Economic Observer reporter Tian Guobao

On September 17th, 80% equity of Shenzhen Longma Real Estate Development Co., Ltd. (hereinafter referred to as "Longma Real Estate") was listed on Alibaba Asset Management with a starting price of 50.658 million yuan. It is planned to be publicly auctioned on December 22nd. The equity was originally scheduled to be auctioned for the first time on October 20th, but was later withdrawn due to the need to further verify the asset situation. This is the relisting after withdrawal.

This is not a simple equity auction.

Longma Real Estate is the development entity of the Sanlian Land Consolidation and Benefit Coordination Project (hereinafter referred to as the "Sanlian Project") in Longhua District, Shenzhen. According to the plan announced by Longhua District in September 2021, the planned reserved residential area for the project is 160900 square meters, which is still under renovation.

After the exposure of real estate liquidity risk, a group of urban renewal projects with private enterprises as the main development body have fallen into difficulties, and related enterprises are unable to continue investing and unwilling to withdraw. The same goes for the Sanlian project, where the equity of Longma Real Estate was frozen due to shareholder debt issues, and the transfer price of the equity could not be negotiated, ultimately leading to a legal auction.

A Shenzhen real estate developer explained that urban renewal projects require large investment, long cycles, and complex interests, making it difficult to revitalize through conventional commercial channels when problems arise. Since 2024, some companies have attempted to resolve legacy issues through judicial auctions.

Previously, urban renewal projects such as Hubei Coordination Area in Luohu District, Hengling Old Village in Longhua District, and Nanshan Nanyou Fuhua Factory in Shenzhen had already disposed of their equity through judicial auctions, cleared out the shareholders who had suffered losses, and revitalized previously difficult to advance urban renewal projects.

Judicial Auction

The Sanlian project was included in the first batch of land consolidation benefit coordination pilot projects in Shenzhen in 2015. In June and August 2016, Longma Real Estate signed a cooperation and development intention agreement and a "Land Preparation Project Cooperation and Development Agreement" with the land owner, Shenzhen Longhua Hebei Co., Ltd. (hereinafter referred to as "Hebei Co., Ltd."), becoming the sole partner and development entity of the project.

Land consolidation benefit coordination is a unique urban renewal model in Shenzhen. Under the leadership of the government and with the former rural collective economic organizations as the implementing entities, the historical unfinished land within the area will be uniformly confirmed, cleared and integrated. The government will return some of the land as reserved land, while the rest will be nationalized.

Longma Real Estate does not directly hold the ownership of the reserved land for the Sanlian project, but only enjoys the cooperative development income rights of the reserved land. After the construction of the reserved land, the basic building area will belong to Hebei Stock Company and be used for the relocation and resettlement of villagers; The supporting building area shall be transferred to the government free of charge; 40% equity of the remaining shared building area belongs to Hebei Stock Company, which will be distributed according to the agreement between Hebei Stock Company and Longma Real Estate. This is Longma Real Estate's main source of income as the development entity.

The Sanlian plot is located in Longhua Street, Longhua District, Shenzhen, with an implementation area of 179400 square meters. It is planned to retain two plots of land totaling 37300 square meters, with a planned capacity of 231000 square meters, including 160900 square meters of residential buildings (including 20000 square meters of public housing) and 54800 square meters of commercial offices.

Longma Real Estate was initially wholly owned by Shenzhen Jade Property Management Co., Ltd. (hereinafter referred to as "Jade Property"). In 2016, in order to raise funds for land acquisition and demolition, the project introduced Zhengzhou Jinsong Real Estate Group Co., Ltd. (hereinafter referred to as "Jinsong Real Estate") and Shenzhen Wenchuan Real Estate Development Co., Ltd. (hereinafter referred to as "Wenchuan Real Estate"), with each holding 10% of the shares and Jade Property holding 80% of the shares.

In April 2018, Jade Property registered a 60% equity change in Longma Real Estate under the name of Jinsong Real Estate. Afterwards, Jinsong Real Estate, Yushi Property, and Wenchuan Real Estate respectively held 70%, 20%, and 10% of the shares, and this registration structure has been maintained to this day.

According to the business registration information, the 70% equity of Longma Real Estate held by Jinsong Real Estate has been frozen by the Zhengzhou Intermediate People's Court, with a freeze period until July 23, 2027; The 20% equity of Longma Real Estate held by Jade Property has been frozen by the Longhua District People's Court in Shenzhen, with a freeze period until August 6, 2029.

