The impasse in urban renewal is being pried open a gap by judicial auction.
On September 17, 80% equity of Shenzhen Longma Real Estate Development Co., Ltd. (hereinafter referred to as "Longma Real Estate") was listed on Ali Assets, with a starting bid price of 50.658 million yuan, and a public auction is scheduled for December 22. This equity was originally planned to be auctioned for the first time on October 20, but was later withdrawn due to the "need to further verify the asset status". This is the relisting after the withdrawal.
This is by no means a simple equity auction.
Longma Real Estate is the development entity of the Sanlian Plot Land Preparation and Benefit Coordination Project (hereinafter referred to as the "Sanlian Project") in Longhua District, Shenzhen. According to the plan publicly announced by Longhua District in September 2021, the planned floor area of residential buildings on the reserved land of the project is 160,900 square meters, and the project is still in the preparation stage so far.
After the exposure of liquidity risks in the real estate sector, a number of urban renewal projects led by private enterprises have fallen into difficulties. The relevant enterprises are unable to continue investing but are unwilling to withdraw. The Sanlian Project is no exception. Due to the shareholders' own debt problems, the equity of Longma Real Estate has been frozen, and the equity transfer price could not be agreed upon, which eventually led to the judicial auction.
A person from a Shenzhen real estate enterprise introduced that urban renewal projects are characterized by large investment, long cycle and complex interest relationships, and it is difficult to revitalize them through conventional commercial channels once problems arise. Since 2024, some enterprises have tried to solve remaining problems through judicial auctions.
Previously, urban renewal projects such as the Hubei Coordination Zone in Luohu District of Shenzhen, the Hengling Old Village in Longhua District, and the Nanyou Fuhua Factory in Nanshan have disposed of the equity of project companies through judicial auctions, removed the troubled shareholders, and brought new vitality to the urban renewal projects that were originally difficult to advance.
Judicial Auction
The Sanlian Project was included in the first batch of pilot projects for land preparation and benefit coordination in Shenzhen in 2015. In June and August 2016, Longma Real Estate successively signed the cooperative development intention agreement and the "Land Preparation Project Cooperative Development Agreement" with Shenzhen Longhua Hebei Joint-stock Cooperative Company (hereinafter referred to as "Hebei Joint-stock Company"), the land ownership party, becoming the only cooperative party and development entity of the project.
Land preparation and benefit coordination is a unique urban renewal model in Shenzhen. Under the leadership of the government, the successor entity of the original rural collective economic organization, as the implementation subject, uniformly confirms the right, demolishes and integrates the land left over from history in the area that has not completed the expropriation and transfer procedures. The government returns part of the land as reserved land, and the rest is nationalized.
Longma Real Estate does not directly hold the ownership of the reserved land of the Sanlian Project, but only enjoys the right to the income from the cooperative development of the reserved land. After the reserved land is completed, the basic floor area belongs to Hebei Joint-stock Company, which is used for the resettlement of villagers; the supporting floor area is transferred to the government free of charge; 40% of the equity in the remaining shared floor area belongs to Hebei Joint-stock Company, which is distributed between Hebei Joint-stock Company and Longma Real Estate in accordance with the agreement. This is the main source of income for Longma Real Estate as the development entity.
The Sanlian Plot is located in Longhua Sub-district, Longhua District, Shenzhen, with an implementation scope of 179,400 square meters. The two planned reserved plots cover a total of 37,300 square meters, with a planned plot ratio of 231,000 square meters, including 160,900 square meters of residential buildings (including 20,000 square meters of public buildings) and 54,800 square meters of commercial and office buildings.
Longma Real Estate was originally wholly owned by Shenzhen Yushi Property Management Co., Ltd. (hereinafter referred to as "Yushi Property"). In 2016, in order to raise funds for expropriation and demolition, the project introduced Zhengzhou Jinsong Real Estate Group Co., Ltd. (hereinafter referred to as "Jinsong Real Estate") and Shenzhen Wenchuan Real Estate Development Co., Ltd. (hereinafter referred to as "Wenchuan Real Estate"), each holding 10% of the shares, and Yushi Property holding 80% of the shares.
In April 2018, Yushi Property changed the registration of 60% equity of Longma Real Estate under the name of Jinsong Real Estate. Since then, Jinsong Real Estate, Yushi Property and Wenchuan Real Estate hold 70%, 20% and 10% of the shares respectively, and this registration structure has remained unchanged to date.
