Reborn, back to a small county town to become a wealthy family

Chapter 692 Come prepared
Dong Xuan chose an inconspicuous location, but the dishes she made were delicious and visually appealing.

Drunken crab marinated in June, steamed wild yellow croaker weighing just over a pound, braised pork with three kinds of shredded vegetables, lion's head meatballs made with water chestnuts and meat, and soup made with wild perch weighing less than half a pound—every dish is meticulously prepared from ingredients to processing. Coupled with extremely high culinary skills, each dish has received high praise from diners.

For this kind of occasion, pairing dinner with Shikumen Shaoxing wine is most appropriate.

"call"

Once he started eating, he didn't want to stop until he was about half full, at which point Luo Yang finally let out a long sigh of relief.

"So, Mr. Luo, are you satisfied with the location I chose?"

Dong Xuan was definitely not a first-timer here, so she was the most free during the meal, either serving food to Chu Xinyao or pouring wine for Luo Yang.

Seeing Luo Yang put down his chopsticks, he immediately started to steer the conversation.

"Not bad, really good."

While praising the place, Luo Yang said, "If the Suzhou Creek next to it could be cleaned up and the environment improved, it would be hard to find a table here in the future."

"The city does have this idea."

There are four of us tonight, at one square table, so each of us can occupy one side.

Chu Xinyao, sitting opposite Luo Yang, put down her chopsticks and looked up to reply, "But this is a long-term process. It not only requires cleaning the river itself, but also cutting off the pollution sources flowing into the Suzhou River at their source. Therefore, the entire project is quite costly."

"Shanghai's fiscal revenue can support it."

Luo Yang smiled and said, "Selling one more plot of land each year will cover the cost of land reclamation."

After saying this, Chu Xinyao was slightly taken aback.

The first sentence was about dinner, but after a few sentences, Luo Yang steered the conversation to real estate.

The topic we're going to discuss tonight is related to the building we're developing.

If this was intentional control, then Luo Yang's ability to control the situation is terrifying.

"It's easy for the government to auction off a piece of land, but for the companies that buy it and develop it, it all depends on luck."

Dong Xuan immediately grasped the key point and continued the conversation: "If the market environment is good, all the funds may be recovered when the project is only one-third complete. But if the market environment is bad, like the building that President Luo has his eye on, let alone making money, it would be good enough if it didn't become an abandoned project."

"The market for residential projects has been fairly good in the past two years."

Luo Yang smiled and said, "Commercial building projects are generally difficult to develop purely for commercial purposes unless they are built and used by a strong company or a state-owned enterprise with plenty of money to create a heavy asset asset."

"Yes, take that commercial building that Mr. Luo has his eye on, for example. It was acquired by Zhaohe Real Estate at a high price four years ago. Because this land is located near Xinzhuang Station on Metro Line 5 and close to Humin Road, its geographical location is quite superior. Therefore, the plan is to create a secondary commercial center connecting Minhang and Xuhui districts."

Dong Xuan's familiarity with this project was extraordinary; she could easily and meticulously explain the background and consequences.

She revealed the root cause, saying, "The project went smoothly in its early stages, but it encountered difficulties starting at the end of 08. This was because those years coincided with the US subprime mortgage crisis, and most of Zhaohe Real Estate's overseas projects faced crises, leading to a near-drying of Zhaohe Real Estate's cash flow. Consequently, the domestic projects were also affected."

Without the support of headquarters funding, the entire project began to encounter difficulties.

The only thing that allowed them to get to the top was borrowed funds and overdue payments for the project.

Perhaps Zhaohe Real Estate also understands that only by completing the main structure of the project can it be sold at a good price. If it becomes an unfinished project, it is not impossible to sell it, but the value will be reduced by more than just a little.

"As far as I know, the building can be pre-sold when the main structure is one-third complete."

Luo Yang asked curiously, "Don't developers use pre-sales to recoup funds?"

"A commercial building that's twenty or thirty stories high, and it took four years just to get the main structure topped out. Who would dare buy it under those circumstances?"

Dong Xuan responded with a smile, then explained, "Construction was halted once before the building even left the foundation pit. Later, due to multiple rounds of financing and borrowing during construction, the project had to be suspended for several months each time. If you were the homeowner, would you dare to buy such an off-plan property?"

That's true. When commercial buildings like these are sold in subdivided units, the starting price is several hundred or even a thousand square meters. After all, once purchased, they are rented out to others for office space, so a smaller area really won't do.

Commodities of this size, combined with housing prices in Shanghai, would start at tens of millions of yuan, or even hundreds of millions.

If you really want to invest, how could you not find a suitable option in a city like Shanghai?
Why take the risk of buying an off-plan property that might end up unfinished?

