The source of profiteering in the Clear Water Bay project

Yin Feng/Wen February 11, Morgan Stanley (hereinafter referred to as "Morgan Stanley") in a filing to the U.S. Securities and Exchange Commission, said a Chinese real estate fund employee from Morgan Stanley was suspected of bribery.　　Morgan Stanley in the domestic bribery after the incident was opened, the Habitat Lok and Morgan Stanley cooperation in the development of Hainan Clear Water Bay Project, was involved in the vortex. The mystery of the shoot hanging 2005, due to clear Water Bay 12 km to the southeast of the coastline has great tourism development value, Hainan Lingshui County Government will adjust it to the tourist attractions, land development area of about 20,000 acres.　　At the end of 2005, Hong Kong Henderson Group, Sanya Silver Bay and other companies are interested in the development, but ultimately, Accor music stand out. But at that time, the agile is not eye-catching, just Pianan in Guangdong Zhongshan Regional real Estate company.　　2002-2004, the sale income of the agile is 760 million yuan, 1.9 billion yuan and 2.5 billion yuan respectively, the profit is-10.2 million yuan, 73.1 million yuan and 230 million yuan. At the beginning of 2006, Accor le Clear Water Bay Project infrastructure supporting project started, in August, ya ju le and Lingshui County government signed a clear Water Bay development Cooperation Agreement, the two sides cooperate in land level development.　　Under the agreement, Accor became the main developer of Clearwater Bay Project, 10 years is expected to invest 13 billion yuan phased development, of which the first 3 years to complete the project infrastructure and two top hotel construction, the total investment of 3 billion yuan, 6 years total investment 7 billion yuan, 9 years total investment 12 billion yuan, 10 years in 13 billion yuan. February 2007, the Lingshui County government will be a total area of clear Water bay 4.5 million square meters of land divided into 12, "Zhao hang" public transfer of state-owned land use rights.　　The total construction area of this part of the land is 2.96 million square meters, and the total cost of developers for these plots is not less than 5.3 billion yuan. In the end, the Agile Real Estate Development Co., Ltd. (hereinafter referred to as "Hainan ya Ju le") to 226 yuan/square meters, a total of 1 billion yuan of the total price of the land to compete for the entire use of the block.　　Of these 12 plots, in addition to the top resort hotels, sea View Resort and Spa Resort Hotel three of the transfer period of 40, the remaining plots of the lease life of 70 years. According to our data, the 12 plots were priced at 183 yuan/sq m, and Accor won only 23% of the premium rate. Such low pricing is inconceivable for local governments, which use land as a major source of revenue. November 2007, Lingshui County Land and resources department to sell Lingshui County County, the South trunk road marking 2007-026 of the plot, the price is 445 yuan/square meters.　　The site's location is worse than clear Water Bay, the price is nearly 2.5 times times the Clear Water Bay project, and the price is also much higher than that of the second time in 2008, the clear Water Bay two, 207 yuan/square metre of the transaction price. Why would Accor get to clear Water Bay massif at such a low price? The company did not give a reasonable explanation, but said that "the group has been planning and developing the Clear Water Bay project in Hainan since 2005 and has beenBuying land and development through legal procedures. "Behind-the-scenes mystery June 27, 2008, Morgan Stanley subsidiary Crystal?" I bought 775 million U.S. dollars (about 5.3 billion yuan) to buy a wholly-owned company in the capital investment 30% of the shares, Morgan Stanley evaluation of the share value of more than 2.5 billion U.S. dollars (about 15 billion yuan). And the Crown Gold investment through its wholly-owned BVI company 100% holding Hainan ya ju le. After the completion of the transaction, the United Kingdom in the Virgin Islands, the BVI company registered wholly-owned companies holding a 70% stake in the Crown gold, Crystal?? I hold the remaining 30% equity. At the same time, MS Ivestment and SSFIII Honolulu Fund respectively hold Crystal.　　I 70% and 30% rights, MS-SSFIII part of the interest. The timing of the deal is worth pondering.　　For the company, the direct benefit of the 30% stake is to whitewash the ugly financial data for the first half of 2008.　　