The anti-corruption campaign in municipal investment companies, which lasted for a year and a half, has finally entered key cities.

On the same day, July 22, Shanghai Urban Investment Group Vice President Hu Xin and former Shenzhen Talent Housing Group Co., Ltd. Party Secretary and Chairman Jia Baoan were both announced to be under disciplinary review and supervisory investigation. The reason for their investigation was "suspected of serious violations of discipline and law." Also on the 22nd, the former chairman of Yunnan Urban Investment Group, Xu Lei, who is currently serving his sentence, was investigated for the third time for suspected major duty crimes.

"The importance of urban investment to local governments has become increasingly prominent over the past period of time, which has created room for rent-seeking and is prone to breeding corruption. This is especially true when it comes to old town renovation, infrastructure investment, and real estate development, all of which involve huge amounts of money," Shen Meng, director of Xiangsong Capital, told Phoenix WEEKLY Real Estate.

Real estate anti-corruption goes one step further

The situations of the three senior executives of municipal investment companies under investigation show how detailed and long-term this round of anti-corruption work in real estate is.

Xu Lei, the chairman of Yunnan Urban Investment Group, who was investigated, is already serving his sentence. Xu Lei had been investigated twice before. The first time was in November 2014, when he was warned by the party for not strictly following the recommendation and investigation procedures for exceptional promotion. The second time was in May 2019, when Xu Lei voluntarily surrendered himself on suspicion of serious violations of laws and disciplines. In December 2020, he was sentenced to 11 years in prison by the Dali Intermediate People's Court for multiple crimes of accepting bribes, offering bribes, and abuse of power by state-owned company personnel.

Jia Baoan, the former chairman of Shenzhen Talent Housing Group, has been out of office for several years. Public information shows that Jia Baoan was born in April 1963 and was a member of the Standing Committee of the Luohu District Committee of Shenzhen, director of the District Committee (District Government) Office, and deputy secretary of the Party Committee of the Shenzhen State-owned Assets Supervision and Administration Commission. In August 2016, Jia Baoan was appointed as the chairman of Shenzhen Talent Housing Group Co., Ltd., which was when the Housing Group was just established, and Jia Baoan was the first chairman.

In March 2021, Shenzhen Talent Housing Group Co., Ltd. announced that Jia Baoan, the company's former legal representative, chairman, and party secretary, would no longer hold the position due to work adjustments, and his successor was Zhao Hongwei. After that, Jia Baoan's public identity appeared again as a second-level inspector of the Shenzhen Municipal CPPCC.

It is worth noting that during Jia Baoan's tenure, Shenzhen Talent Housing Group participated in Evergrande's return to A-share market and had a protracted equity transfer dispute with Shandong state-owned enterprise Shandong Hi-Speed, which has not been resolved to date.

In November 2020, four months before Jia Baoan left office, Evergrande announced the termination of its reorganization with Shenzhen Shenfang A (000029.SZ). Shandong Hi-Speed ​​and its parent company Shandong Hi-Speed ​​Group chose to withdraw. Shenzhen Talent Housing Group took over Shandong Hi-Speed's equity in Evergrande, which was 1.1759% of the shares, and the consideration was 5 billion yuan.

Afterwards, Shenzhen Talent Housing Group paid the consideration in installments. The two parties agreed that in November 2020, Housing Group would acquire 1.1759% of the equity for 5 billion yuan, and within 12 months from the signing of the agreement, the equity transfer payment would be paid in three installments, namely 1.5 billion yuan, 1.5 billion yuan and 2 billion yuan. The first installment of 1.5 billion yuan was paid on November 20, 2020, the second installment of 1.5 billion yuan was paid within 6 months, and the third installment of 2 billion yuan was paid within 12 months.

However, after paying the first two installments, Shenzhen Talent Housing Group suspended the third installment of 2 billion yuan, at which time Shandong state-owned enterprises had completed the transfer of equity. In 2022, Shandong filed an arbitration against Shenzhen Talent Housing Group.

