“Ocean Flower Island”, symbol of the madness of grandeur of real estate developer Evergrande

Published on : 01/05/2022 – 5:32 PM

Ten days to destroy 39 buildings covering nearly 435,000 m² on the largest artificial island in the world. The over-indebted Chinese real estate giant Evergrande said on Tuesday (January 4th) that it intended to act “in accordance with the demolition order of the local authorities in Hainan. [région du sud de la Chine]”.

Officially, the construction of these buildings was made in violation of local environmental regulations. These buildings are said to be a threat to the coral reefs in the region.

Three artificial islands on 800 hectares

This is a new blow for the group on the verge of bankruptcy, which since September 2021 has been trying to find ways to repay the $ 300 billion in debt it has accumulated. The quotation of Evergrande’s share was even temporarily suspended on Monday to prevent the announcement of the demolition order from further sinking its price. who has already lost more than 80 % of its value for a year.

If this new twist in the Evergrande saga has aroused such renewed concern for the developer’s future, it is because it affects one of the jewels of his real estate empire: the controversial “Ocean Flower Island” project.

It is a set of three artificial islands in the shape of a flower which should eventually extend over 800 hectares, or 1.5 times the size of the famous Dubai Palm Islands. In many ways, this project combining a tourist complex, a cultural district and immense residential districts symbolizes more than any other project the madness of the grandeur of Evergrande’s heyday.

So of course, the real estate giant hastened to clarify that the demolition order concerned only part of the subdivisions supposed to be able to accommodate this year more than 110,000 inhabitants. But the simple fact that the authorities of Danzhou, the city on which the “Ocean Flower Island” depends, have decided to crack down is, for Evergrande, “very bad publicity which will further erode the confidence that investors could still have”, said insured at Bloomberg Kenny Ng, analyst for Everbright Sun Hung Kai Co, a Chinese financial advisory firm.

The municipality of Danzhou had, in fact, given free rein to the madness of the grandeur of Evergrande for nearly ten years. Even though from the outset, in 2012, the “Ocean Flower Island” project was suspected of being carried out without taking into account environmental protection regulations, and its promoters had to face challenges. corruption charges relating to obtaining building permits.

But it must be said that the promise of Evergrande with its “Ocean Flower Islands” had enough to make the authorities of Hainan salivate, an island province in the south of the country often presented as “Chinese Hawaii”. These immense artificial islands fit perfectly into the grand design of the government which wants to transform this region in international capital of tourism.

Luxury hotels, an amusement park and serial controversies

The promoter had promised to put 160 billion yuan (22.2 billion euros) on the table to transform the maritime landscape off Danzhou into a complex comprising two artificial islands reserved for housing and a huge third island entirely dedicated to entertainment. and tourism.

When, in 2015, Evergrande laid the foundation stone for his project, he began with his artificial paradise for tourists. Erected on the island number 1, it includes – for an investment of more than 10 billion dollars – luxury hotels, a giant American-style shopping center, a water park, an amusement park in the world of fairy tales, a mansion for celebrating weddings, a botanical garden and a gigantic 90,000 m² conference center. Culture lovers also have the right to a museum, several art galleries and an opera house.

Evergrande will take five years to finalize the construction of island number 1 and the first 60,000 homes. Meanwhile, the local government in Hainan has imposed a fine of almost 30 million euros to developers, from 2015, for breaches of the rules for the allocation of construction permits. Chinese environmental authorities, for their part, wanted to stop, in 2017, the construction of certain housing units because the site risked damaging marine ecosystems, but the mayor of Danzhou ignored this advice. Three years later, this local councilor was arrested and sentenced to life imprisonment for corruption in several cases including that of “Ocean Flower Islands”.

Was the game worth the candle? In any case, the tourist complex is not unanimous since it arrived, in 2021, in first place of the top 10 of the “ugliest real estate projects in China”, note it Washington post. On the other hand, it has attracted a lot of people: since this floating tourist Ali Baba cave opened its doors in December 2020, it has welcomed more than five million visitors.

A success that Evergrande will have difficulty confirming in 2022. The demolition order for the 39 buildings was taken in parallel with an injunction to stop all construction on these artificial islands.

For the promoter, this is not only a serious setback for its ambitions in tourism. This obligation to destroy buildings in order to preserve the environment deprives him of goods that he could have resold in an attempt to pay off part of his $ 300 billion in debt. This decision will also have a more global impact on the value of the entire project, underlines the Wall Street Journal, since the injunction signals that the local authorities have decided to prioritize the protection of local nature over crazy real estate projects.