In the first half of 2008, the company achieved sales revenue of 2.3 billion yuan, operating profit of 660 million yuan, the year-on-year decline of 26.7% and 45%, and the transfer of investment in the capital of 30% of its operating profit increased to 4.8 billion yuan, against the same period of increase 300%. But the catch is that, as early as the two sides signed the acquisition agreement a year ago, Morgan Stanley has three times to play money to the Accor wholly-owned subsidiary, Yu-Wing holdings, that is, June 22, 2007 to pay 1.5 billion yuan, October 10, 2007 to pay 1 billion yuan, June 20, 2008 to pay 1.05 billion yuan, a total of 3.55 billion yuan paid.　　According to the 2008 agreement between the two sides, the three payments are part of the entire acquisition plan, the remaining 1.8 billion yuan, Morgan Stanley will be paid four times. In fact, before the signing of the Agreement on the acquisition of Morgan Stanley and Accor, he did not make any announcements on this matter.　　In that case, before the first money was made in June 2007, the two sides had signed an agreement, otherwise, why would Morgan Stanley be willing to pay a huge sum for the pleasure? The material provided by Accor to this economist shows that Morgan Stanley has been involved in the clear Water Bay overall planning phase of the Lingshui County government. "Our 6 five-star hotels in Clearwater Bay is the introduction of Morgan Stanley Go-Between, at the same time, in the project developers in the hotel operators and the choice of terms and conditions, they also provide us with ideas and enlightenment." "The people said.　　In fact, Morgan Stanley was the sponsor of the 2005 Hong Kong listing. Since Morgan Stanley in 2007 has three times a total of 3.55 billion yuan to the music, then this money in the form of the financial system in the agile, and why not be confirmed by 2008?　　Ya Ju le didn't explain. Another question that deserves to be mentioned is, how is it possible for the company to apply the money to mainland project companies? According to the overseas listed real estate company return investment restrictions Ordinance, Ya Ju le need to the Foreign Exchange Administration (hereinafter referred to as "safe") application to be able to put the money into the mainlandCompany。 "Hainan Clear Water Bay cooperation belongs to the overseas cooperation, ya Ju le Investment in Hainan project funds including its own funds and offshore financing funds, all legal, after the Hainan Province relevant foreign trade and economic departments and the State Ministry of Commerce and Foreign Affairs authority for the registration of the registered capital mode of entry into the territory."　　"People in the area said. According to the information provided by Accor, the Hainan Agile has been approved by China Foreign Exchange Authority, its total registered capital increased by HK $1.19 billion, and agile will apply to the project company to further increase the total registered capital.　　In addition, once Hong Kong-1 (that is, the "Chak Gao Group") and Hong Kong-2 (that is, "the Hsiao Gao Group") have been approved by the AA for the registration of the Clearwater Bay Project company, and through the exchange of funds equivalent to the approval of the renminbi, Morgan Stanley acquisition of the end of the investment through Hong Kong-1 and Hong Kong-2 injection project company ("Domestic injection"). In addition, the acquisition Agreement stipulates that Morgan Stanley's shareholding in July 2008 to July 2011 can not be transferred, after the expiry of the transfer. Why is Morgan Stanley willing to cooperate with Accor in such harsh conditions?　　Morgan Stanley said it would be inconvenient to comment on the results of the internal investigation. Share profits because of the extremely low land price, the clear Water Bay project is enough to make the world of elegance and Morgan Stanley a full pot. In late March this year, the world began to sell its clear water clear Water Bay project, the first house average price of 8500 yuan/square meters, villa average price of 18,000 yuan/square meters.　　As of the end of 2008, the Clear Water Bay project is expected to complete the total construction area of 125,000 square meters, which means that sales revenue can be achieved 1.06 billion-2.25 billion yuan. In fact, these 125,000 square meters accounted for only 2.9% of the total residential area of Clearwater Bay. According to planning, the total construction area of the project is 7.3 million square meters, of which the construction area of residential projects accounted for 58%, 4.23 million square meters.　　At current prices, if all the residential projects in the clear Water Bay Project are fully developed, the minimum cumulative sales income is 36 billion yuan, and in addition to the sale of residential items, Accor Le also has luxury hotels and recreational facilities can generate revenue. In fact, the total price of clear Water Bay, which was scored three times before and after, was about 2.5 billion yuan, of which 4.5 million square meters of land in February 2007 were priced at only 1 billion yuan.　　