The people and businesses that once made their name in the “bomb shelter” model are now in crisis.
In the just-released 2013 annual financial report, Renhe Commercial lost as much as RMB 1.7 billion. At the same time, commercial projects it developed in Chengdu, Daqing and other places have led to constant disputes due to the transfer of operating rights.
Moody's and Standard & Poor's have downgraded its credit rating several times due to pressure on cash flow.
Dai Xiuli, a female business owner, divorced her husband.
Huge loss of 1.7 billion
The myth of high growth for people and business came to an abrupt end this year.
On April 29, Renhe Business released its 2013 annual financial report. During the reporting period, it achieved operating income of 547 million yuan, down 20.4% from last year, including operating lease income of 455 million yuan and income from transfer of operating rights of 92.718 million yuan. However, the loss was as high as RMB 1.7 billion. In the same period last year, Renhe Business made a profit of 895 million yuan.
"The losses of Renhe and Commerce are not unexpected." Wang Yongping, secretary-general of the China Commercial Real Estate Alliance, told 21st Century Network, "His model is not sustainable. The most important thing about commercial real estate is the later management. Renhe sold all the shops to retail investors for many years without participating in the management."
21st Century Network found that there were three main factors that led to Renhe Commercial’s huge losses. First, the investment property was depreciated by 832 million yuan. In 2013, Renhe Commercial converted a 38,000-square-meter shopping mall in Dongguan into a parking lot. Second, the impairment of accounts receivable was 540 million yuan. Third, financing costs were as high as 477 million yuan.
According to Renhe Commercial Announcement, the impairment of accounts receivable of RMB 540 million came from two projects in Chengdu and Anshan.
In its 2010 annual report, Renhe Commercial stated that it "indirectly transferred the operating rights of five projects through the sale of all the equity capital of five wholly-owned British Virgin Islands subsidiaries. These five projects are the Chengdu, Weifang, Dalian, Daqing and Anshan Phase I projects."
Among them, the agreed price of the Chengdu project is HK$2.372 billion, and the Anshan Phase I project is HK$1.305 billion.
However, in the past four years, the buyers of these two projects still have unpaid debts of HK$638 million and HK$345 million respectively, and Renhe Commercial decided to discount these debts.
On March 6, 2014, Renhe Commercial announced that the group and the buyer had signed the Chengdu Deed and the Anshan Deed. The buyer had agreed to pay HK$190 million and HK$127 million to the group to settle the payments for the Chengdu and Anshan projects. After all the payments were settled, the buyer should no longer have any unpaid or undischarged debts and obligations for the purchase of the Chengdu project, and the Chengdu and Anshan personal guarantees would also be released.
Regarding this approach, Renhe Commercial stated that the unpaid payments related to the Chengdu Project and Anshan Project have been in arrears for some time. Considering that taking legal action may be expensive and time-consuming, signing the Chengdu Deed and Anshan Deed will help recover the unpaid payments and allow the group to maintain an ongoing business relationship with the buyers of the Chengdu Project and Anshan Project respectively and help improve the group's cash flow position.
But in fact, Renhe and Commerce’s “cutting off” positions seems to have another meaning.
Disputes continue over sale projects
At the beginning of 2014, the "Diyi Avenue" projects in Chengdu, Anshan, Daqing and other places after Renhe Business transferred their operating rights have caused constant disputes due to the transfer of operating rights.
On April 16, outside the Diyi Avenue office at No. 38 Renmin East Road, Chengdu, dozens of Diyi Avenue merchants sat down to ask for an explanation.
It is reported that these merchants purchased the right to operate shops on Diyi Avenue in Chengdu in 2011 at prices ranging from 90,000 to 100,000 yuan per square meter.
Several owners of Diyi Avenue in Chengdu told 21st Century Network that during the sale, the developer and operator promised that Diyi Avenue would "seamlessly connect 17 large shopping malls in Yanshikou, Luomashi, Chunxi Road and Tianfu Square, and connect to the subway. Diyi Avenue will be built into a first-class commercial center in Chengdu." But three years later, these promises have all come to nothing.
"Not one of the seventeen shopping malls is connected, and there is no investment in commercial advertising."
What makes these merchants even more unacceptable is that the mall operators not only failed to find ways to solve the problems in operation and management, but focused on collecting the balance.
A merchant surnamed Wang told 21st Century Network that in the contract, Diyi Avenue and the merchant clearly agreed that the total operating period would be 40 years, divided into two phases, each phase of 20 years. Renhe Business promises that merchants only need to pay half of the house payment (i.e., the first 20 years of rent), and the other half (the next 20 years of rent) will be handled by Diyidadao, which will find a bank to provide credit and loans to the merchants.
But in fact, these shops converted from civil air defense projects had no property rights at all. People and Commerce finally asked the merchants to take out their residential properties as mortgages. However, many merchants were still unable to pay the rent for the next 20 years due to insufficient funds or other problems, and the conflict intensified.
"Our demand is to withdraw the stores." It is reported that a total of 256 merchants requested refunds this time, involving more than 450 stores, a store area of about 7,500 square meters, and the amount involved may reach 700 million yuan.
But in the eyes of these owners, people and business are still related to Chengdu Diyi Avenue. In the previous coordination, a vice president from the Diyi Avenue headquarters came to Chengdu to listen to the opinions of the merchants.
In Anshan, the local Diyi Avenue project lasted more than three years from investment promotion in 2010 to opening at the end of 2013. Due to construction collapse, Party A's breach of contract and other reasons, many owners have asked to withdraw from the project.
In Daqing, due to disputes with the operator Daqing Yigao Investment Company, nearly 200 owners of Diyi Avenue organized multiple rights protections to demand the withdrawal of their properties.
Representatives of merchants on Daqing Diyi Avenue said that at the time, Daqing Yigao Investment Company claimed that they were a subsidiary of Renhe Commercial.
According to industrial and commercial information, Daqing Yigao Investment Company has now been renamed Daqing Yigao Trading Co., Ltd., the controlling shareholder is Hengying Investment Co., Ltd., and the legal representative is Huang Hao.
Female boss Dai Xiuli divorces her husband
It was reported on March 10 that Hogan, a British mathematics teacher, finally decided to divorce his wife Dai Xiuli, who is worth 1.2 billion pounds (approximately RMB 12.33 billion), because he was not used to the life of a rich man, and he only asked for 1 million pounds in alimony.
According to reports, Hogan, 57, met Dai Xiuli on a blind date. They have been married for 21 years and have a 17-year-old son. Three years ago, Hogan's wife, Dai Xiuli, suddenly had the idea to transform many air-raid shelters in the mainland into underground shopping malls, and she became rich overnight. She now owns 22 "underground shopping malls" and a mainland football team.
After Dai Xiuli became prosperous, she took Hogan back to the mainland in 2013 to ride on a yacht and drink famous wine. Hogan, however, was quite uncomfortable. He said that he still likes to go to British fast food restaurants for three meals.
With the money in hand, Hogan resigned from his teaching position. He now only teaches children from poor families for free. Hogan said that maybe others think he should pay more alimony, but he believes that as long as he saves a little money, 1 million pounds is enough for him to live for the rest of his life.
