A father’s billion-dollar empire built over 40 years, lost by his son in 4 years

Ask AI · How differences in parent-child business philosophies lead to the collapse of a trillion-dollar empire?

*This image generated by AI

Author | Shi Dalang & Cat Brother

Source | Shi Dalang & Da Mao Finance Pro

The most tragic unfinished building in Shenzhen, the planned tallest building in China, is about to be revived.

A few days ago, the core plot of Longgang Dayun’s “Shenzhen-Hong Kong International Center” was relisted for auction, starting at 7.05B yuan. This is the highest listing price in Shenzhen this year, with results announced on May 6.

This is a story-rich unfinished building. 7.05B yuan is considered high in today’s market, but in 2017, the sale price of this land was 23.94B yuan. Over these nine years, a trillion-yuan real estate giant also experienced a brutal collapse, and now there are rumors of family internal strife.

What’s going on?

In 2017, the buyers of this land were Old Xu and Little Xu, father and son, from Shimao Group.

Old Xu is from Fujian, went to Hong Kong in the 1970s, later became a securities trader. It’s said he made his first fortune through stock trading, about 13.04B yuan, though he has not confirmed this himself.

Then in 1994, he returned to mainland China to develop, precisely caught the real estate boom, and took almost all the real estate dividends from start to finish.

At its peak, the company’s assets were several hundred billion yuan, and he was a regular on the rich list, even once Shanghai’s richest.

Old Xu has three notable traits in business:

1. Low profile, even after making the rich list, he would call to ask to be removed. The most flamboyant thing he did was spend 10.44B yuan to buy cultural relics and donate them to the Forbidden City, which got him back on the Spring Festival Gala.

2. Prefers luxury homes, known as the “Luxury Home Godfather,” at one point, a third of the luxury homes in Beijing, Shanghai, and Shenzhen were his projects.

3. Likes landmarks, many of his projects have become local landmarks, such as the Shanghai Deep Pit Hotel, which has won many awards.

Image source: YouTube blogger screenshot

Because of his personality, he is very conservative financially, with a debt ratio similar to major state-owned enterprises, much lower than companies like Vanke.

Originally thought such a company would be very stable.

But the succession went seriously wrong.

Old Xu had high expectations for his son, Little Xu. When Little Xu was 23, Old Xu handed him the then Shanghai’s top luxury residence, Shimao Binjiang Garden, to practice.

However, this heir has been in the role for 20 years, and as he gained more control over the company, his influence over Old Xu grew.

Old Xu’s interests are in landmarks and luxury homes; Little Xu advocates for scale, land king grabs, and high leverage.

Is there a project that satisfies both father and son?

Yes. In 2016, a piece of land in Longgang, Shenzhen, was targeted by both. They personally negotiated in Shenzhen and launched an ambitious plan for “China’s tallest building,” called “Shenzhen-Hong Kong International Center,” over 700 meters tall, with a total investment of over 50 billion yuan.

Thus, Old Xu set the strategy and approved it, while Little Xu led the execution and personally went to grab land.

The Longgang land auction lasted only 3 minutes, with Shimao directly bidding 7.05B yuan, winning without competitors and a single capped bid.

After buying the land, construction began. By then, Shimao had completed its succession, and Little Xu was in the spotlight. This was late 2018, three years before the 2021 peak.

Little Xu’s style was to pursue scale. After taking over, his goal was to reach 300 billion yuan in revenue by 2020, much higher than Old Xu’s era.

To achieve this, Little Xu spent money like water. In just 80 days after succession, he spent over 20 billion yuan, acquiring more than 20 projects others couldn’t sustain, earning him the nickname “White Knight.”

Indeed, in 2020, the group’s official figures showed sales exceeding 300 billion yuan.

But from 2021, the good days ended. Revenue declined sharply, in 2022, the company’s income dropped from over 300 billion to just over 80 billion, and at the same time, the company’s debt ballooned from over 200 billion to 530 billion yuan.

They simply couldn’t pay it back, so in 2022, Shimao directly defaulted, just three years after Little Xu took over.

Things got even worse. Sales revenue fell year after year, delisting was imminent, and banks had already applied to bankrupt the company, Old Xu’s 40 years of wealth was nearly gone in just three or four years.

With the group in such a state, the Shenzhen tallest building project was even more powerless. The capital chain broke, construction halted completely, and it became one of Shenzhen’s most notorious unfinished projects.

Creditors applied to sell the project to recover funds.

There were two auction attempts, with starting prices dropping from 13.044 billion yuan to 10.435 billion yuan, but no buyers showed up.

Shenzhen was also anxious. Last July, they directly launched land acquisition, spending 6.8 billion yuan to reclaim the land.

Just a few days ago, the land was relisted at 7.045 billion yuan. Who will take over?

Private enterprises are now only Lianhua’s days slightly better, but they definitely dare not touch it. Only large state-owned or national enterprises would dare to take over.

But regardless, this project is no longer connected to Shimao.

Once a trillion-yuan family, recent rumors of internal strife have surfaced, several key family members want to control the most valuable property company, sparking hot searches.

It’s true—rich second-generation kids really shouldn’t be in business, a true maxim.

Author’s note: Personal opinions, for reference only