Real Estate Business Sold for Just 1 Yuan! This State-Owned Enterprise Responds to Shenzhen Stock Exchange Inquiry

Since announcing its exit from the real estate sector, *ST Zhongdi (000736.SZ) has been under close market scrutiny.

Late on July 25, the state-owned enterprise quietly disclosed several announcements, including its response to the Shenzhen Stock Exchange’s inquiry on the major asset sale, transaction reports, and independent financial advisor opinions.

The announcement revealed that this once "100-billion-yuan sales target" property developer plans to transfer its real estate development-related assets and liabilities to its controlling shareholder, CCCC Real Estate Group Co., Ltd., for a transaction price of just 1 yuan.

However, the Shenzhen Stock Exchange raised multiple questions regarding the necessity of the transaction and the sustainability of future operations.

According to CCCC Real Estate’s response, the primary reason for exiting the real estate business is mounting financial pressure. In 2022, 2023, and 2024, the company’s net profits attributable to shareholders were 34 million yuan, -1.611 billion yuan, and -5.179 billion yuan, respectively, with its real estate business significantly dragging down performance.

In the past year alone, CCCC Real Estate’s operating revenue, net profit, and net profit attributable to shareholders were 18.302 billion yuan, -6.396 billion yuan, and -5.179 billion yuan, respectively. Meanwhile, the assets to be divested contributed 17.252 billion yuan, -6.426 billion yuan, and -5.228 billion yuan in the same metrics, confirming that the company’s losses were primarily from real estate.

Due to persistent poor performance and negative net assets by the end of 2024, the company was placed under delisting risk warning starting April 16. Additionally, its debt-to-asset ratio stood at 89.75%, with 57.644 billion yuan in outstanding financing, making debt repayment a major concern.

Under the combined pressures of losses, delisting risks, and debt, CCCC Real Estate decided to fully divest its real estate business.

Post-transaction, the company’s total assets will drop from 107.698 billion yuan to 2.036 billion yuan, and operating revenue will shrink from 18.302 billion yuan to 1.097 billion yuan. However, net profit will improve from -5.179 billion yuan to 91 million yuan, and its debt-to-asset ratio will decline from 89.75% to 40.17%. Meanwhile, cash reserves will decrease from 8.645 billion yuan to 997 million yuan.

After exiting real estate, CCCC Real Estate will shift its core business to property management and asset management. As of 2024, its managed property area reached 62.65 million square meters, with 1.218 billion yuan in annual contract orders. The company believes its existing projects are stable, customer attrition is controllable, and performance can remain steady.

The shift toward a "lighter" business model also reflects broader industry trends, according to CCCC.