SHANGHAI/HONG KONG, Aug 31 – In the beginning, Hui Ka Yan followed a simple formula. Borrow to buy land. Sell homes on the site before they are built. Use the cash to pay lenders and finance the next real estate project.For two decades, starting in the mid-1990s, this approach was enormously lucrative as Chinese home prices soared. It transformed Hui, a former steel industry employee from a rural village, into China’s richest man. And it turned his company, China Evergrande Group(3333.HK), into a vast real-estate empire.But as Evergrande grew increasingly laden with debt, the company resorted to ever-more unorthodox strategies to generate funds.By 2016, at least one Evergrande subsidiary was encouraging some staff to buy financial products from the group’s wealth-management unit, which helped fund property development, according to a former employee and a company document reviewed by Reuters. The former employee said some people were asked to spend up to half of their salaries on such products.Hitting up employees for funds, Reuters has found, was just one of a number of unusual practices employed by the company before it came to the brink of a messy collapse in 2021 under the weight of hundreds of billions of dollars of debt. This account of the rise and fall of Hui and Evergrande is based on interviews with more than 20 people who have worked with the tycoon or at his company. All spoke on condition of anonymity.Evergrande said Hui wasn’t available for an interview. Neither the founder nor the company responded to written requests for comment, including about whether employees were encouraged to purchase financial products, Hui’s management style, the company’s business practices and the challenges it faces.Hui was an ambitious businessman who could be demanding with his staff, charismatic with creditors, and at times self-indulgent. He had a team of female personal assistants and at least some of them were hired primarily for their looks, according to four former employees and a person familiar with the company.Evergrande’s story also reveals the inner workings of a Chinese property giant, from the heady days of rocketing real-estate prices to the precipitous decline of the company when incensed retail investors stormed its offices. The company’s arc also traces the fortunes of China’s broader property market, a key driver of growth of the world’s second-biggest economy – but is now an anchor tugging that economy down.Companies accounting for 40% of Chinese home sales have defaulted since mid-2021, according to analyst estimates. Homes have been left unfinished. Suppliers haven’t been paid. And some of the millions of Chinese people who put their savings in property-linked wealth management products face the prospect of not getting their money back.Evergrande’s properties were “sold as a speculative investment, not sold as a place to live,” said Anne Stevenson-Yang, managing principal at J Capital Research in…
Original from www.reuters.com