The applicants and executors for this auction are Jinsong Real Estate and Wenchuan Real Estate. The asset evaluation report attached to the listing states that the auction targets include 60% equity of Longma Real Estate registered under Jinsong Real Estate and 20% equity of Yushi Property. The remaining 10% equity under Jinsong Real Estate and the 10% equity held by Wenchuan Real Estate are not included in the auction scope.

According to the listing documents, the assessed value of all equity of Longma Real Estate shareholders is 90.4609 million yuan, and the total assessed value of the two parts of equity auctioned this time is 72.3687 million yuan, with a starting price of about 70% of the assessed price.

A person close to Longma Real Estate told Economic Observer that the land to be prepared for the Sanlian project involves 535 plots, and a total of 181 plots and 7 above ground buildings have been reclaimed; Longma Real Estate initially invested around 40 million yuan to obtain the Sanlian project, and after Jinsong Real Estate invested, it gradually invested 630 million yuan.

Deadlock

After Jinsong Real Estate invested in Longma Real Estate, the progress of the Sanlian project was not smooth. The relevant land parcels to which the project belongs have been included in the industrial block line, and the progress of applying for transfer is slow. In addition, the project has not been approved by the competent department's meeting minutes for a long time.

In the face of increasing project uncertainty, in January 2019, Jinsong Real Estate and Wenchuan Real Estate wrote to Yushi Property requesting to withdraw from the cooperation, but negotiations were unsuccessful. In June of the same year, two companies filed a lawsuit with the Shenzhen Intermediate People's Court (hereinafter referred to as the "Shenzhen Intermediate Court"), demanding the termination of the cooperation agreement and the return of investment funds.

In September 2020, the Shenzhen Intermediate People's Court ruled to terminate the cooperation agreement, requiring Jade Property to return an investment of 632 million yuan to Jinsong Real Estate and Wenchuan Real Estate, and pay an annual interest rate of 15% for the use of funds. The judgment also specifies the steps for withdrawal, which are to first establish a joint management account and terminate the joint management of equity. After the refund is paid to the joint management account by Jade Property, the equity will be reversed and the funds will be released.

At the beginning of 2021, Jade Property, Jinsong Real Estate, and Wenchuan Real Estate respectively applied to the court for compulsory enforcement. Due to different understandings of the implementation steps between the two parties, the refund and equity reversal have been delayed.

The execution ruling of the Shenzhen Intermediate People's Court states that the materials jointly managed by both parties include valuable documents such as 158 pieces of homestead land and purchase vouchers for 7 buildings stored in the safe deposit box of Longhua Branch of Shenzhen Rural Commercial Bank, as well as the original official seal, financial seal, and business license of Longma Real Estate stored in the safe deposit box of Yushi Property Office.

Jinsong Real Estate and Wenchuan Real Estate believe that Yushi Property did not provide repayment guarantee, and the court needs to simultaneously seal it when releasing joint management. Jade Property believes that the other party's refusal to terminate joint management and return equity has led to the stagnation of the project.

Just as the three companies failed to terminate their cooperation, there was a turning point in the Sanlian project.

In September 2021, the Urban Renewal and Land Consolidation Bureau of Longhua District, Shenzhen announced the implementation plan for the land consolidation benefit coordination project of Sanlian plot, and the land value increased accordingly. Afterwards, the two sides negotiated multiple times and attempted to introduce local real estate companies and state-owned enterprises in Shenzhen to take over, but failed to reach an agreement due to differences in transfer prices.

In July 2022, the Shenzhen Intermediate People's Court ruled to seal the above-mentioned jointly managed materials. In May 2024, due to a guarantee dispute between Jinsong Real Estate and Zhongyuan Bank, the 70% equity of Longma Real Estate under Jinsong Real Estate was frozen by the Zhengzhou Intermediate People's Court, and was frozen again in July of the same year.

In July 2024, the Shenzhen Intermediate People's Court issued a notice of deadline for performance, requiring Jade Property to pay a total of 940 million yuan in investment funds and fund usage fees, after deducting the late performance fee payable by the other party, to the court's execution account within 15 days. Jinsong Real Estate and Wenchuan Real Estate have raised objections to the execution, stating that the payable amount is 1.443 billion yuan and no deductions should be made. In July 2025, the Shenzhen Intermediate People's Court ruled to reject the objection.

