11. The Banghe Residence That Has Not Yet Been Abandoned

"Come over and take a look, sit tight."

Since the establishment of Jinmen Hongye Construction Engineering in 2009, the company had grown significantly, now holding multiple Grade-A construction qualifications, though the coveted Grade-A design qualification remained elusive.

Since Chen Ze still intended to live the life of a wealthy heir, there were certain things he had to do, and the sooner, the better.

In just over a month, his family would be headed toward bankruptcy, but it was highly likely that the boss of Bangyuan Real Estate had already been planning his escape long before that.

Looking back from the future, the fact that his family fell into such a state was not entirely unjust.

Gong Yaowen, the chairman of Bangyuan Real Estate, had been a benefactor to Chen Tianhong. The two had been collaborating since 2012, but when Gong Yaowen passed away suddenly due to illness in 2016, Bangyuan Real Estate fell under the control of his younger brother, Gong Yaowu.

Ordinarily, that would be their own business, but during a dinner in 2017, Gong Yaowu sought out Chen Tianhong.

There was land over in the Binhai Road area of Hebei, and Hongye Construction had previously served as the general contractor for projects there, making them eligible for the bid.

However, as everyone knows, 2015 saw some people strike it rich overnight while others jumped from buildings. After the real estate market crash, although Bangyuan Real Estate hadn't gone under, it was suffering, and its capital chain needed time to recover.

This time, it wasn't just about advancing funds; if Chen Tianhong were willing, he could co-develop the project.

Private developers usually use shell companies with the necessary qualifications to build residential complexes because it isolates risk. Therefore, it was natural for Chen Tianhong to receive shares if he invested his money; after all, the shell company could simply be discarded once the complex was finished.

Construction companies are different from real estate firms. They are typical "Party A" and "Party B" relationships, which are inherently unequal.

Taking residential developments as an example, a real estate company usually acquires the land first and then finds others to handle surveying, design, and construction.

The construction company is merely the contractor—the one getting paid to do the labor. They are the "Party B" hired by the real estate firm, so it is naturally difficult for the relationship to be equal, especially in China.

As the saying goes, a soldier who doesn't want to be a general is not a good soldier. Although real estate developers bear more risk, they also make much more money; the profit margins are significantly higher.

In a residential project, the contractor might only make about 10% profit from the foundation to the final landscaping.

Yet, the developer, simply by securing the land and maintaining good relations with banks and the government, walks away with the lion's share of the money.

Although developers carry significant risk, making that much money is expected. However, there is an unwritten rule in the Chinese real estate industry that has always been a thorn in the side of contractors: advance funding.

There is no need to explain why advance funding is necessary, but it acts like borrowing money from a friend to gamble; if they win, they only return your principal, but if they lose, you are left with nothing.

In the eyes of the contractors, they are the ones sharing the risk, yet they receive the smallest slice of the pie.

However, transforming from a contractor into a developer is not easy. It requires not just capital but also connections. After all, land in China is worth its weight in gold and requires a strong economic foundation. Banking business is difficult to negotiate, and obtaining the "Five Certificates" requires deep connections. Developing a residential project is far more complex than just building it.

But now, with a "big brother" figure inviting you to cooperate—and since you have to bear risk regardless—why not make it a bigger play?

If Chen Ze hadn't come from the future, he wouldn't have known how to persuade his father. After all, after the real estate market crashed and rebounded, the last two years had been the most lucrative period in history.

The fact that home buyers in Tier 1 and Tier 2 cities in 2017 were happier to win a housing lottery slot than a national lottery jackpot shows just how insane the property market had become.

If this project were successfully completed, Hongye Construction Group would essentially have one foot in the door as a developer. Gong Yaowu had even mentioned another plot of land over at Tuanbo Avenue. Under normal circumstances, Chen Tianhong could personally earn a "small target" of 100 million yuan.

...

"I thought you didn't care about the family business?"

As the slightly aging Maybach pulled onto Binhai Road, Su Wei, sitting in the passenger seat, tossed his cigarette out the window and asked with curiosity.

"I've grown up, haven't I?"

Chen Ze looked at the roadside buildings, which looked slightly different from six years ago, and explained, "After spending so much money in the United States, I've at least learned something. I should be doing my part to help the family."

"Good lad, that's the spirit."

As mentioned before, no one had seriously doubted the changes in Chen Ze after his long time abroad, and Su Wei, not being one to look too closely, added happily, "You should have done this a long time ago instead of picking fights with your mom and dad. All this property is going to be yours eventually anyway."

