Evergrande Extends Buying Spree With $2 Billion China Deals

  • Builder to buy four developments from New World China Land
  • Deal brings Evergrande deals this year to $6.8 billion

A wholly-owned subsidiary of Evergrande Real Estate Group Ltd. has agreed to buy 13.5 billion yuan ($2.1 billion) of assets from a unit of New World China Land Ltd., capping a multi-billion dollar shopping spree by the Chinese developer this year.

The Evergrande unit will buy a project and loans in the provinces of Hainan, Guangdong and Hubei, according to statements from the developers to the Hong Kong stock exchange. Evergrande shares fell 1.8 percent to HK$6.19 in Hong Kong at the midday break, compared with a 0.3 percent drop in the benchmark Hang Seng Index. New World China Land lost 0.5 percent to HK$5.54.

Evergrande, China’s third-largest developer, has been an aggressive investor, announcing $6.8 billion worth of acquisitions this year, according to data compiled by Bloomberg. The developer paid a record $1.6 billion last month for Mass Mutual Tower in Hong Kong, and diversified into insurance with the purchase of a 50 percent stake for $610 million in Great Eastern Life Assurance Co.’s Chinese joint venture.

“Evergrande’s sales are strong this year and they would need to replenish their land bank,” said David Hong, a Hong Kong-based director of China Real Estate Information Corp. “Buying these landbanks at such costs will definitely be less expensive than bidding at government auctions.”

A recovery in China’s residential property market prompted Evergrande to raise its 2015 sales target 20 percent in November after sales jumped, becoming the first among domestic peers to do so. Evergrande shares have doubled this year.

‘Scarce Resources’

The Evergrande unit will buy a project and loans associated with it in Haikou, the capital of the island province of Hainan, for 8.6 billion yuan; a development and loans in Huiyang in Guangdong province for 1.1 billion yuan, and two projects and debt in Wuhan in Hubei province for 3.8 billion yuan, according to statements from the developers to the Hong Kong stock exchange.

The existing properties and land in Haikou are “scarce resources,” located in a high-end residential area in Haikou City, while the Huiyang project is focused on the high-end consumer groups in Shenzhen, Evergrande said in its statement. Property prices in Shenzhen, which borders Hong Kong, have led gains nationwide this year.

The two properties close to the Wuhan central business district are atop metro stations with good accessibility, Guangzhou, Guangdong-based Evergrande said.

New World China estimates it will make a net gain of HK$2.9 billion ($374 million) from selling the Wuhan projects, HK$77 million from the Huiyang disposal and HK$3.6 billion from the Haikou deal, it said in its statement.

“As the costs of selling homes have risen in China, they could make larger profits on the appreciation of land,” Hong said.

— With assistance by Andreea Papuc

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