Islands |
| Norges Bank Investment Management | 0.229% | Norwegian bank’s investment arm |
| Charles Schwab Investment Management, Inc. | 0.054% | U.S. financial services company |
| Geode Capital Management, LLC | 0.048% | U.S. asset manager, a spinoff from Fidelity |
| Northern Trust Global Investments | 0.036% | U.K.-based investment management company |
| State Street Global Advisors, Inc. | 0.036% | U.S.-based asset management division of State Street. |
| AP Fonden 7 | 0.026% | Swedish pension investment fund |
| Teachers Insurance and Annuity Association of America – College Retirement Equities Fund | 0.024% | U.S. retirement fund |
| UBS Asset Management | 0.019% | U.K.-based asset manager |
| Credit Suisse Asset Management | 0.016% | Swiss asset manager |
| Standard Life Aberdeen plc | 0.015% | U.K.-based global investment firm |
| AQR Capital Management, LLC | 0.013% | U.S. investment management firm |
| Pictet Asset Management Limited | 0.013% | Swiss multinational private bank |
| HSBC Global Asset Management (UK) Limited | 0.013% | U.K. investment arm of HSBC bank |
| Deutsche Asset & Wealth Management | 0.012% | German investment management arm of multinational bank Deutsche Bank |
| AP Fonden 2 | 0.011% | Swedish pension investment fund |
| Amundi Asset Management | 0.01% | French asset management fund |
| Invesco Capital Management LLC | 0.009% | U.S.-based asset manager |
| 118 other minor stakeholders | 0.166% | |
Hannah Reale is a staff writer with The Wire. Previously, she reported for the New England Center for Investigative Reporting, The West Side Rag, and her college newspaper, The Wesleyan Argus. @hannahereale
