The hits keep coming for China’s real estate sector and one of its largest developers, Evergrande. Last month, the company liquidated amidst over $300B in unpaid bills. This is extremely important because China’s property sector accounts for an astounding 30% of GDP (17% in America).

Evergrande's financial strategy seems less like a business plan and more like trying to diet by counting calories after you’ve eaten the cake.

'Oh, we've inflated our revenue by $78 billion? Let's just call it 'pre-success' and move on.'

Evergrande's origins as a dominant force in Chinese real estate set the stage for what many considered an unassailable empire. Accounting for approximately 2% of China's real estate, with over 1,300 projects across 280 cities, Evergrande epitomized the zenith of China's urban development frenzy.

The company's name, symbolizing constancy and magnitude, became synonymous with China's relentless pursuit of urbanization and property market growth.

But wait, there’s more: Last week, we learned more about the company’s trouble with reports that the China Securities Regulatory Commission (CSRC) accused Evergrande and its founder of inflating the company’s onshore unit revenue by an astonishing $78 billion in the two years leading up to its default.

Let’s put that easily $78B into context for you…

This inflation represented half of Hengda Real Estate Group’s revenue in 2019 and 79 percent in 2020, with the onshore unit also being fined $581 million by the CSRC. In response to these allegations, the company shifted its revenue recognition practices in 2021, opting to recognize revenue only after apartments were delivered or occupied, moving away from its earlier practice of recognizing presold but undelivered apartments.

The company's founder, Hui Ka Yan, was fined $6.5 million and banned from China's financial markets for life. It's like getting banned from a buffet after eating everything: 'Sorry, you can't come in. 'That's fine; I was leaving anyway. By the way, you're out of shrimp.'

Unsurprisingly his whereabouts are unknown. Playing hide and seek is the next logical step when you inflate your revenue by billions. 'Ready or not, here comes the CSRC!’

With roughly $332 billion in liabilities, Evergrande's journey from being the world's most indebted developer to its current state of insolvency highlights not only the scale of its financial mismanagement but also the profound impact it has had on its creditors and the broader financial market.

Evergrande’s default on an offshore dollar bond in December 2021 marked the beginning of its dramatic fall, culminating in a Chapter 15 bankruptcy protection filing in the United States as it sought restructuring. The loss of $81 billion between 2021 and 2022 further complicates the financial landscape, leaving creditors uncertain of the recoverable value from Evergrande’s extensive asset portfolio.

So What? The ongoing troubles in China's property sector, including Evergrande, could steer global investors towards more stable North American real estate markets. This could intensify affordability issues in cities already impacted by significant foreign investment. As investors seek safe havens, the increased demand may drive property prices higher, affecting market dynamics, especially in urban centers.

Regal Estate: Gov. Ron DeSantis and Disney settled their dispute over the future development of Walt Disney World. The settlement agreement was approved by DeSantis' appointees on the Central Florida Tourism Oversight District's board, ending two years of litigation. The disagreement stemmed from Disney's opposition to a Florida law banning classroom lessons on sexual orientation and gender identity. However, a new board member was appointed, easing tensions and setting the stage for Florida's economic growth and job creation. This resolution marks the end of a contentious chapter. (AP)

Sunburnt Market: Florida's condo market is in a downturn, with listings surging 30% and prices in major markets declining by 1% to 6.5% compared to the previous year. This slump is due to high homeowner insurance premiums, increasing HOA fees after the Surfside Towers collapse, and rising interest rates. Prospective buyers are offering less or avoiding the market altogether due to concerns about insurance, HOA fees, and the risk of foreclosure. (Yahoo!)

Slowing Multifamily: The MSCI Real Capital Analytics report shows a significant downturn in multifamily property prices. In February, prices dropped by 1%, accelerating from a 0.4% decline reported last month. Annually, prices have fallen by 8.9%. The Commercial Property Price Index (CPPI) indicates a broader trend of declining commercial property values. Multifamily properties have experienced an 18.4% fall from their peak but are still 14.3% higher than in January 2020. This contrasts with the pre-pandemic trend, where multifamily properties were 8.5% lower, and all commercial properties were 8.4% below their expected trajectories. (YieldPro)