"Chongqing's Li Ka-shing" is bottom-fishing R&F PROPERTIES.

The image shows Zhang Songqiao (left) and Zhang Li (right).

Author: Cao Anxun

Editor: Zhou Zhiyu

Like many first-generation real estate tycoons, Zhang Songqiao, who used to play cards with Hong Kong tycoons like Cheng Yu Tong and Liu Luanxiong, and rang the bell on the same stage with Xu Jiayin, has not made a public appearance for over five years.

As the former richest man in Chongqing and the chairman of the board of directors of Zhongyu Land, Zhang Songqiao was an important participant in the golden age of the industry. Starting in Chongqing, mingling in the circle of Hong Kong tycoons, and eventually venturing overseas, he left his legend in the real estate world.

Today, the real estate story belonging to Zhang Songqiao is still being written. This mysterious and low-key tycoon has never been far away, stirring up the real estate world behind the scenes.

On February 6th, R&F Properties announced that Zhang Songqiao will take over all the equity and debt of the One Nine Elms project in London owned by R&F Properties through a debt-based acquisition. One Nine Elms, a high-end large-scale project valued at billions of Hong Kong dollars on the Thames River, played a key role in the funding crisis of Wanda Hotel Development and R&F Properties. Now, the tables have turned, and this project will fall into the hands of Zhang Songqiao.

This is a win-win deal. R&F Properties can reduce its debt pressure and gain a net profit of at least 3.084 billion Hong Kong dollars, while Zhang Songqiao, with an innovative approach, not only helps an old friend but also acquires a decent asset to expand his overseas territory.

After more than twenty years of ups and downs in the business world, the fate of real estate tycoons has diverged significantly. The once high-flying top tycoons have either fallen into the mud or disappeared, while low-key and privileged individuals like Zhang Songqiao, who followed in the footsteps of the top tycoons, have harvested assets from the big players with their speculative vision and capital operations.

This is a stark contrast in personal destinies and a cruel reflection of the changing times and industry cycles.

Each to Their Own

According to the announcement, as per the letter of intent, London One Limited, wholly indirectly owned by Zhang Songqiao, will acquire all the equity and debt of the One Nine Elms project company - R&F Properties International Real Estate Investment, at a price of 1 Hong Kong dollar.

However, London One Limited will also have to take over the existing notes of R&F Properties' subsidiary, Yilue, with a minimum principal of 800 million US dollars (approximately 6.247 billion Hong Kong dollars).

Zhang Songqiao will not directly pay off this part of the debt in cash but is preparing for a debt restructuring.

Specifically, this debt restructuring will involve two exchange invitations and the issuance of three perpetual bonds. In order to gain the support of creditors, the three new perpetual bonds will be supported by the potential cash flow of One Nine Elms. With this, Zhang Songqiao not only completed the settlement of this acquisition but also extended the assumption of debt. At the same time, he raised funds to repay the existing loans of the project company, ultimately obtaining a project company with a relatively simple and clean equity structure.

It's a clever capital operation.

Yan Yuejin, the research director of E-House Research Institute, mentioned that perpetual bonds only require interest payments to be made on time. Through this series of capital operations, Zhang Songqiao transformed the original USD bonds with maturity dates into perpetual bonds. This not only reduced the cash cost of the acquisition but also lowered the debt burden of the project company while supplementing capital.

For Zhang Songqiao, through this transaction, he is seizing an opportunity to acquire a globally high-quality asset that is about to enter the harvest period.

One Nine Elms is located in the prime location of London, adjacent to landmarks such as the Thames River, Buckingham Palace, the Parliament Building, and the London Eye.

The project is expected to be completed in April this year. According to the independent valuer Kroll Advisory Ltd, the property is valued at GBP 1.341 billion, equivalent to approximately HKD 13.359 billion.

The project originally belonged to Wanda Hotel Development and was a treasure planned by Wanda Hotel Development Chairman Wang Jianlin to invest GBP 1 billion in. It was once the largest single project invested by Chinese real estate developers in Europe.

However, due to a shortage of funds at Wanda Hotel Development, the project fell into the hands of R&F Properties and became an asset of increased credit in the debt restructuring of R&F Properties, helping R&F Properties overcome the difficulties of debt restructuring.

Bai Wenxi, Vice Chairman of the China Enterprise Capital Alliance, stated that Zhang Songqiao should have seen the long-term potential of this project in the London real estate market. By taking over this project, Zhang Songqiao is expected to gain substantial profits and international influence, expanding the territory of his business empire.

However, facing the dilemma of its own capital chain, R&F Properties now has to let go.

According to the financial report, in the first half of 2023, R&F Properties incurred a net loss of RMB 4.978 billion, and the asset-liability ratio increased to 191.8%. Including restricted cash, R&F Properties' total cash and bank deposits amounted to RMB 9.986 billion, but the loans due within one year were as high as RMB 40.338 billion.