After the approval of the Sanlian project, both Jade Property and Jinsong Real Estate were unwilling to withdraw at cost price and hoped to lead the project and introduce new partners to obtain greater profits. However, neither party had sufficient funds to continue investing, and the equity rotation could not be completed; And most of the equity has been frozen, making it difficult for new investors to enter, and the initial investment cannot be recovered.

Judicial auction has thus become an option for addressing the remaining issues of the tripartite project.

Solve The Problem

The Sanlian plot project is still in the preparation stage, and Longma Real Estate enjoys the right to cooperative development benefits, rather than land or construction projects that can be disposed of separately. The compensation for demolition, land price, and various expenses paid in the early stage are all deposited in the project company, and the transfer of the project mainly relies on equity transactions.

Compared to ordinary residential projects that can be exited through the transfer of assets such as land and construction in progress, these types of projects rely more on equity transfer. Once the equity is frozen or queued for freezing by multiple creditors, even if the merger and acquisition negotiations reach an agreement, it is difficult to complete the delivery.

The above-mentioned Shenzhen real estate enterprise personnel stated that the disposal of such projects often requires court intervention, and the frozen equity is disposed of through judicial auctions to create conditions for new entities to enter.

The person close to Longma Real Estate mentioned above said that there have been several other investors who were willing to acquire projects at a certain premium on the basis of already invested funds, but were unsuccessful because the shareholders believed that the project value was undervalued.

Previously, some projects in Shenzhen have resolved similar issues through judicial auctions.

The Luohu Hubei coordinated area was once one of the largest urban renewal projects in Shenzhen. In 2011, China Resources Land intervened in the project, and the project applicant was China Resources Land (Shenzhen) Development Co., Ltd. (hereinafter referred to as "China Resources Land Shenzhen"), whose shareholder was Shenzhen Hubei Shunrun Investment Co., Ltd. (hereinafter referred to as "Hubei Investment"). Hubei Investment is 60% owned by China Resources Land, with China Resources Shenzhen Trust and Shenzhen Yunxiang Industrial holding 20% each.

In September 2022, the A4 plot of the Hubei Overall Planning Area project began pre-sale. Starting from 2023, Hubei Investment has become a debtor multiple times, and the equity of China Resources Land Shenzhen has been frozen multiple times, hindering the progress of the project.

In July 2024, China Resources Land, as the applicant for execution, listed and auctioned 100% equity of China Resources Land Shenzhen on JD Asset Management. However, the execution was postponed due to objections raised by stakeholders. In September 2025, China Resources Shenzhen Trust, as the applicant for execution, listed the 20% equity of Hubei Investment held by Shenzhen Yunxiang Industrial on Alibaba Asset Management. It was ultimately acquired by China Resources Shenzhen Trust for 444 million yuan.

In November 2025, the A9 plot of the Hubei Overall Planning Area project completed its planning adjustment, and the project began to accelerate its progress.

The Longhua Hengling Old Village project was originally developed by Pengpai Real Estate, a subsidiary of Jiazhaoye. In 2021, it was introduced by Hefan Investment, which holds a 45% stake. After Jia Zhaoye's accident, its 55% stake in Pengpai Real Estate was auctioned multiple times in 2024, and finally won by He Fan Investment in October 2024.

The implementing entity of the Nanshan Nanyou Fuhua Factory project is Shenzhen Blue Space Creative City Infrastructure Co., Ltd. (hereinafter referred to as "Blue Space"), jointly established by Hualian Holdings and Century Star Source. After Century Star Source's accident, its 25% stake in Blue Space was auctioned multiple times and ultimately acquired by Hualian Holdings.

The situation of these projects is similar, with shareholders facing liquidity risks, project progress hindered, and ultimately relying on judicial auctions to clear out risky shareholders. And those who take over are mostly the original shareholders, who have already accumulated funds in the project. Increasing their holdings is not only related to whether the initial investment can be recovered, but also to who will lead the subsequent development.

After the equity relationship is clarified, the project still needs to go through the process of expropriation, demolition, construction, and capital recovery. The taking over party needs to calculate not only the bidding price, but also the funds and time required to complete the project.

(Author Tian Guobao)