Evergrande Group venue dreams crash down


China Evergrande cancels stadium deal Image: Evergrande Group & Gensler

The China Evergrande Group is cancelling a multibillion land contract with a local Government in the Southern Guangdong province of China at a substantial loss to overcome a liquidity crisis, ending a grandiose plan to build and own the world’s largest football stadium.

‘South China Morning Post’ stated that the embattled developer will return land-use rights on four parcels of land totaling 499,113 square meters to the Guangzhou Municipal Government for a 5.52 billion yuan (US$818 million) refund, according to a stock exchange filing recently. It paid 6.813 billion yuan for the rights in April 2020.

Evergrande said in a statement, “The group’s liquidity issue has adversely affected the development of and construction on the land.”

The decision is fair and reasonable and is in the best interest of the company, it added.

The China Evergrande Group is an investment holding company which engages in the development, investment and management of real estate properties. The firm also involves in property construction, hotel operations, finance business, Internet business, and health industry business.

The developer is racing against time to fend off hostile creditors, including holders of about US$20 billion worth of offshore bonds following a default in late December. It disappointed investors last month when a restructuring plan failed to offer details on how it will repay some of its US$300 billion of liabilities.

The April 2020 contract allowed Evergrande to build and sell homes, as well as develop commercial and sports facilities for a term of 40 years, and allowed business uses for 50 years.

Founder and Chairman of China Evergrande Group Hui Ka-yan envisioned a lotus-shaped 100,000-capacity stadium at a cost of 12 billion yuan, a size surpassing Europe’s biggest 99,354-capacity Camp Nou in Barcelona, Spain. Evergrande sunk 2.1 billion in construction costs into the stadium project until it was halted as the developer ran out of cash.

Xia Haijun, then Chief Executive Director, said during the groundbreaking ceremony two years ago, “The Evergrande Stadium will become a new world-class landmark comparable to the Sydney Opera House and Burj Khalifa in Dubai, and an important symbol of Chinese football to the world.”

The Guangzhou Football Club, formerly known as Guangzhou Evergrande Taobao Football Club, is a professional Chinese football club that participates in the Chinese Super League under the license of the Chinese Football Association.

The 54,856-capacity Tianhe Stadium is a multipurpose stadium in Tianhe District, Guangzhou, Guangdong, China. It is currently used for football matches. It serves as the home venue of Guangzhou F.C.

‘South China Morning Post’ further stated that Evergrande bought the Guangzhou Evergrande football team in 2010, spent lavishly to sign international players and won the Chinese Super League for an unprecedented seventh consecutive season in 2020, before finishing third last year.

The 5.52 billion yuan refund will be transferred directly into an escrow account linked to the plot of land and will be used to settle the costs related to the Guangzhou Evergrande Football Stadium deal, including loans Evergrande owed to the Citic Trust, construction costs and unpaid wages, the company said in the filing.

The refund took into account an initial deposit of 1.36 billion yuan in April 2020, 218,300 square meters of land in 4,371 commercial housing units it has pre-sold to buyers for 2.02 billion yuan and the 2.1 billion yuan in construction costs. The Guangzhou Government has agreed to complete the stadium project, it added.

Evergrande failed to pay the interest on US$645 million and US$590 million of junk bonds in December, even after a grace period, triggering a cross-default on its other borrowings. Its bond maturing in January 2023 has fallen by more than 85 per cent in the past year to about 8 cents to the dollar.

The Hong Kong stock exchange operator warned the company in June of the possibility of a delisting as it continues to delay publishing its accounts. It last published its financial report for the interim 2021 period in August last year.

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