This means that the cost of the land will be fully recovered by Accor's sale through the clear Water Bay first phase, and that even if the $13 billion construction fund is to be invested in the project in 10 years ' time, the agile and Morgan Stanley would share several profit margins.　　According to nicer 2002-2007 construction cost data speculated that in the total cost, the construction cost accounted for about 50%, the land cost accounted for about 30%, the remaining 20% for business tax, value-added tax and other taxes and expenses, and the cost of the share of sales revenue in about 60%. According to the normal project cost calculation, the Clear Water Bay Project House cost should be 5100 yuan/square meters, villa cost is 10,800 yuan/square meters, in which the floor price should be 1530 yuan/square meters and 3240 yuan/square meters. This means that the Clearwater Bay Project, the house everySquare meters gross margin of 3400 yuan, villas per square metre gross margin of 8000 yuan. Because the clear Water Bay project Floor price is only 230 yuan/square meters, therefore, the house and villas per square metre of gross margin will be increased by 1300 yuan and 3000 yuan, to 4700 yuan/square meters and 11000 yuan/per square metre, in other words, its corresponding product gross profit margin of 55% and 61% respectively.　　In terms of capital investment, profits were 122% and 156%, respectively.　　For Morgan Stanley, 5.3 billion yuan to acquire clear Water Bay Project company 30% shares, equivalent to the project company held a floor price of about 1800 yuan/square meters, the profits are also 3000 yuan/square meters and 9400 yuan/square meters, gross margin of 35% and 52% respectively. And the reason that agile and Morgan Stanley can make a big profit on the Clearwater Bay Project depends on the Lingshui County government giving concessions on the sale of premium.　　Of course, if the Clear Water Bay project is successful, the Lingshui County government can profit from the tax, but that should not be an excuse to transfer the land to developers. In addition, if the first global sale of Clearwater Bay is successful, then the investment in the follow-up development of Accor and Morgan Stanley is not big.　　Because ya le can rely on the sale of funds rolling into follow-up development, the actual need to invest in their own capital is not large, and Morgan Stanley can not only through the project company dividends to recover costs, but also a substantial profit. On the surface, Morgan Stanley's acquisition of the project company 30% Equity will lead to 5.3 billion yuan capital precipitation, but in the long run, not only a huge profit space, and the exit path is also quite clear. Morgan Stanley encountered latent rules Yin Feng/Vendamo domestic bribery was opened, Morgan Stanley original China Real Estate fund head of Gus. Peterson (Garth Peterson) immediately became the target of criticism.　　Gus joined Morgan Stanley's China Real Estate Fund in 2002, and was gradually promoted to the head of the fund department. This is not the first exposure to foreign bribery in China, before there have been Siemens, Lucent and other bribery, but unlike before, this is the Jieduan from Morgan Stanley. Why did Morgan Stanley do this?　　Why does Gus bribe in China, and by what means, to whom? Who squeezed the pus? Morgan Stanley internal investigation originated late last year.　　Affected by the financial crisis, Lehman Brothers, Merrill Lynch, Bear Stearns and other companies have been closed or bought, Morgan Stanley also had to shrink the size of assets to meet the regulatory requirements of capital adequacy ratio. Seeking foreign investors, Morgan Stanley turned to the U.S. government. September 21, 2008, the Federal Reserve announced the approval of the last two U.S. investment banks Goldman Sachs and Morgan Stanley into bank holding companies.　　After the transformation, Morgan Stanley must operate commercial bank deposit business in the United States, the Fed continued to provide the Bank discount window for Morgan Stanley, the Federal Deposit Insurance Corporation (FDIC) provides insurance for Morgan Stanley bank deposits. The Federal Reserve and FDIC have adopted strict regulatory measures against Morgan Stanley. Morgan Stanley insiders on the "Securities Market weekly," said, on the one hand, Morgan Stanley has a strict internal control mechanism; On the other hand, Morgan StanleyThe shift to bank holding companies faces tighter regulation, "it is better for us to take the initiative than to find internal problems in the regulatory layer." However, in Morgan Stanley's view, bribery is not worth the attention of the outside world. "We are not reporting to the SEC on the bribery itself, but we are referring to the daily filing documents we submitted to the regulators." "In the information sent to this newspaper, Morgan Stanley specifically asked reporters to pay attention to the paragraph order of the document.　　