Lujiazui bought poisoned land and claimed tens of billions of yuan: Sugang made a big profit of 10 times in 8 years of "covering the land", and the major shareholder has changed hands
(Image source: Visual China)
Author|Xiao Wang
Edited by Chen Fuye
Produced by Prism Tencent Xiaoman Studio
A lawsuit announcement involving tens of billions of yuan caused a sensation in the financial circle.
On November 4, Lujiazui (600663. SH) announced that the listed company and other plaintiffs sued Jiangsu Sugang Group and Suzhou Institute of Environmental Sciences in court due to infringement disputes over soil pollution. Recently, the plaintiff received a notice of acceptance from the Jiangsu Provincial High Court.
Back to 8 years ago, Lujiazui won 95% of the shares of Green Bank Company, which was listed and sold by Suzhou Iron and Steel Group through its wholly-owned subsidiaries. The main assets of Green Bank are 17 land use rights in the north of Sutong Road and the east of Sugang Road in Suzhou High-tech Zone. However, since 2022, environmental investigations by Lujiazui Company and various parties have determined that 14 plots of land under the name of Green Bank Company are polluted, and the area and degree of pollution far exceed the situation disclosed by Suzhou Iron and Steel Group when it was listed for sale.
Accordingly, Lujiazui Company requested that Sugang Group be ordered to compensate 10.044 billion yuan for infringement liability.
The author noticed that Sugang Group made a big profit of more than 10 times in 8 years. At the time of the land sale, Sugang Group was still under the Peking University Founder Group, and now, Peking University Founder has been restructured due to insolvency, and its new major shareholder is Ping An Group of China.
So, who should bear the loss of 10 billion yuan caused by buying "poisonous land"?
There is a risk of impairment of more than 10 billion inventory
Signs of risk began to emerge in April last year.
Lujiazui Company pointed out that on the evening of April 12, 2022, the Jiangsu Provincial Department of Ecology and Environment issued a transfer of the second central ecological and environmental protection inspection team, involving pollution of part of the land under the name of the company's holding subsidiary, Green Bank.
"Recently, Green Bank unexpectedly discovered that plots 2 and 13, where educational facilities have been built, and plots 3 and 4, which have not yet been developed, are at serious risk of pollution, and many elements in the soil or groundwater are significantly exceeded, which does not meet the original planning land standards for these plots." Lujiazui Company pointed out that the company invested 450 million yuan in four plots, and the corresponding inventory was 2.242 billion yuan.
According to the information disclosed by Sugang Group, the soil and groundwater in the non-coking area of the plot under the name of Green Bank Company are basically unpolluted and can be redeveloped; The pollution in the coking area is mainly concentrated in the local area of plot 4.
Lu Jiazui said that he participated in the bidding of Green Bank Company "based on his trust in the public market equity listing information and reasonable trust in the administrative actions of government departments". After the completion of the equity transaction, the pollution scope disclosed by Sugang Group has been treated and remediated.
Lujiazui commissioned a third-party agency to investigate, and in addition to the seven polluted plots disclosed earlier, the report received on June 17 this year showed that the remaining seven plots were also seriously polluted. For example, the Reading School on Lot 2 was originally an international school introduced by Lujiazui, but due to soil pollution, Green Bank was not only fined 5.43 million yuan, but also ordered to stop construction and dismantle experimental equipment.
Lujiazui has not only invested a lot of money in construction, but its inventory is huge, but there is a risk that it will not be able to be listed and will have to make a large impairment provision.
According to the statistics of the corresponding announcement, Lujiazui has invested more than 2.19 billion yuan in related projects, and the corresponding inventory amount is as high as 11.3 billion yuan.
In August this year, Lujiazui Company angrily sued Sugang Group and the environmental impact assessment agency entrusted by Sugang to the court, claiming 10 billion yuan, which was recently accepted.
Some items have been sold out, and agents do not recommend buying them
At the beginning, in order to win 95% of the shares of Suzhou Green Bank Company, Lujiazui spent a lot of effort.
The Shanghai Stock Exchange pointed out that in 2016, Suzhou's land market was in full swing, and real estate companies had a strong willingness to acquire land, and high-premium land plots were constantly born. The 17 plots under the name of Green Bank are planned for residential, commercial, industrial R&D, education, gas stations, etc., of which the total planned area of residential land is 664,000 square meters, which is the largest plot in the entire Suzhou market in recent years, which can be used for overall system development.
At first, the appraised value of 95% of Suzhou Green Bank's equity was 1.36 billion yuan, and the listing price was 3.15 billion yuan. More than 30 intended transferees submitted materials, and after 222 rounds of fierce competition for quotations, a consortium of an asset management company and a trust company under Lujiazui finally stood out with the highest quotation of 6.84 billion yuan.
Lujiazui actually paid more. According to the asset purchase announcement, the consortium formed by Jiawan Company, a wholly-owned subsidiary of Lujiazui, and Huabao Trust plans to invest a total of 8.525 billion yuan, of which the equity transaction price is 6.84 billion yuan, and the debt of Suzhou Green Bank is 1.685 billion yuan.