On June 19 this year, Shandong received the "Notice of Response" from the Shenzhen Intermediate Court and the "Application for Non-Execution of Arbitration Award" from Shenzhen Talent Housing Group, and learned that Shenzhen Talent Housing Group applied to the Shenzhen Intermediate Court for non-execution of the arbitration award. The case was heard in the Shenzhen Intermediate Court on July 2.

Jia Baoan is not the first executive of Shenzhen Talent Housing Group to be investigated. In November 2022, Liu Hui, former deputy general manager of Shenzhen Talent Housing Group, was investigated for suspected violations of discipline and law and was subsequently investigated. One of the final findings of the investigation into Liu Hui was that he used his position to seek benefits for others in contracting engineering projects and illegally accepted huge amounts of property.

Hu Xin of Shanghai Urban Investment Group was born in 1967. He has served as deputy director of Shanghai Water Conservancy Engineering Design Institute, chief engineer of Shanghai Water Authority (Municipal Ocean Bureau), and chief engineer of Shanghai Urban Investment Group. He has served as vice president of Shanghai Urban Investment Group since June 2021.

He also has a more "eye-catching" identity: Vice Chairman of Greenland Holdings.

According to the announcement of Greenland Holdings, Hu Xin is an external director appointed by the shareholder of Greenland Holdings. Currently, except for serving as the company's director, vice chairman, member of the board's strategic committee, and member of the board's compensation and assessment committee, he does not hold any other positions in the company and does not participate in the company's daily operations and management. The above matters will not have a significant impact on the company's production and operation activities.

Greenland Holdings told Phoenix Weekly Real Estate: "The announcement shall prevail."

Shanghai Chengtou currently holds a 20.55% stake in Greenland Holdings and is one of the major shareholders of Greenland Holdings.

According to public information, Hu Xin's term of office at Greenland is from May 26, 2021 to February 16, 2025, and he does not receive any salary from Greenland.

"Because the Urban Investment Group sent him (Hu Xin) as a shareholder representative to serve as a director here, he just comes to attend the board meetings every year and does not participate in actual work. Because Shanghai Urban Investment Group is not listed and we are a listed company, we have to make an announcement." said an internal employee of Greenland Holdings.

Public data shows that Hu Xin is not on the list of directors or executives of Shanghai Chengtou Group's listed company Chengtou Holdings. His last public appearance was on June 30 this year, when he attended the groundbreaking ceremony for the first phase of the road system renovation project at the Shanghai Laogang Ecological and Environmental Protection Base.

On June 11, Shanghai Urban Investment Group held a communication and promotion meeting on the rectification of the municipal party committee’s inspection.

The promotion meeting mentioned that we should continue to improve the work system of strictly managing thoughts, strictly managing cadres, strictly grasping work style, and strictly grasping discipline, further straighten out the relationship between the Party Committee, the Board of Directors, and the management level, and strive to improve the vitality of corporate governance and the efficiency of research and decision-making on major issues. We should strengthen source governance and internal control system construction, continue to tighten the system cage, and plug the loopholes that cause problems from the root and source.

All are local leading platforms

Shanghai Urban Investment Group, Shenzhen Talent Housing Group and Yunnan Urban Investment Group are all leading local urban investment platforms.

According to the official website of Shanghai Urban Construction Investment, it was established in 1992. The predecessor of Shanghai Urban Construction Investment was Shanghai Urban Construction Investment and Development Corporation, which was originally established to solve the investment and financing problems of Shanghai's urban construction. In other words, it was simply a government financing platform that led the issuance of corporate bonds.

In 2002, Shanghai successfully applied to host the World Expo. Shanghai Chengtou Group took advantage of the Expo to grow, starting with the Shanghai Middle Ring Road project and then expanding to roads and bridges, land, environment, and water. In 2014, Shanghai Chengtou Group was restructured into a limited liability company, which is wholly owned by the Shanghai State-owned Assets Supervision and Administration Commission.

