Put up for auction at a starting price of 7.843 billion yuan, can Shanghai Evergrande Hongqiao International be revitalized once again?

The largest commercial and office complex in Shanghai Hongqiao CBD has finally been put up for auction.

On August 5, the land use right and under-construction works of the Evergrande Hongqiao International Project were listed on the Ali Assets Platform, with a starting price of 7.843 billion yuan. The asset package will be auctioned on August 31, with a bidding period of 1 day.

Bidders are required to pay a deposit of 400 million yuan in advance, and the winning bidder needs to make up a land transfer fee of about 300 million yuan.

As of the press time, the transaction has attracted 2,853 views, 59 people have set auction reminders, and the number of registered bidders is 0.

According to public information, Evergrande Hongqiao International is located in the core business district of Hongqiao, at 979 Shenchang Road, Minhang District, Shanghai. The total floor area of the project is 470,000 square meters, roughly divided into Zone A and Zone B. Zone A has 8 buildings in total, and Zone B has 5 buildings.

Specifically, Zone A has a total floor area of about 142,500 square meters, with a total supporting basement area of 127,400 square meters. The land uses include shops, offices, hotels, commerce, convention and exhibition, special purposes, warehousing and other categories.

This zone has obtained the pre-sale permit for commercial housing in October 2018 (369 housing units have completed online signing and filing), and retains a self-owned area of 2,337.4 square meters.

Zone B has a total floor area of 121,400 square meters, with a total supporting sunken plaza area of 77,200 square meters. Its uses cover hotels, shops, offices and special purposes, and the pre-sale permit has not been obtained so far.

In terms of construction status, the main structure of the project has been capped, the facade decoration has been completed, and part of the installation works of interior decoration have not been finished. The project has been suspended since March 2020.

Sleep - Revival - Re-suspension

From the perspective of origin, Evergrande is not the original developer of this project. In 2011, Shanghai Red Star Macalline jointly established a joint venture Shanghai Hongyuan Shengshi with Shenzhen Shengshi Wanxiang Investment Management and Shenyang Shouyuan Investment Management. The latter won the Lot 02 of Phase I of the core area of Hongqiao Business District with 3.067 billion yuan.

In the original construction plan, the plot was to be built into a large-scale urban complex project -- Hongyuan Shengshi International Cultural City, integrating office, commerce, culture and entertainment, convention and exhibition, hotel and serviced hotel formats, with a construction period from January 2013 to August 2016 and a total investment of 7 billion yuan.

However, since 2014, the project has seen frequent changes of investors, many investors withdrew one after another, leaving only Shenzhen Shengshi Wanxiang Investment Management.

The project was suspended after the main structure was capped in 2015, becoming the last "unfinished and suspended" project in the core area of Hongqiao Business District at that time.

In 2018, Evergrande "rescued" this large project that had been suspended for three years by acquiring the equity of the project company, and renamed the project Evergrande Hongqiao International.

At that time, Evergrande Real Estate's entry was favored by most industry insiders. A market analyst from Centaline Property Shanghai once told Insight Media that Evergrande's entry may have a positive impact on the project.

In the early stage, Evergrande did make great efforts to revive the project. In 2018, the first China International Import Expo was about to open in November, and Hongqiao Business District was the core display window.

Evergrande's top priority was to complete the facade curtain wall installation of multiple buildings of Evergrande Hongqiao International in less than a year to improve the overall image of Hongqiao Business District. To this end, Evergrande needed to negotiate with the original general contractor in a short period of time, organize construction teams to enter the site, establish an efficient project management and control system, and so on.

Fortunately, about a week before the opening of the CIIE, Evergrande Hongqiao International completed the construction of all individual building facades, taking the first step of the project's revival.

However, Evergrande Hongqiao International only completed the first step.

Affected by the overall capital dilemma, Evergrande was unable to pay the relevant project funds, and Evergrande Hongqiao International was suspended again in 2020, failing to complete the interior fine decoration and part of the installation works.