Industrial and commercial registration documents show that 70% of the equity of Longma Real Estate held by Jinsong Real Estate has been frozen by Zhengzhou Intermediate People's Court, and the freezing period will last until July 23, 2027; 20% of the equity of Longma Real Estate held by Yushi Property has been frozen by Longhua District People's Court of Shenzhen, and the freezing period will last until August 6, 2029.
The applicants for execution of this auction are Jinsong Real Estate and Wenchuan Real Estate. The asset appraisal report attached to the listing states that the auction targets include 60% of the equity of Longma Real Estate registered under the name of Jinsong Real Estate and 20% of the equity under the name of Yushi Property. The remaining 10% of the equity under the name of Jinsong Real Estate and the 10% of the equity held by Wenchuan Real Estate are not within the scope of the auction.
The listing documents show that the total equity appraisal value of Longma Real Estate's shareholders is 90.4609 million yuan, and the total appraisal value corresponding to the two parts of equity in this auction is 72.3687 million yuan, with the starting bid price being about 70% of the appraisal price.
A person close to Longma Real Estate told the Economic Observer that the land to be prepared for the Sanlian Project involves 535 plots, and a total of 181 plots and 7 above-ground buildings have been recovered; Longma Real Estate invested about 40 million yuan in the initial stage of obtaining the Sanlian Project, and after Jinsong Real Estate took shares, it successively invested another 630 million yuan.
Deadlock
After Jinsong Real Estate took shares in Longma Real Estate, the progress of the Sanlian Project was not smooth. The relevant plots under the project were classified into the industrial block line, and the application for adjustment out of the line progressed slowly. In addition, the project has not obtained the approval of the competent department in the form of meeting minutes.
In the context of increasing uncertainty of the project, in January 2019, Jinsong Real Estate and Wenchuan Real Estate sent a letter to Yushi Property, requesting to withdraw from the cooperation, but the negotiation failed. In June of the same year, the two enterprises filed a lawsuit with the Shenzhen Intermediate People's Court (hereinafter referred to as "Shenzhen Intermediate Court"), requesting to terminate the cooperation agreement and return the investment funds.
In September 2020, the Shenzhen Intermediate Court ruled to terminate the cooperation agreement, requiring Yushi Property to return 632 million yuan of investment funds to Jinsong Real Estate and Wenchuan Real Estate, and pay the capital usage fee at an annual interest rate of 15%. The judgment also clarified the withdrawal steps: first, set up a jointly managed account and lift the joint management of equity; after Yushi Property pays the refund to the jointly managed account, the equity transfer procedures shall be handled, and then the funds shall be released.
In early 2021, Yushi Property, Jinsong Real Estate and Wenchuan Real Estate respectively applied to the court for compulsory enforcement. Due to different understandings of the performance steps between the two parties, the refund and equity transfer have not been completed for a long time.
The enforcement ruling of the Shenzhen Intermediate Court states that the jointly managed documents of the two parties include valuable certificates such as the acquisition vouchers of 158 homesteads and 7 buildings stored in the safe deposit box of Longhua Sub-branch of Shenzhen Rural Commercial Bank, as well as the official seal, financial seal and original business license of Longma Real Estate stored in the safe in the office of Yushi Property.
Jinsong Real Estate and Wenchuan Real Estate believe that Yushi Property has not provided repayment guarantee, and the court needs to seal up the assets simultaneously when lifting the joint management. Yushi Property believes that the other party refuses to lift the joint management and return the equity, which leads to the stagnation of the project.
Just as the three enterprises failed to terminate their cooperation, a turning point appeared in the Sanlian Project.
In September 2021, the Longhua District Urban Renewal and Land Preparation Bureau of Shenzhen announced the implementation plan of the Sanlian Plot Land Preparation and Benefit Coordination Project, and the land value rose accordingly. Since then, the two parties have negotiated many times and tried to introduce local Shenzhen real estate enterprises, central SOEs and local state-owned enterprises to take over the project for several times, but no agreement has been reached due to differences in transfer prices.
In July 2022, the Shenzhen Intermediate Court ruled to seal up the above jointly managed documents. In May 2024, due to the guarantee dispute between Jinsong Real Estate and Zhongyuan Bank, 70% of the equity of Longma Real Estate under the name of Jinsong Real Estate was frozen by Zhengzhou Intermediate People's Court, and was frozen again in July of the same year.
In July 2024, the Shenzhen Intermediate Court issued a notice on performance within a time limit, requiring Yushi Property to pay a total of 940 million yuan of investment funds and capital usage fees, after deducting the delayed performance fee payable by the other party, to the court's enforcement fund account within 15 days. Jinsong Real Estate and Wenchuan Real Estate raised an objection to the enforcement, claiming that the payable amount was 1.443 billion yuan and no deduction should be made. In July 2025, the Shenzhen Intermediate Court ruled to reject the objection.
