Construction funding was also allocated in incrents, drawn down according to progress.
With the oversight of the fund manager, Mingu couldn’t possibly divert the earmarked funds. This was precisely the purpose of SPD Bank’s involvent.
In exchange, Mingu had already mortgaged the actual ownership and revenue control of the Ming Capital property entirely to the project initiator—Han Lie’s Zhongi Company.
Upon maturity, if the full principal and interest were paid, Gu Yong would reclaim ownership of the property.
If the paynt couldn’t be made upon maturity, Panzi would have to buy the project ownership from Zhongi Company according to the agreent. Han Lie would then settle the cash with all parties, while Panzi slowly dealt with the property.
If Mingu Real Estate failed to complete the construction on ti per the contract agreents, the remaining construction funds would belong to Zhongi Company. The land and the unfinished buildings would also go to Zhongi Company.
In the end, Panzi would be responsible for the cash backing.
Just where was the brilliance of this whole project?
Han Lie didn’t need to care whether Mingu had enough money or ti; he controlled both the funds and the project’s progress.
Once the contract was signed, all the problems would be theirs. I would only be responsible for oversight and giving directions.
With both supervision and monitoring in place, being behind schedule was their problem, quality issues were their problem, and not being able to sell was still their problem...
The total construction area was 200,000 square ters, with a sellable area of 150,000 square ters and a final pre-assessed value of 4 billion. Mortgaging 2.5 billion of that was indeed quite ruthless.
Even more ruthlessly, Han Lie, taking advantage of Gu Yong’s urgent need for funds, added an additional guarantee agreent: Mingu, the parent company, would have to provide 55% of its shares as additional collateral.
In other words, if the Ming Capital project failed, not only would the property itself be lost, but Mingu’s major shareholder would also change to Panzi...
Of course, that 55% stake technically didn’t hold much value. The company’s net assets already included the paid portion for the Ming Capital project site. The remaining miscellaneous assets were worth at most about 3 billion, making 55% of the shares equivalent to roughly 1.6 billion.
So, this amounted to a total guarantee of 5.6 billion (4 billion from the property 1.6 billion from shares) for a mortgage loan of 2.5 billion, at an annual interest rate of 17.5% for a term of 18 months.
The first year’s interest amounted to 437.5 million.
The remaining six months’ interest was 218.7 million.
By maturity, a total of 3.152 billion would have to be repaid.
If the Ming Capital project could sell around 100,000 square ters at current housing prices, it would be enough to clear the principal and interest.
Gu Yong felt it was profitable and manageable.
But in reality, it was very difficult.
2015 was quite a tumultuous year. The project was set to start around January 10, 2014, and end on July 10, 2015, coinciding exactly with the end of the stock market crash.
How severe was that period?
To put it mildly, the real estate market continued to crash until the end of 2015. This persisted until the country’s foreign exchange reserves plumted to 3.2 trillion due to significant capital outflows. Out of necessity, the governnt had to reactivate the real estate market as a capital reservoir.
With a host of new policies, including discounted down paynts and interest rates, the removal of purchase and loan restrictions, and the monetization of shantytown renovations, among other incentives, the real estate market began another upward cycle in 2016.
Why did Han Lie limit the project’s duration to 18 months?
Because if it were a two-year period, Gu Yong might have held out until January 2016 and possibly seen a turnaround.
All optimistic estimates real estate developers held at the ti would be utterly shattered throughout 2015.
And all the pessimistic expectations hobuyers ford in 2015 would be completely shattered by reality in 2016, leading to imnse regret.
Whoever could grasp this trend in advance would be invincible.
Han Lie, for instance.
So, the true significance of that additional guarantee was this: in the event of a default, Gu Yong would have to exert all his efforts to prevent Mingu Real Estate from falling into Panzi’s hands. This would leave him with no capacity to worry about the Ming Capital property.
If Gu Yong still had the ans to secure support, he would have to prioritize saving his company.
As for Panzi, he only needed to stall slightly, without taking any substantial action, and the Ming Capital residential project would inevitably fall into his and Han Lie’s hands.
If Gu Yong failed, or if Panzi played his part too effectively, then besides the main course, Han Lie would also get a little dessert.
That was the gist of it. Now, Han Lie could start calculating his own cut.
On Monday the 7th, SAIC signed the funding agreent.
On Thursday the 10th, SAIC’s 2.5 billion was transferred to the designated account at SPD Bank, and the contract officially went into effect.
Thus, an elated Gu Yong imdiately sent out invitations, planning a grand celebration banquet for the day after tomorrow, Saturday, January 12th, at 8:00 p.m. at the Four Seasons Hotel.
His main purpose wasn’t to thank Han Lie, but to demonstrate to his major creditors, contractors, and all cooperating parties that he finally had money!
On the 10th, the sa day, the core mbers of their inner circle gathered. This included Han Lie, Dou Mingde, Old Xing, Panzi, Old Zhang, Liu Minghao, Old Gao from CITIC Securities, Old Liu from CITIC Trust, and Old Huang from SPD Bank.
Through this collaboration, their camaraderie had deepened.
At the sa ti, due to the smooth cooperation, they began to look forward to the next opportunity.
During their conversation, Old Zhang proudly brought up Gu Yong’s elation.
"Old Gu has practically been saved by you all. So, are we guys going to his celebration banquet to gloat a little?"
Han Lie and Panzi exchanged a hidden glance, their eyes containing a smile.
Rescue? Well, sothing like that...
Old Xing was the first to shake his head. "I’m not going. Who is he to , anyway? If it weren’t for Teacher Han, forget 2.5 billion, I wouldn’t have lent him 250,000!"
Dou Mingde nodded in agreent. "Exactly. I can’t be bothered with people I’m not close to."
Panzi added, "I won’t go either. I don’t have the ti."
"It wouldn’t be appropriate for to attend," Old Huang stated calmly, and everyone understood his aning.
Strictly speaking, Gu Yong had always wanted to ingratiate himself with Old Huang, but he could never reach him.
Even though they were cooperating now, Han Lie had organized it. What did that have to do with Gu Yong?
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