Morgan Stanley has continued to investigate the details of the bribery scandal until recently. Despite the pressure of the regulatory layer, shareholder pressure is also the reason for Morgan Stanley Self-Examination. Since 1991, Morgan Stanley has set up 6 real estate Trust investment funds, funded from North America, Europe, the Middle East and Asia pension funds, endowment funds, foundations and individuals, investment international funds include Msref III iternational and Msrefivinternational.　　Shanghai Real estate industry veteran in the "Securities Market weekly," said that in the financial crisis, pension funds, endowment funds, foundations and other institutions suffered serious losses, shareholders need to know the operation of Morgan Stanley real estate funds. "Before the subprime crisis, real estate funds from overseas banks, large funds through the leveraged solution, leveraged financing over the funds, 4%-5% interest rates dismantled, pension funds cheaper, and then transferred to China to invest in high return property." In a bad market situation, it will lead to a lever imbalance.　　said the person. When China's real estate market is booming, the market is flooded with opportunistic funds, radical funds and robust funds.　　Radical funds are relatively small, and their investment style is likely to risk more only when the market is good will there be more such funds; Once the market is stable, or once the market is in a high position, such a foundation is relatively small, because it will feel that the high margin is unlikely to last, the investment may have some risks.　　Another kind of real estate trust is similar to the investment in mature property, the fund is relatively large, the mainstream fund investment model, such as mature commercial properties, shopping malls, office buildings, etc. can generate a certain cash flow of the property is its target. "It will have its own investment assessment, such as the annual return on investment can not be less than the amount, once the rate of return is below an investment of its leverage will be unbalanced, profit if there is no way to meet the rate of dismantling, it will not be able to operate."　　said the industry personage. In fact, Morgan Stanley's investment in China is three different styles, but the results are the same-the projects are poorly run.　　In the Nanjingxilu plate of the East China Sea Square, after the market only completed 35% of the rental rate, Baoshan District of the Business Square Business Plaza, and the property sold to Morgan Stanley's Shanghai state-funded background enterprises are making pots full of pot. Morgan Stanley's acquisition of Shanghai Plaza also faces a lucrative problem. "The office is very delicate, the location of the Shanghai Square is problematic, and its area is not an office area." And Shanghai is very widefield, in the office to set up a supermarket in the area, it is impossible to profit, so the continuous loss. Later, after the relocation of people, only to get better.　　"Shanghai Real Estate Circle senior Personage, Shanghai municipal government real estate consultant, the former Shanghai University of Finance and economics, Professor Inhua, said to the securities market weekly." At the end of 2008, Morgan Stanley sold the Shanghai Plaza Mall, the East China Sea Plaza Office, the Baoshan District Commercial Plaza and three residential projects, but never found a buyer. "Now foreign real estate funds are basically out of the market. JPMorgan Chase, a replacement for Citi Real Estate fund, has poured out a lot of foreign property funds last year.　　"Zou Yi, general manager of Shanghai Five-hop think-tank, said to the securities market weekly." Gus, who is in charge of the China area of Morgan Stanley, has invested about 6 billion yuan, and the dismal investment results are hard to satisfy shareholders and management.　　And his immediate boss, Morgan Stanley Global real estate investment director Carcy (Sonny Kalsi) is also the administrative leave. "Unspoken rules" in addition to the agile clear Water Bay and other few projects, Morgan Stanley cast most of the real estate projects in Shanghai area.　　January 10, 2002, Shanghai Huangpu River Cross-strait Comprehensive Development planning officially launched, when the mayor Chen Liangyu proposed that the Huangpu River at present Cross-strait Bank line from the production-oriented to comprehensive service-oriented transformation, to achieve financial trade, tourism culture, ecological living function.　　