Currently, Shanghai Chengtou has 6 subsidiary groups (Chengtou Highway, Chengtou Water, Chengtou Assets, Shanghai Center, Chengtou Environment, Chengtou Xinggang), 2 listed companies (Chengtou Holdings and Shanghai Environment), 1 scientific research institution (Chengtou Research Institute), as well as Chengtou Laogang, Changxing Development Company, Changxing Qianwei Company, Chengtou Finance Company, Chengtou Environmental Protection Financial Services Company and other units.

According to a "2023 National Urban Investment Company Total Assets List" released by the Urban Construction Investment and Financing Research Professional Committee of the China Urban Development Research Association, Shanghai Urban Investment Corporation ranks third in the country in total assets, only after the urban investment companies in Tianjin and Beijing, and ranks first in Shanghai.

As a super-large urban investment platform, Shanghai Chengtou's business focus is still real estate. The core enterprise of Shanghai Chengtou Group is the listed company "Shanghai Chengtou Holdings Co., Ltd." (Chengtou Holdings: 600649.SH). According to Chengtou Holdings' 2023 annual report, its annual real estate business revenue was 1.929 billion yuan, accounting for 75.40% of its operating income. The second largest revenue was construction agency business, franchise project revenue, operation management and other revenue.

Shanghai Chengtou Holdings has developed rapidly in recent years. In addition to Shanghai, it has also cooperated in the development of the Huangshan High-speed Railway New City project in Huangshan, Anhui. It is also relatively active in the land market. In the fourth batch of centralized land supply in Shanghai last year, Chengtou Holdings won the Daqiao Street plot in Yangpu District with 1.264 billion yuan. In the first land auction in Shanghai on July 9 this year after the land price cap was lifted, Shanghai Chengtou also participated in the auction.

In the sales performance list of Shanghai real estate companies from January to June 2024 compiled by China Index Academy, City Investment Holdings ranked 10th with 8.474 billion yuan, which is 9 places higher than the 2023 list (ranked 19th in 2023).

Shenzhen Talent Housing Group is a very "young" city investment company, established in 2016. It has a high starting point, with an investment amount of 100 billion yuan. As soon as it was listed, it announced that the 30 billion yuan of funds invested by the Shenzhen Municipal Government had been in place. The website of the Shenzhen State-owned Assets Supervision and Administration Commission called it a "high start" in its introduction to the Talent Housing Group. By the end of 2023, the group's total assets will be 208.5 billion yuan, with a total of 282,000 units of affordable housing planned and built, and 122,500 units supplied, accounting for about 1/3 of the city's total during the same period.

As a young platform in a young special economic zone, Shenzhen Talent Housing Group is also very market-oriented and has personally participated in land acquisition on many occasions. In 2018, Shenzhen only sold 10 residential land plots, and Shenzhen Talent Housing Group won 6 of them that year. In 2020, it became the biggest winner in Shenzhen's land auction, acquiring 16 plots.

Shenzhen Talent Housing Group's aggressive acquisition of land in the open market is widely considered to be a powerful tool for Shenzhen to learn from the "Singapore model". The Shenzhen Housing and Construction Bureau has stated that it will use Singapore as a model for Shenzhen to learn from, and in the future 60% of Shenzhen citizens will live in government-provided rental or sale housing.

In addition, Shenzhen Talent Housing Group also started to exert its strength in the rental market this year, establishing the "Anju Leyu" company to carry out the leasing business of urban village renovation. According to the Shenzhen Talent Housing Group, Anju Leyu has acquired and stored 1,122 residential buildings in urban villages, which can raise about 54,000 housing units.

Yunnan Urban Investment Group was established in 2005. It is the first provincial urban investment company in the country and was once the largest state-owned real estate development company in Yunnan. Due to its massive expansion, Yunnan Urban Investment Group frantically acquired real estate projects and fell into a debt crisis. In order to repay its debts, Yunnan Urban Investment Group has tried to sell projects and attract Dongfang Assets, while trying to transform and survive. In 2022, Yunnan Urban Investment Group's Urban Investment Real Estate listed the sale of 14 real estate company equity, officially announcing its failure to survive.