In terms of funding sources, Jiawan Company invested 2.025 billion yuan, and Huabao Trust's peace of mind trust plan invested 6.5 billion yuan. In the trust plan, the Agricultural Bank of China invested 4.475 billion yuan to subscribe for the priority share of the trust plan, and Jiaer Company, a wholly-owned subsidiary of Lujiazui, invested 2.025 billion yuan to subscribe for the inferior share of the trust plan.
However, the authors note that Huabao Trust has exited in April 2021, and Suzhou Green Bank is currently 72.44% and 22.56% owned by Jiaer Company and Jiawan Company, respectively, while Suzhou Iron and Steel Group holds the remaining 5%.
After several years of development, some of the residences on the plot have been delivered. According to the shell page, taking the Lujiazui Jinxiu Lanshan project developed by Suzhou Green Bank as an example, its unit price is close to 25,000 yuan per square meter, and the total reference price is 1.82 million yuan to 3.78 million yuan per set, and some buildings of the project have been sold out.
After the announcement of Lujiazui's lawsuit was disclosed, some real estate agents said that this land is very polluted and it is not recommended to buy it, and a rectification document has been issued. At present, the market is most concerned about how to protect the rights of residents who have already bought the corresponding plots.
(On the Shell APP, in the discussion area of a real estate project developed by Suzhou Green Bank, the intermediary does not recommend customers to buy)
Xu Erjin, chairman and acting general manager of Lujiazui, introduced at the third quarterly report performance meeting on November 6 that Suzhou Green Bank has suspended relevant development, construction and sales work. At the same time, the company's special working group is going all out to carry out disposal and rights protection work, and promote the relevant responsible parties to bear the responsibility for follow-up disposal.
Sugang has made ten times more money in eight years of land acquisition
According to the data, Sudi 2008-G-6 land was won by Suzhou Iron and Steel Group at the end of 2008, with a bid of 648 million yuan.
Construction was supposed to start by the end of June 2011 and be completed by the end of June 2013. However, the Suzhou Iron and Steel Group, which got the land, was trapped by the continuous loss of the steel industry and was unable to develop it at all. In 2014, Suzhou Iron and Steel Co., Ltd. wholly owned Suzhou Green Bank Real Estate Development Co., Ltd., and in 2016, the equity was listed and transferred.
Regarding the overdue development of land plots and other issues, the Lujiazui announcement pointed out that the documents issued by the relevant departments of Suzhou showed that the target company Suzhou Green Bank was not found to have illegal activities such as idle land, land speculation, covering up the market and reluctant to sell, and raising house prices.
Suzhou Iron and Steel Group joined the Founder Group of Peking University in 2003 and is the main sector of its steel business layout. According to the data, the project plot belongs to the "Peking University Youth City" project in the important urban development area in the northwest of the central urban area determined by the "Suzhou Urban Master Plan 2007-2020". As the future major shareholder of Suzhou Green Bank, Lujiazui Co., Ltd. will actively coordinate with Suzhou Iron and Steel Group to introduce high-quality resources such as education, scientific research, medical care, and finance from Peking University Founder Group to create high-quality projects and help upgrade and transform Hushuguan Old Town.
On the occasion of the land sale, Sugang Group belongs to the subsidiary enterprises of Peking University Founder Group. However, due to poor management and crazy borrowing, Peking University Founder Group was applied for reorganization by creditor banks in February 2020.
Since then, a consortium composed of Ping An Group, Zhuhai Huafa Group Co., Ltd. (on behalf of Zhuhai State-owned Assets) and Shenzhen Tefa Group Co., Ltd. has participated in the reorganization of five Founder companies, including Peking University Founder Group Co., Ltd. Ping An Group, through Ping An Life, plans to invest 48.2 billion yuan to acquire about 66.51% of the equity of New Founder Group, thus becoming the controlling shareholder of New Founder Group. On January 30, 2022, the former China Banking and Insurance Regulatory Commission (CBIRC) approved Ping An Life's investment in New Founder Group.
Today, the controlling shareholder of Suzhou Iron and Steel Group is Founder Commercial Real Estate Co., Ltd., behind which is New Founder Holding Development Co., Ltd. (hereinafter referred to as "New Founder Group"), and Ping An Group is the largest shareholder.
What impact will this lawsuit have on Ping An Group? The author inquired with Ping An Group, but did not receive a reply by press time. Some investors also asked on the Shanghai Stock Exchange's e-interaction, did Ping An's due diligence before acquiring the founder involve the risk of the Suzhou Iron and Steel poisoned land? If Sugang loses the lawsuit between Lujiazui and Sugang, how much loss will it cause to Ping An?
However, the above questions have not yet been answered by the company.
Lujiazui also pointed out that the company commissioned a professional agency to verify and found that in the process of adjusting the regulations and transferring the land involved in the case, the defendants had a series of tortious acts of violating laws and regulations, committing fraud, and failing to perform their duties in accordance with the law, which jointly led to the plaintiff's transfer of the seriously polluted land involved in the case.