Since then, the global investment fund has poured in, hoping to occupy a place in it, Hong Kong Sun Hung Kai, Hong Kong Henderson, the United States Rockefeller Group, Morgan Stanley Real Estate company, Merrill Lynch Real Estate Company, the new Huangpu, China Resources property, Shimao group and so on in its list. After so many funds come in, the biggest question is whether we can find a good project. "The money has to be quickly cast out, must find a reliable project to vote, this is a relatively large challenge." In addition to the difficulty of selling the exchange, real estate and stocks like the need to Amoy projects, and it is not like the stock market is trading information is open, the real estate is a private market, involving developers, government links, you need to have a very good local network, there is channel resources to get good projects, Otherwise such a good project on what to do for you. Rich people are, big developers can do, developers in the local can take, there must be their own channels and their own resources, you have to compete with others network, resources and channels, in order to get better than others project.　　Shanghai Real Estate industry people Frank. The first thing that foreign investors learn after they come in is to relate. "A lot of foreign real estate fund managers are foreigners, running outside are Chinese, is relying on these people to accompany the relevant departments of people eat and drink to find items."　　said the person. Morgan Stanley has been very successful in the development and maintenance of interpersonal relationships. There are three main lines in Gus ' relationship network: One is the Shanghai state-owned system enterprise, the other is the mainland real estate listed company with all kinds of related business of Morgan Stanley, and the third is Morgan Stanley's relationship network in Chinese political and business circles　　On this basis, Gus in China to establish a complex relationship between the political business circle. In this list, the most important state-owned enterprises are Shanghai wing YipGroup, Shanghai Sheng Rong Investment Co., Ltd. (hereinafter referred to as "Shanghai Sheng Rong") and Shanghai Allianz Investment Co., Ltd. (hereinafter referred to as "Shanghai Allianz"), the mainland real estate listed companies including Accor LE (3383.HK), Shanghai Forte (2337.HK), Greentown China (3900.HK), Shimao property ( 600823,0813.HK), decimating real Estate (2777.HK), the Golden Land Group (600383) and China's overseas development (0688.HK) and other large real estate companies.　　On the list of enterprises through the complex business dealings, to build a network covering China's entire range of power, the network of enterprises to each other occasion, mutual use. "Foreign real estate funds to develop mainland real estate, it is impossible to avoid bribery, because our real estate market is the approval system, there is rent-seeking space." Their funds are cost-approved for one day, and interest is the equivalent of an Audi car. Therefore, only through bribery can speed up the approval of relevant departments.　　People familiar with the matter said. "There are a lot of foreign-funded links, including land, project development planning and design projects need to be approved by the relevant government departments." Unless the background is very hard, the relevant departments will be in the approval of speed. For example, a Shanghai real estate enterprise is the central introduction down, in the approval aspect no one dares to card it. Sometimes, even if Morgan Stanley and other foreign investors have a deep background of the partners, but also need to dredge the relevant departments. "These foreign investors have mainland partners," he said. Direct acquisition projects for foreign capital is relatively simple: early participation in equity investment, the latter will be the acquisition of the project company back.　　Professor Inhua said. "The risk is that if you are working with the developers in China or investing in equity, it involves the integrity of the cooperation unit or the subject matter of the investment, if you buy the land without problems." But real estate funds generally do not buy their own development, are entrusted to a company to buy land, or packaging, foreign investment as a strategic partner; Money to buy, partners to contribute, and the project company managers, and then turn this into profit. How to find a good partner? Need it to carefully screen partners, this process will involve the inspection of the enterprise, the investigation of people, in fact, the nature and the same as VCs. "Zou Yi said.