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As the post-approval vote on the implementation plan for the renovation of Shaxi Village in Guangzhou is about to expire, news has come out that the implementing entity of this 10 billion yuan renovation project will be changed.

Recently, the Shaxi Village Shareholding Cooperative Economic Society of Luopu Street, Panyu District, Guangzhou City, said that it had received a letter from Shanghai Shenglong Investment Group Co., Ltd. (hereinafter referred to as "Shenglong Group"), Guangzhou Fangyuan Real Estate Development Co., Ltd. (hereinafter referred to as "Fangyuan Real Estate"), and Guangzhou Shenglong Fangyuan Real Estate Co., Ltd. (hereinafter referred to as "Guangzhou Shenglong Fangyuan") on the introduction of the Star River Group to participate in the renovation of Shaxi Village. The letter pointed out that it was decided to introduce Guangdong Star River Real Estate (Group) Co., Ltd. (hereinafter referred to as "Star River") to participate in the renovation of Shaxi Village, and the relevant cooperation agreement had been reached.

In July 2019, Shenglong Group and Fangyuan Real Estate formed a consortium and won the qualification of cooperative enterprise for the Shaxi Village renovation project, and then established the project company - Guangzhou Shenglong Fangyuan. In July 2020, the implementation plan for the renovation of Shaxi Village was approved, but it was repeatedly delayed because the signing rate did not meet the standard. In July last year, the voting period for the project implementation plan was extended by one year to July 31, 2024, and it is about to expire.

The above letter shows that after officially becoming the main body of the renovation and implementation of the Shaxi Village renovation project, Galaxy Bay will provide huge funds to ensure the smooth progress of the renovation work, and will also coordinate various promotion work of the project. Some villagers said that compared with Shenglong Group and Fangyuan Real Estate, Galaxy Bay has more advantages in renovation experience and financial strength, and it may be more secure for it to be responsible for the renovation of Shaxi Village. Some careful villagers also found that the only thing missing from the above letter was Galaxy Bay's signature and seal, and it was not determined whether it would "enter the market".

In response to the above-mentioned questions, Galaxy Bay told the reporter from China Business News: "We have nothing to say for now, please refer to the official information." Regarding the progress of the renovation of Shaxi Village, relevant staff of Fangyuan Real Estate said: "It is not convenient to disclose." As of press time, Sunac China has not responded.

Thang Long and Fang Yuan seek external aid

A year later, the reporter visited Shaxi Village and noticed that the banners hung last year to promote the beautiful vision of old town renovation were already in tatters, and were replaced by brand new mobilization banners printed with "Secure the plan, secure the interests, and ensure that future interests are not discounted." It is reported that the approval and voting of the Shaxi Village old town renovation implementation plan will expire at the end of July this year. Nowadays, some of the rented buildings in the village are empty and the walls are mottled, but the reporter also saw that some shops with brightly colored doorways have reopened in the locations where shops were closed last year.

Public data shows that the Shaxi Village renovation project was included in the "Guangzhou City 2018 Urban Renewal Annual Plan" and the "Guangzhou City Urban Renewal Three-Year Action Plan (2019-2021)". On July 31, 2020, the implementation plan of the Shaxi Village renovation project was approved. According to the approval document, the current total construction area within the renovation scope of Shaxi Village is about 2.13 million square meters, and the renovation cost is about 24.778 billion yuan (if the actual renovation cost exceeds this amount, the implementation entity needs to raise funds on its own to solve the excess funds, and the government will no longer arrange financing area); the initial cost is 18.7942 million yuan, which should be repaid by the implementation entity; the reconstruction and resettlement funds are about 19.804 billion yuan, which will be included in the supervision in accordance with relevant regulations. The project renovation is implemented according to the principle of "overall renovation and one-time relocation".