Due to financial constraints, R&F Properties even owed RMB 49.0817 million in taxes in the third quarter of 2023. Many investors are concerned that R&F Properties may default again.

Although it was the first in the industry to complete domestic and overseas restructuring in 2022, R&F Properties still has a long way to go to shore up due to reasons such as a weak market recovery. According to data from CRIC, R&F Properties only achieved a total sales volume of RMB 1.39 billion in January this year, a nearly 70% year-on-year decrease. In 2023, the once trillion-yuan real estate giant R&F Properties only achieved a sales volume of RMB 13.53 billion. In the context of no improvement in sales, R&F PROPERTIES had to accelerate asset sales to raise funds to repay debts and ensure project completion.

The sale of R&F PROPERTIES International Real Estate this time can help avoid project company defaults and reduce R&F PROPERTIES' own debt burden. R&F PROPERTIES will also gain a net profit of at least HKD 3.084 billion from this, thus enhancing their financial report.

Bowie Wen expressed that this project had been a financial burden due to construction delays and funding issues. Through this sale, R&F PROPERTIES can exit the London project, focus resources on addressing other financial and operational issues.

Paths of Destiny

Between the buying and selling of the One Nine Elms project, it tells the stories of the rise and fall of giants, showcasing the unpredictability of fate.

Whether it's Zhang Songqiao, R&F PROPERTIES founders Li Silian and Zhang Li, they have all once enjoyed the dividends of the real estate boom, becoming early real estate tycoons.

During the rise of real estate companies like Vanke, Greenland, China Overseas Land, R&F PROPERTIES, and Evergrande, Zhang Songqiao's Chongqing Yuzhou became a dominant force in the regional real estate sector, joining the ranks of top-tier real estate companies in Chongqing.

However, Zhang Songqiao's expansion in real estate development did not go smoothly. Starting from 2015, Chongqing Yuzhou began a rapid contraction of its domestic footprint, selling off assets. Even in 2017, Chongqing Yuzhou announced its transformation from a developer in western China to an international enterprise.

Zhang Songqiao shifted his focus from real estate development to investment. Over the years, he has been keen on following top tycoons to make money, whether through land acquisitions, share purchases, or taking over assets from tycoons, engaging in speculative businesses.

While tycoons like Zheng Yutong, Liu Changle, and Yang Shoucheng invested in Evergrande, Evergrande Auto, and China Yurun Group, enjoying the capital feast of these companies, Zhang Songqiao also profited alongside them, gradually earning the title of "Chongqing Li Ka-shing."

Zhang Songqiao also has his unique business acumen. Chongqing Yuzhou's 2021 financial report shows that Zhang Songqiao liquidated his shares in Evergrande Auto, realizing nearly 20 million yuan in cash gains, making him one of the few to profit from investing in Evergrande Auto.

Misfortune depends on fortune, and fortune hides misfortune. Unexpectedly, Chongqing Yuzhou missed out on the years of rapid development in the mainland real estate market but managed to survive the industry's intense adjustment battle, and is now back in the spotlight.

Chongqing Yuzhou has now transformed into a "landlord" with rental income accounting for over 90% of total revenue, with a presence in London, Hong Kong, Australia, and other locations.

Moreover, in 2022, Chongqing Yuzhou took over a project company's equity from R&F PROPERTIES, injecting HKD 2.66 billion into R&F PROPERTIES after its liquidity crisis.

In addition, in 2022, Chongqing Yuzhou, in collaboration with Emperor Group, acquired Hong Kong luxury residence No. 15 Shoushan Mountain from Shimao and Mingfa. With this deal, Zhang Songqiao "bottom-fished" a distressed real estate company, showing a growing ambition to supplement high-quality assets.

However, in just over five years, many real estate tycoons, including Zhang Li, who once sat side by side with Zhang Songqiao and had pleasant conversations, have gradually drifted apart.

Zhang Li resigned as Executive Director and CEO of R&F PROPERTIES at the end of last year, leaving Chairman Li Silian to single-handedly support R&F PROPERTIES. By 2023, with a wealth of 20.5 billion yuan, Zhang Songqiao ranked 261st on the Hurun China Rich List, leaving Zhang Li and his son, as well as Li Silian, far behind.

After a profound industry adjustment, the first-generation real estate tycoons have taken different paths in fate. Wu Yajun, Ling Ke, Xu Yongjun, Song Weiping, and others have retired and disappeared, leaving only a few active figures on the stage, such as Wang Jianlin, Qi Jinxing, and Sun Hongbin.

They briefly walked together under the arrangement of the times. After parting ways, looking back, it seems like a completely different world.