Evergrande vows that it’s ready to rebuild
To mark the completion of a residential complex called World City, the indebted property giant China Evergrande Group held an elaborate red carpet ceremony Monday, with eight cannons firing off confetti before a cheering crowd. The company then released a series of images featuring newly completed buildings covered with bright red decorations.
Just weeks earlier, Evergrande had been declared in default. The developer has unpaid bills in excess of $300 billion and has struggled to pay back its creditors and business partners. Some in China saw the company’s celebrations as premature.
For months, Evergrande could not pay its builders, painters and contractors. The company, whose problems have made investors wary of China’s onceflourishing property sector, remained relatively silent as its debt problems led to panic in global markets and among people around the country who had purchased apartments before they were completed.
Construction on more than 1 million homes stalled, and then, two weeks ago, Evergrande signaled it could no longer go on — officially entering into default after failing to make a final debt payment to foreign investors. Now the developer has pledged to start paying its workers again and to deliver homes, part of a push to restore confidence in the company and the sector.
“We will sprint at full speed,” Xu Jiayin, Evergrande’s billionaire founder, told top executives Sunday, according to a statement. He did not provide any details about where the money would come from, nor did he say anything about the failure to pay foreign creditors.
Despite the company’s bullishness, the challenges it faces remain enormous. Some homebuyers
say they are still in the dark about their unfinished apartments. Former employees and contractors continue to wait for back payments. Dozens of lawsuits from business partners that have piled up in court remain unresolved. Property sales across China, meanwhile, have fallen for five consecutive months.
A few weeks ago, government technocrats stepped in to help steer the company. The head of China’s Ministry of Housing and Urban-rural Development said last week that Beijing was committed to “guaranteeing home deliveries, protecting people’s livelihoods and maintaining social stability.” With just a few days left in the month, Xu pledged Sunday to deliver 39,000 apartment units by the end of the year.
The company has also said that it has restarted partnerships with more than 80 percent of its longterm
suppliers of materials and indicated that it would soon be able to repay its debt and begin sales of new apartments.
Evergrande’s sudden rush of promises has created more questions than answers for the homebuyers, suppliers, contractors and creditors who have yet to hear directly from the company. Some people have started to track which of Evergrande’s hundreds of property projects have actually restarted construction.
Li Menghe, chair of Qingdao Wanhe Construction & Decoration Group, a glass supplier to Evergrande, has begun using his official Weibo account to post daily details on the hundreds of projects that have revved up again in recent days. Homebuyers respond to his posts with more questions as they try to figure out if their apartments are likely to be completed.
One homebuyer asked about the on-and-off construction progress for one of Evergrande’s residential projects in the province of Shandong.
“Brother, there is no money in the supervised account,” Li replied, referring to the escrow account where Evergrande was supposed to place the money it received upfront from the sale of the apartments. He did not explain how he knew this or respond to a request for comment. But in some government complaint forums online, local officials have told homebuyers that money in developers’ escrow accounts is missing.
Zhang Yao, a yoga instructor who taught at Evergrande Healthy Land, a health and wellness park in the central province of Henan, said she was asked to resign in September but is still owed $750. Zhang, 29, said she had been paid through an employment agency but had recently confronted an Evergrande manager, who was unable to give her a date for when the company would pay her.
She said the manager told her that Evergrande’s own employees had not been paid since October. A representative for the company did not respond to a request for comment.
In September, Evergrande employees joined worried homebuyers in protesting outside company offices around China. Some were later detained or visited by the local police. As many as 80 percent of Evergrande employees were at one point asked to put up money to help fund the company’s operations.
Amid the uncertainty, Evergrande’s colorful founder, once known for wearing a flashy goldbuckled Hermès belt, has been largely absent from public view. In early September, he posed behind top executives signing a “military order” pledging to deliver homes. (Over the following months, Evergrande would finish less than 10,000 units.) In a memo leaked later that month, he promised employees they would soon “walk out of the darkness.”
Last week, Evergrande published new photographs of Xu presiding over a meeting during which he called on executives to keep delivering homes. Then came dozens of photos of suddenly completed apartment projects. Homebuyers were photographed happily signing documents that would allow them to finally take possession of their long-awaited apartments.
With Evergrande under the guidance of government officials, some homebuyers and investors are likely to feel more hopeful. This week, the company delivered 1,419 apartments at its World City development as part of its push to finish 39,000 homes by the end of the year. But Evergrande is still on the hook for an estimated 1 million more.