The Maybach soon arrived at the construction site entrance. The ground was now paved with concrete, and the iron gate bore the "Hongye Construction" logo, with security guards stationed to keep outsiders out.

But this car was no stranger. After the elderly guard opened the gate, Chen Ze kept his hands on the steering wheel, looking up through the windshield at the place that had once filled him with despair.

This project was called [Banghe Mansion]. It was located between the Inner and Middle Rings, not far from the Tianjin Eye, right in the city center near the Haihe River.

The pre-sale price had reached 38,000 yuan per square meter, and by June, it had climbed to 46,000 yuan and was still rising. If everything went perfectly, an opening price of 50,000 yuan would be standard.

Although not a state-owned enterprise, Bangyuan Real Estate was a well-known local developer in Jinmen. Before the collapse, no one expected it to become an unfinished "zombie" project.

The entire development covered 300,000 square meters and was divided into two phases. The first phase, where Chen Ze now stood, was nearly topped out.

The project was publicly announced as a 4 billion yuan investment, but in reality, it was nowhere near that high. The total cost was only around 1.2 billion yuan, with construction costs under 1 billion.

After all, Gong Yaowen had acquired the land cheaply while he was alive. It was precisely because of the skyrocketing land premiums in 2016 that they rushed to build and "harvest leeks" before the three-year land development deadline expired.

If land prices aren't rising, don't build. That was one of the industry's secrets.

The project was planned for 19 high-rise residential buildings and 9 garden villas, totaling 28 structures. Currently, 12 high-rises were being built in the first phase, and the main structures were close to topping out.

Why did Gong Yaowu run? No one knew.

But when he fled, he siphoned off a portion of Bangyuan Real Estate's liquid capital, took the escrow funds obtained through the "topping-out" certifications, and cleared out other project funds.

The direct economic loss exceeded 6 billion yuan.

After Gong Yaowu fled, the court liquidated Bangyuan Real Estate's assets to repay the banks. The reason Chen Ze's family went bankrupt along with them was that the amount the man had siphoned off was simply too large.

The project was too massive; Hongye Construction was already stretched thin trying to complete it, and the collapse was a fatal blow.

As the general contractor, the Hongye Group not only had to compensate the subcontracted workers for their wages, but because Chen Tianhong was a shareholder, he was also liable for the bank debts, and Hongye Construction had to cover the outstanding payments to suppliers like the cement factory.

And if there wasn't enough money to pay?

Group bankruptcy followed by personal asset liquidation.

...

Some netizens once asked: Why do unfinished buildings stay unfinished forever?

It isn't because they can't be finished; it's because the debts are too high and there are too many conflicting interests involved.

1. Land mortgage development loans (Banks).
2. Pre-sale funds (Home buyers).
3. Commercial mortgage loans (Financial institutions).
4. Contractor payments (Workers).

With these four debts weighing down the project, any other developer wanting to take over would have to pay them all off first.

These situations are often mired in disputes, and the capital required to simply acquire the project is in the billions. With that kind of money, one might as well bid on a new plot of land—why wade into such muddy waters?

Yes, sometimes the "National Team" intervenes.

But there are too many unfinished buildings!!

If you wait for the "National Team" to solve it, you’ll be waiting for a long time.

Take [Banghe Mansion] for example: once a new developer takes over, they would need to compensate Chen Tianhong 273 million yuan.

Because this is the construction payment that [Banghe Mansion] owes to Hongye Construction. When the old boss runs, the new boss must pay.

Or, as the government might coordinate, one building within [Banghe Mansion] would belong to Chen Tianhong personally. In other words, anyone who wants to take over the project must clean up the mess left by the predecessor—which is the main reason why unfinished buildings stay unfinished.

As for why "Little Boss Gong" ran and where he went, no one knew, even by 2024.

But for Chen Ze, who came from the future, preventing his family's bankruptcy was actually quite simple to resolve.

First, he had to refuse to issue the topping-out certification. Although the supervisor issues this certificate, it requires the official seal of the Hongye Construction Group and the legal representative's seal, as it is a tripartite agreement.

Without this topping-out certificate, Gong Yaowu would not have been able to siphon off the 1 billion yuan in escrow funds or proceed with the project launch.

Secondly, that was the reason Chen Ze had come to the site—he had to assess the situation to prepare for what was to come.

"Hey, why are you taking the cigarettes?"

Seeing Chen Ze take the 1916 cigarettes from the dashboard, Su Wei, who had just unbuckled his seatbelt, paused.

Weren't those a gift for him? Why was he taking them back?

"Uncle, let's get out and talk."