Caixin Development's Lu Shengju is on the edge of a cliff.
Zebra Consumer Yang Zhe
Like Huang Hongyun of Jinke Co., Ltd. (000656.SZ), Lu Shengju made his fortune in Fuling in his early years and later moved to Chongqing to delve into the real estate industry. The difference is that his Caixin Group relied on its real estate business as a foundation and gradually expanded into the financial sector. At its peak, it held licenses for securities, insurance, trust, funds, and more, weaving a vast financial empire.
Now, the financial empire Lu Shengju painstakingly built is collapsing step by step. Following the crisis at its subsidiary Hua'ao Trust last year, Caixin Real Estate and Caixin Group have also reached the edge of a cliff.
According to an announcement from Caixin Development (000838.SZ), these two companies have recently applied for pre-reorganization to the Fifth Intermediate Court of Chongqing and completed the filing registration. This does not mean immediate reorganization, as the key lies in the attitude of creditors.
As the only listed company under Caixin Group, whether the control of Caixin Development will change due to reorganization has drawn particular attention. At yesterday's close, the company's stock price was 2.69 yuan, down 2.89%, with a total market capitalization of 2.96 billion yuan.
Pre-Reorganization
Caixin Development (000838.SZ) announced on October 19 that the pre-reorganization of its controlling shareholder and indirect controlling shareholder has completed registration and filing. Although this news was disclosed three days ago, it still leaves small and medium investors uneasy.
This news is indeed significant, as it not only affects the stability of the listed company's control but also relates to the future of this real estate company—whether and how the reorganization will proceed.
Currently, this is only the first step before formal court acceptance of the reorganization. Whether the reorganization proceeds depends on further communication and support from creditors. Whether the reorganization happens and whether it succeeds remain uncertain.
According to the announcement, Chongqing Caixin Real Estate Development Group Co., Ltd. (hereinafter referred to as Caixin Real Estate) holds approximately 399 million shares of the listed company, accounting for 36.25% of its total shares, all of which are pledged and frozen. Chongqing Caixin Enterprise Group Co., Ltd. (hereinafter referred to as Caixin Group) is the controlling shareholder of Caixin Real Estate, holding 100% of its shares.
A preliminary review shows that the pledges and freezes on Caixin Real Estate's shares mostly stem from financial loans and engineering disputes. Since May this year, it has been executed 13 times by courts such as Jiangbei District Court of Chongqing, Chengdu-Chongqing Financial Court, and Chongqing First Intermediate Court, with a total execution amount of approximately 785 million yuan. Additionally, there are nine closed cases with a total execution amount of about 4.667 billion yuan, with a 100% non-performance rate.
Data shows that among the 108 cases involving Caixin Real Estate, the company was the defendant in lawsuits totaling 6.623 billion yuan.
Caixin Group is in even worse shape, with 129 cases where it was the defendant, involving lawsuits totaling 9.712 billion yuan. Since December last year, it has been executed 10 times, with a total execution amount of about 1.481 billion yuan. Additionally, there are 16 closed cases with a total execution amount of approximately 6.186 billion yuan and a non-performance rate of 97.98%.
As the core figure of Caixin Group, Lu Shengju holds 40.897% of its shares. He has already been subject to judicial measures such as execution and restrictions on high consumption, with a total execution amount of about 1.456 billion yuan.
Struggling Real Estate Business
The crisis at Hua'ao Trust last year revealed the tip of the iceberg for Caixin Group. Now, Caixin Real Estate and Caixin Group are seeking to resolve their difficulties through reorganization, meaning Lu Shengju has laid the risks of Caixin Group bare.
This may truly be a last resort, as Caixin Development, the only listed company under Caixin Group, has little chance of recovering significantly in the current real estate market.
From 2021 to 2023, the company's net profit attributable to shareholders suffered consecutive losses, totaling approximately 1.219 billion yuan. It was only in the first half of this year that the situation improved.
In the first half of the year, its operating revenue and net profit attributable to shareholders were 645 million yuan and 9.71 million yuan, respectively, representing year-on-year changes of -69.10% and +118.61%. Although it has turned a profit, sustained recovery is difficult in the current real estate market environment.
In the first half of the year, the company had no new construction projects, with completed construction area of about 46,200 square meters and settled area of about 120,000 square meters. Relying on existing resources, it signed sales contracts for 47,500 square meters, with sales amounting to approximately 234 million yuan.
Since 2021, the company has not added any new land reserves. As of June, its only remaining land reserve is the Zhenjiang Shangshufang project, with a total construction area of 227,400 square meters and a remaining developable area of 67,700 square meters.
In addition, the company has three rental projects: Guoxing·Haitang International, Guoxing·North Coast Jiangshan, and Caixin City, located in Dazu District, Dazu District, and Shizhu County of Chongqing, respectively, with rentable areas of 7,172 square meters, 2,448 square meters, and 1,520 square meters. Their average occupancy rates are 51.26%, 100%, and 29.28%, respectively.
From January to June, the company's real estate business generated revenue of about 590 million yuan, down 71.20% year-on-year. Only the environmental protection segment saw a 39.33% year-on-year increase in revenue, but its scale was small at 54 million yuan, accounting for 8.42% of the company's total revenue.
As of June this year, the company's monetary funds were about 166 million yuan, insufficient to cover short-term borrowings of 28.1845 million yuan and non-current liabilities due within one year of 283 million yuan.
The Mysterious Tycoon
Lu Shengju spent over 20 years meticulously building the vast Caixin capital empire, but he has always been low-key and mysterious, making it difficult for outsiders to even find recent photos of him.
He started as a purchasing agent at Dazu County Ironware Factory and, in the 1990s, seized the opportunity of reform to gain control of Fuling Shudong Industrial. These rags-to-riches stories are often talked about in the public.
His first major splash in the business world came in 2006 when he publicly competed for land at No. 600 Jinlong Road, Yubei District, Chongqing. Four years later, the Caixin City International Plaza standing on this land became a local landmark.
Under Lu Shengju's personal direction, many such buildings have risen in Chongqing, including the New Century Building on Guanyinqiao Bubujie, North Coast Jiangshan, and Jiangbeizui Caixin Plaza.
Beyond real estate, Lu Shengju continuously expanded his boundaries. In 2010, he acquired shares in Guoxing Real Estate, later increasing his holdings to become the actual controller, officially entering the capital market. In 2015, Guoxing Real Estate was renamed Caixin Development.
After this battle, Lu Shengju became more convinced of the power of capital, and his ambitions grew.
In 2016, he led a consortium to the U.S. to initiate an acquisition of the Chicago Stock Exchange, drawing attention at home and abroad. After two years of twists and turns, the acquisition was ultimately rejected by the U.S. Securities and Exchange Commission, and Lu Shengju returned in defeat.
While his real estate peers fought for scale, Lu Shengju extended his capital reach into the financial sector. His Caixin Group rapidly expanded, acquiring licenses for banking, trust, insurance, funds, and microfinance through equity investments.
Caixin Group remains the eighth-largest shareholder of Chongqing Rural Commercial Bank (601077.SH) and a shareholder of Hua'ao Trust and Yinfeng Equity Investment Fund. Additionally, Caixin Investment Group is the third-largest shareholder of Zhongken Leasing.
Caixin Group was also the second-largest shareholder of Evergrande Life Insurance but decisively sold its stake for 1.969 billion yuan in 2021. Before and after this divestment, Lu Shengju may have already sensed danger.
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