Property veteran Song Weiping is known for not folding even in the toughest of times. So now, with things seemingly more or less back on track, why has he chosen to bow out?
Over the past few years as top policymakers have been bent on containing runaway urban home prices across China, Hangzhou-based developer Greentown China (03900.HK) has been dogged by bankruptcy rumors. Its worst days were in 2012 before Wharf Holdings (00004.HK) and Sunac China (01918.HK) swooped in to save the firm by the skin of its teeth.
Greentown’s business improved substantially in 2013 but then the unexpected happened. The market was caught off-guard by Sunac’s sudden offer to buy the firm and Song’s decision to pull out of Greentown two decades after he founded it.
No one foresaw how Song’s ties with his firm would end in such an abrupt way.
In an interview with Southern Weekend, Song opened up and said that Sunac chief Sun Hongbin is the best person to take over the Greentown wheel.
An emotional Song told the newspaper that he didn’t care how much he got out of the deal and he didn’t see the point in staying. Certainly Greentown’s financial standing is healthy enough to warrant him remaining at the helm — its 2013 contractual sales soared to 65.1 billion yuan (US$10.4 billion) with net gearing ratio dropping to 67 percent. But he said he has lost his faith in the realty sector.
Most of Greentown’s developments are in Zhejiang and throughout the Yangtze River Delta, an area hit hard by stalled external demand and lukewarm industrial investment. Many of the region’s factory owners and middle class — the majority of Greentown’s customers — have either waded into deep financial trouble or simply headed offshore, Song added.
Then there is an alternative theory about Song’s share sale—the succession issue.
In recent years many sizable private firms have been passed from the hands of their founders to their children or professional managers. But it could be a touchy subject at Greentown given Song, 55, does not have children and, Shou Bainian, Greentown CEO and Song’s closest ally, turns 61 this year. Shou is reported to be in poor health and started planning to retire as early as 2009.
Another rumor had it that Song had amassed massive gambling debts in Las Vegas, forcing him to sell his firm. Song denied this to Southern Weekend but admitted that he does love gambling. Greentown has no doubt been his biggest bet on China’s realty sector but this time the veteran gambler has decided to get out of the game.
When asked about his plans for the future, Song mentioned construction, elderly care services and agriculture. Greentown Construction, an entity founded in 2010 that is not part of the listed arm, has emerged as a major contractor in Zhejiang province on the strength of its parent’s reputation for quality. He has already begun testing elderly care services at some of Greentown’s developments and plans to build well-fitted nursing homes. As for agriculture, Greentown Agriculture is expected to soon reap rewards from organic fruit and vegetable production.
One thing Song can surely count on is that he has more than just a business relationship with Sunac’s Sun, now Greentown’s largest shareholder. Not only did Sun lend a helping hand during Greentown’s 2012 crisis through the acquisition of several of the latter’s unfinished projects, Sun owns a Greentown home in Wuxi and has more than a passing interest in Song’s focus on premium products. With a small remaining stake, Song can still wield some influence at the firm that he founded.
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