"I really wouldn't dare take such a risk."

Having seen this kind of thing many times, Luo Yang added a guess: "I even suspect that there is a behind-the-scenes power struggle between the Shanghai project company and Zhaohe headquarters."

"How to say?"

Chu Xinyao became curious after hearing this and interjected with a question.

"Because the headquarters is facing funding problems, if the branch offices have money, they will definitely allocate funds."

Luo Yang shrugged and said, "But from the perspective of the Shanghai project company, if the only funds are diverted, or if the funds raised from pre-sales are withdrawn, causing the project to ultimately fail to be completed, not only will they owe the bank money, but the homeowners who bought the houses will also cause them trouble!"

Without needing to explain everything, just mentioning this much was enough for the other three to understand.

As long as there are no pre-sales, even if the project runs into problems in the end, the project company will only owe money to the bank and the construction company. In the end, the building will simply be taken back by the bank, auctioned off, or mortgaged. It's not a big problem.

However, if a portion of the project is pre-sold, and problems arise in the future, the debt will have priority over the banks.
Those homeowners who paid for off-plan properties but couldn't even get their collateral back would be furious. Moreover, the buyers who invest in commercial buildings are all people with some money. If these people cause trouble, the project company will definitely be unable to handle it.

"That's also very likely."

Dong Xuan had to admit that Luo Yang also had unique insights in some aspects.

"So the building's current debt is limited to bank loans and construction costs?"

At this point in the discussion, we can now get straight to the core issue.

"Our investigation revealed that, apart from loans from three banks, the remaining debts are all related to construction project payments and do not involve any other loans."

Chu Xinyao replied to Luo Yang in a serious tone: "Of course, we are not very clear about whether there are any hidden debts. If the developer intends to hide them, it is really hard to tell unless the debtor comes forward or we conduct a full review of their company's financial records."

"The issue of hidden debt is easy to resolve; it just needs to be clearly stated in the acquisition agreement."

Luo Yang was experienced in handling such matters and asked about other things without any worry: "I heard Dong Xing mention before that your Yongcheng Bank has already coordinated with two other banks to take over Zhaohe's debts?"

"No agreement has been signed yet, but a verbal agreement has been reached."

Chu Xinyao said frankly, "Please rest assured, Mr. Luo, that once your company signs the relevant agreement with our Yongcheng Bank and you sign the acquisition negotiation agreement with Zhaohe, we will arrange for the debt assumption of the other two banks, and then work with Zhaohe to discuss debt restructuring."

"That is to say, two prerequisites are required."

Luo Yang smacked his lips and said, "We need to negotiate the acquisition price with Zhaohe and sign a new loan agreement with you before you will sign debt assumption agreements with the other two banks and then bring us two banks to talk about debt restructuring?"

"Yes, Mr. Luo's understanding is correct."

"That's it"

Luo Yang muttered something to himself, then glanced at Dong Xuan before falling into deep thought. Dong Xuan gave a slightly bitter smile in response to his gaze.

She knew the meaning behind Luo Yang's eyes.

If he needs to achieve this level, what is the point of having Ningbo Bank?
Why not just contact Pudong Development Bank directly?

For the bank, there is basically no risk, and they have also obtained a high-quality loan.

Yes, debt restructuring sounds impressive, but in reality, it's like Luo Yang planning to buy a headquarters building with no debt, but he doesn't have enough cash flow, so he takes out a portion of it himself and borrows the rest from a bank.

For companies like Ling Shi Gong Group, with extremely low debt ratios and exceptionally high-quality assets, it's common for banks to proactively approach them to inquire about lending money, let alone request a loan.

Doesn't Ningbo Bank essentially get a great loan?

"Assistant Chu, if this is the only condition, I think..."

Not long after, Luo Yang looked up at Chu Xinyao and said, "Our company still needs to consider the matter of acquiring Zhaohe's building."

Dong Xuan's expression visibly turned anxious.

But before she could speak, Chu Xinyao spoke first: "President Luo thinks that our bank didn't take any risk and just got a freebie, right?"

"Assistant Chu, weren't those conditions just now obvious?"

At this moment, Wen Wan interjected, speaking on Luo Yang's behalf: "Mr. Dong, don't you think so? With these conditions, which bank can't our Ling Shi Palace Group do it with?"

She could speak if there were any difficulties Luo Yang faced.

"But what if our Ningbo Bank offers a lower loan interest rate?"

Chu Xinyao calmly replied, "Currently, the medium- and long-term interest rates for commercial loans from major banks are 6.55%. If the loan amount is large and the loan project has low risk, we can negotiate, but the maximum reduction is 25 percentage points, which is already the largest concession in the industry."

When she mentioned the loan interest rate, Luo Yang and Wen Wan both looked at her silently.