In 2022, the project company Shanghai Hongyuan Shengshi entered the bankruptcy liquidation procedure. Evergrande Hongqiao International, which has been dormant for six years, will be publicly auctioned on the last day of August 2026, looking for its third-generation owner.

Source: Ali Assets Platform

Retreat from Shanghai

The fact that Evergrande Hongqiao International is pushed to the judicial auction stage is not an isolated case, but another landmark sample in Evergrande's massive asset disposal wave.

In Shanghai, Evergrande's asset disposal is mainly divided into two paths: in the early stage, Evergrande mainly transferred asset rights and interests on its own initiative, and in the later stage, creditors disposed of assets compulsorily through bankruptcy liquidation.

Among them, the Hongkou North Bund project is one of the few cases where Evergrande voluntarily sold assets.

In September 2020, Evergrande won two plots HK286A-03a and 03c in North Bund, Hongkou, Shanghai with a total price of 2.295 billion yuan. These two old renovation plots for historical features protection are named "diamond plots" because they are close to the White Magnolia Plaza and only 300 meters away from the Huangpu River in a straight line.

According to the plan, the plot will be built into a comprehensive project integrating commerce, residence and office, with a total planned floor area of about 45,000 square meters, including 20,000 square meters of residential floor area and about 25,000 square meters of commercial and office floor area.

But plans never catch up with changes, and the capital chain crisis came earlier than the planned high-rise buildings.

In order to solve the problem of capital liquidity and prevent the suspended North Bund project from being taken back by the government, Evergrande could only transfer 70% of the project's equity to a subsidiary under Everbright Xinglong Trust, retaining 30% of the equity itself.

At the end of 2023, Evergrande, still mired in financial crisis, continued to transfer its 30% equity to Everbright Xinglong Trust at a price of 663 million yuan, completely withdrawing from the development and construction of the North Bund project.

Later, Everbright Xinglong Trust transferred the 30% equity to Yitai Real Estate (a real estate subsidiary of coal energy company Yitai Group), and the North Bund project was able to switch from the shelved state to the construction state.

As Evergrande's financial crisis intensified, the ownership of many of its assets in Shanghai was taken over and disposed of by creditors, and its once vast Shanghai real estate territory gradually shrank.

Since 2024, many of Evergrande's creditor's rights in Shanghai have been intensively listed on asset auction platforms, many of which are listed for circulation at a large discount, including multiple creditor's rights asset packages starting at a "1-yuan starting price".

Such creditor's rights belong to the game of "high risk, high profit". The winner needs to recover the debt from Evergrande on its own, while Evergrande has long been mired in severe financial difficulties, with hundreds of enforcement records, so there is great uncertainty about whether the creditor's rights can be honored.

Back to the auction of Evergrande Hongqiao International, whether it can successfully find a buyer is also uncertain.

Calculated based on the salable area of 470,000 square meters and the starting price of 7.843 billion yuan, the unit price of this project is only about 16,700 yuan per square meter, far lower than the general unit price of 30,000 to 50,000 yuan per square meter for commercial and office projects in the core area of Hongqiao Business District.

However, behind the 7.8 billion yuan, there are about 300 million yuan of supplementary land transfer fee, the negotiation and delivery of 369 online signed housing units, as well as the risk of subsequent construction and operational challenges of the project itself.

Therefore, the market's speculation on the potential buyers is mainly divided into three categories: state-owned and central state-owned real estate enterprises, AMC institutions, and financial institutions as creditors.

State-owned and central state-owned real estate enterprises have strong capital strength and can afford high transaction prices and subsequent investment in continued construction; AMC institutions are good at handling complex creditor's rights and debt relations, and can obtain project control at a low price through "creditor's rights acquisition + debt restructuring", then introduce a construction management party to complete the continued construction and sales; financial institutions can offset part of the transaction price with valid creditor's rights, greatly reducing the actual cash expenditure.

This article is from the WeChat Official Account "Insight", written by Insight Media, authorized for release by 36Kr.