The above-mentioned approval document shows that the project implementation plan must be approved by more than 80% of the total number of villagers and ancestral house owners within three years from the date of approval before it can take effect. In July last year, when the countdown to the "80% voting approval rate" for the renovation of Shaxi Village began, the voting time after the approval of the project implementation plan was extended by one year, and the signing time was postponed accordingly. In other words, by the end of July 2024, if the signing rate cannot reach 80%, the project implementation plan may face re-approval.

Previously, Luopu Sub-district Office of the People's Government of Panyu District, Guangzhou City (hereinafter referred to as "Luopu Sub-district Office"), where Shaxi Village is located, told reporters that some difficulties were encountered during the post-approval voting period for the Shaxi Village renovation project, mainly including the resolute opposition of some illegal vested interests such as occupying land for building houses and illegally leasing; some villagers lacked confidence and were worried about unfinished projects; and some villagers were unable to vote due to disputes over the division of family interests. On July 17, the reporter interviewed Luopu Sub-district Office about the current voting approval rate of the Shaxi Village renovation implementation plan, and the relevant person in charge only said: "It will be subject to subsequent public announcements."

In fact, the advancement of Shaxi Village's renovation has been shrouded in the "dark cloud" of capital turnover. According to the Luopu Sub-district Office, at the beginning of this year, the performance guarantee fund of Shaxi Village's renovation was used to pay the rent and late payment fees owed by the renovation partner and its affiliated companies. After coordination, the renovation partner will make up the 39.18 million yuan of funds used.

On July 1, Fangyuan Real Estate announced the overdue loan of Guangzhou Shenglong Fangyuan, that is, Guangzhou Shenglong Fangyuan failed to repay a part of a 1 billion yuan loan for the Shaxi Village renovation project as scheduled. Fangyuan Real Estate provided a 400 million yuan guarantee for the loan, and the loan has been extended for one year. Industrial and commercial information shows that Shenglong Group and Fangyuan Real Estate are currently listed as the parties subject to execution, and the execution amounts are approximately 1.046 billion yuan and 19.25 million yuan respectively.

Shenglong Group and Fangyuan Real Estate stated in the "Letter on Introducing Xinghewan Group to Participate in the Renovation of Shaxi Village" that in recent years, due to non-corporate factors such as policy adjustments, especially since the downturn in the real estate market in the second half of 2021, the renovation of Shaxi Village has been significantly affected, and villagers have become anxious about the promotion of the renovation of Shaxi Village. "We actively seek external cooperation and strive to introduce companies with strong capital and high-quality brands to participate in the renovation of Shaxi Village."

Considering the financial strength (bank deposits), corporate brand, product quality, Guangzhou urban village renovation and real estate development experience, Shenglong Group and Fangyuan Real Estate decided to introduce Galaxy Bay to jointly promote the comprehensive renovation project of Shaxi Village. In July this year, the above entities reached a cooperation agreement, and Galaxy Bay will have absolute control over Guangzhou Shenglong Fangyuan. According to policies and regulations, the introduction of new cooperative enterprises must be approved by Shaxi Village and then reported to the district government department for approval.

Behind the “luxury house halo”

Not far from Shaxi Village, Galaxy Bay Peninsula, once known as "Guangzhou's No. 1 luxury home", is the pioneering work of Galaxy Bay. In the following years, Galaxy Bay replicated its luxury home model in Shanghai, Beijing and other places. In the industry, Huang Wenzai, chairman of Galaxy Bay, is known as the "godfather of luxury homes". After 2018, urban renewal became the expansion tool of Galaxy Bay.

According to the official website of Galaxy Bay, the Luofeng Old Village Renovation Project in Huangpu District, Guangzhou (hereinafter referred to as the "Luofeng Project") is the first urban renewal project in which the company has participated. The total land area for the renovation is approximately 79.44 hectares and the construction area is approximately 2.36 million square meters. In June of this year, the Luofeng Project completed the lottery distribution of the first batch of 3,541 resettlement houses. According to public information, the Luofeng Project is the first old village renovation project approved after Huangpu District was approved as a pilot for reform and innovation in the "three old" renovation in Guangdong Province. The project implementation plan was approved in March 2019, and Galaxy Bay was introduced to participate in the cooperative renovation. Huang Wenzai once said: "I believe that the new Luofeng will definitely become a benchmark for urban renewal in Guangzhou and even the whole country."