"However, regarding the restructuring loan project for this headquarters building acquisition, our Ningbo Bank can offer two concessional options."

Chu Xinyao raised her index finger and said, "Because Zhaohe took out the loan two years ago, the interest rate for medium and long-term commercial loans at that time was as high as 7.05%. Moreover, because Zhaohe urgently needed money for its project, and the project risk assessment was medium, no concessions were made. Given that the current interest rate for medium and long-term commercial loans has been lowered, our Yongcheng Bank can reduce the interest rate of all loans to the negotiated figure during the debt restructuring."

According to her, if Ling Shi Gong and Yongcheng Bank finally reach an interest rate of 6.30%, then Zhaohe's loan interest rate for the previous three years will also be reduced from 7.05% to 6.30%.

Currently, Zhaohe owes 14.15 billion yuan to Pudong Development Bank, 12.88 billion yuan to Ningbo Bank, and 5.27 million yuan to Huaxia Bank, totaling 32.3 billion yuan in loans.

"Wen Wan, do the accounts."

As soon as Luo Yang spoke, Wen Wan immediately picked up her phone and opened the calculator.

"Mr. Dong, does the loan accrue compound interest?"

"Not counting."

What was the principal amount of the previous loan?

"32.3 is the loan principal."

The result came out after a question-and-answer session between the two.

"Boss, if we calculate at an interest rate of 7.05%, the total interest over three years will be 6.83145 million; if we calculate at an interest rate of 6.30%, the total interest over three years will be 6.1047 million, a difference of 7267.5 million."

Wen Wan replied to Luo Yang, "But we don't know how much Zhaohe has repaid in principal and interest over the past three years, so the current total is unclear."

There will definitely be repayments over these three years, and they will be made at an interest rate of 7.05%, so the exact difference in figures needs to be calculated in detail by the finance department.

However, there is definitely a difference of 60 million.

"What about the second option?"

The first option is equivalent to reducing interest by tens of millions at once, which Luo Yang thinks is acceptable.

“Our Ningbo Bank will invest in this building, holding no more than 40% of the shares, to alleviate your group’s loan pressure.”

Chu Xinyao raised her second finger: "Moreover, we can sign an agreement with your company that allows you to repurchase the shares at any time within five years, with the price calculated based on the building's market value at the time."

Why wasn't the buyback price calculated based on the principal plus interest?

Although Ningbo Bank is not a state-owned enterprise, it has state-owned assets in its shares, so it dares not sell state-owned assets at a low price.

"boss"

Just as Chu Xinyao finished speaking, Wen Wan called out anxiously.

In her view, housing prices in Shanghai will definitely rise rapidly in the future, and the rate of increase will far exceed the interest rate of commercial loans from banks during the same period. Therefore, if she waits a few years to recoup her investment at the market price at that time, the cost will be even higher.

Little did Wen Wan know that when it came to judging the future trend of housing prices in Shanghai, no one present could compare to Luo Yang.

On the surface, it seems that most people would choose the first option.

Directly reducing interest by 60 to 70 million is the most intuitive way to save money, and there is absolutely no risk involved.

However, for Luo Yang, the second option was actually better.

What's so good about it?

It is now the second half of 2012, and housing prices in Shanghai have actually risen quite a bit. However, a year and a half later, in 2014, the housing market suddenly entered a period of stagnation due to strict policy regulation.

From 14 until the first half of 15, not only in Shanghai, but also across the country, housing prices plummeted to low levels.

Ningbo Bank essentially used 12 billion yuan to buy commercial office buildings in the second half of 12, and then sold them at the end of 14 or the first half of 15. Making a profit was definitely out of the question; they would be lucky if they didn't lose money.

But
Luo Yang was afraid of one thing.

What if they find out they've lost money selling the shares this way, and then they resort to dishonest tactics?
Luo Yang didn't think he could outmaneuver the bank.

Moreover, this matter cannot be addressed through private efforts, because the bank's leaders dare not "sell off" state-owned assets at a low price. They would rather keep these heavy assets in their hands, which is simply a matter of holding them for a few years.

After holding onto it for a few years, you'll find that the market value of this commercial building has skyrocketed, and you can make a profit.
At that time, Luo Yang will have shot himself in the foot!
"Assistant Chu, now that you've said that, I see the sincerity of Yongcheng Bank."

Since we can't decide for now, let's put it aside for the time being.

Luo Yang smiled and raised his glass, saying, "I'll think about the two proposals you mentioned and get back to you by next week at the latest. I also wish us a pleasant cooperation."

Saying this basically means he's willing to cooperate with Yongcheng Bank.

All that's left is to choose which discount plan to accept.

(End of this chapter)