After the Sanlian Project was approved, neither Yushi Property nor Jinsong Real Estate was willing to withdraw at the cost price, and both hoped to lead the project and introduce new cooperative parties to obtain greater benefits. However, neither of the two parties had sufficient funds to continue investing, and the equity transfer could not be completed; moreover, most of the equity was frozen, making it difficult for new investors to enter, and the early investment could not be recovered.
Judicial auction has thus become an option to deal with the remaining problems of the Sanlian Project.
Solution
The Sanlian Plot Project is still in the preparation stage. Longma Real Estate only enjoys the right to income from cooperative development, rather than land or under-construction projects that can be disposed of separately. The expropriation and demolition compensation, land price and various expenses paid in the early stage are all settled in the project company, and the transfer of the project mainly relies on equity transactions.
Compared with ordinary residential projects that can withdraw through transferring assets such as land and under-construction projects, such projects rely more on equity transfer. Once the equity is applied for freezing and successive freezing by multiple creditors, it is difficult to complete the delivery even if the acquisition and merger negotiation reaches an agreement.
The above person from the Shenzhen real estate enterprise said that the disposal of such projects often requires the intervention of the court, and the frozen equity is disposed of through judicial auction to create conditions for the entry of new entities.
The above person close to Longma Real Estate said that previously, many other investors were willing to acquire the project at a certain premium on the basis of the invested funds, but none of the transactions succeeded because the shareholders believed that the project value was underestimated.
Previously, some projects in Shenzhen have solved similar problems through judicial auction.
The Hubei Coordination Zone in Luohu was once one of the largest urban renewal projects in Shenzhen. In 2011, China Resources Land intervened in the project, and the project declaration entity was China Resources Land (Shenzhen) Development Co., Ltd. (hereinafter referred to as "CR Land Shenzhen"), whose shareholder is Shenzhen Hubei Shunrun Investment Co., Ltd. (hereinafter referred to as "Hubei Investment"). Hubei Investment is 60% owned by China Resources Land, and 20% owned by China Resources SZITIC Trust and Shenzhen Yunxiang Industrial respectively.
In September 2022, the pre-sale of Plot A4 of the Hubei Coordination Zone Project started. Since 2023, Hubei Investment has been the person subject to enforcement for many times, and the equity of CR Land Shenzhen has been frozen for many times, which hindered the progress of the project.
In July 2024, with China Resources Land as the enforcement applicant, 100% equity of CR Land Shenzhen was listed for auction on JD Assets, and the auction was later suspended due to the enforcement objection raised by interested parties. In September 2025, with China Resources SZITIC Trust as the enforcement applicant, 20% of the equity of Hubei Investment held by Shenzhen Yunxiang Industrial was listed on Ali Assets, and was finally bought by China Resources SZITIC Trust for 444 million yuan.
In November 2025, the plot adjustment of Plot A9 of the Hubei Coordination Zone Project was completed, and the project began to advance at an accelerated pace.
The original Hengling Old Village Project in Longhua was developed by Penghui Real Estate, an affiliate of Kaisa. In 2021, Hefan Investment was introduced, which holds 45% of the shares. After Kaisa encountered liquidity trouble, the 55% equity of Penghui Real Estate it held was auctioned for many times in 2024, and was finally won by Hefan Investment in October 2024.
The implementation entity of the Nanyou Fuhua Factory Project in Nanshan is Shenzhen Blue Space Creative Urban Infrastructure Co., Ltd. (hereinafter referred to as "Blue Space"), which was jointly established by Hualin Holdings and Century Star Source. After Century Star Source encountered liquidity trouble, the 25% equity of Blue Space it held was auctioned judicially for many times, and was finally obtained by the Hualin Holdings side.
The situations of these projects are similar: the shareholders have liquidity risks, the progress of the project is blocked, and finally the risky shareholders are removed through judicial auction. Most of the transferees are the original shareholders, who have already sunk funds in the project. The equity increase is not only related to the recovery of early investment, but also related to who will lead the subsequent development.
After the equity relationship is straightened out, the project still needs to go through the process of expropriation and demolition, construction and capital recovery. For the transferee, in addition to the auction price, they also need to calculate the funds and time required to complete the project.
This article is from the WeChat official account "Economic Observer", author: Tian Guobao, published with authorization from 36Kr.