After the Luofeng project, Star River won four old village renovation projects in Guangzhou, including Tangbu East Village and Xiyi Village in Panyu District, as well as the Xianjiang Village project in Huangpu District. However, apart from the Luofeng project, Star River's other old village renovation projects in Guangzhou have rarely been reported in recent years.

The reporter noticed that a netizen asked questions on the message board of local government leaders in May this year about the progress of the renovation of Xianjiang Village and the issue of unpaid temporary relocation fees. On July 11, the People's Government of Huangpu District, Guangzhou City replied that the implementation plan for the renovation of Xianjiang Village had been approved by the district government on January 13, 2024, and is currently actively completing the supplementary work of the missing materials, and the renovation project continues to advance. "Since the beginning of this year, the street has organized four coordination meetings among all parties to urge Xinghewan to resolve the issue of temporary relocation fees. Regarding the issue of whether the developer will withdraw, Xianjiang Community has not terminated its cooperation with Xinghewan. In the next step, the street will continue to follow up on the progress of the Xianjiang Community renovation project and the payment of temporary relocation fees."

As the progress of some old-town renovation projects is slow, what is the real situation of Xinghewan, which Sunac China and Fangyuan Real Estate said would "provide huge amounts of funds" to participate in the renovation of Shaxi Village?

"Galaxy Bay is in the most difficult stage of the new long march," Huang Wenzai said in his 2024 New Year's speech. He further added that in this cold winter of the real estate industry, Galaxy Bay will ignite "three big fires". In the new stage, "Galaxy Bay's past achievements must be cleared to zero."

The annual report shows that the real estate development and operation business of Galaxy Bay is mainly focused on high-end improved residential buildings with fine decoration and large flats, targeting high-net-worth individuals. In terms of development and construction, it adopts the small-scale rolling development as the business model to ensure steady and sustainable development. At the same time, it participates in some asset-light operation projects through construction agency and brand output, including cooperative development and brand output.

In its annual report, Galaxy Bay stated that, unlike the rigid housing with high turnover and high debt in the real estate industry, the company has always insisted on building high-quality residential housing since its establishment. "The company has always been able to steadily launch high-quality products to gain market confidence, relying on good sales performance and stable financial operations to survive the market winter. Galaxy Bay's products and financial status can stand the test of the times." However, Galaxy Bay's real estate sales revenue in the past two years has been less than 10 billion.

From 2021 to 2023, Galaxy Bay's revenue was RMB 13.307 billion, RMB 7.993 billion, and RMB 9.829 billion, respectively. The corresponding real estate sales revenue was RMB 12.697 billion, RMB 7.492 billion, and RMB 9.067 billion, respectively, accounting for more than 90%. However, the gross profit margin of this business continued to drop from 47.64% to 33.37%. Galaxy Bay stated in its 2023 annual report that the downward trend in the real estate market led to a decline in the overall gross profit margin of real estate sales. In 2023, Galaxy Bay's net profit dropped from approximately RMB 957 million in 2022 to approximately RMB 175 million.

As of the end of 2023, Xinghewan held approximately RMB 5.806 billion in cash and the balance of interest-bearing debt within the scope of the consolidated financial statements was RMB 15.446 billion (non-consolidated interest-bearing liabilities were RMB 4.504 billion), of which debts due within 6 months were RMB 424 million and debts due over one year were RMB 14.47 billion; short-term loans were RMB 5 million, non-current liabilities due within one year were RMB 1.011 billion, and bonds payable were RMB 234 million.