UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
(Mark One)
¨
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REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
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OR
x
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For The Fiscal Year Ended December
31, 2019.
OR
¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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OR
¨
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SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Date of event requiring this shell company report
Commission file number: 001-33863
XINYUAN REAL ESTATE CO., LTD.
(Exact name of Registrant as specified in its
charter)
N/A
(Translation of Registrant’s name into English)
Cayman Islands
(Jurisdiction of incorporation or organization)
27/F, China Central Place, Tower II
79 Jianguo Road, Chaoyang District
Beijing 100025
People’s Republic of China
(Address of principal executive offices)
Yu (Brian) Chen
Xinyuan Real Estate Co., Ltd.
27F, China Central Place, Tower II,
79 Jianguo Road, Chaoyang District
Beijing 100025
People’s Republic of China
Tel: (86-10) 8588-9255
Fax: (86-10) 8588-9300
(Name, Telephone, E-mail and/or Facsimile number
and Address of Company Contact Person)
Securities registered or to be registered pursuant
to Section 12(b) of the Act:
Title of Each Class
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Trading Symbol(s)
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Name of Each Exchange on Which Registered
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American Depositary Shares, each representing two common shares, par value US$0.0001 per share
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XIN
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New York Stock Exchange
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Securities
registered or to be registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
Securities
for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
(Title of Class)
Indicate the number of
issued and outstanding shares of each of the Issuer’s classes of capital or common stock as of the close of the period covered
by the annual report. 107,875,468 common shares, par value US$0.0001 per share, as of December 31, 2019.
Indicate by check mark
if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
¨ Yes x No
If this report is an annual
or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934.
¨ Yes x No
Note - Checking the box
above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 from their obligations under those Sections.
Indicate by check mark
whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
x Yes ¨ No
Indicate by check mark
whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit such files).
¨ Yes x No
Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company.
See definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company”
in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨
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Accelerated filer x
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Non-accelerated filer ¨
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|
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Emerging growth company ¨
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If an emerging growth
company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected
not to use the extended transition period for complying with any new or revised financial accounting standards† provided
pursuant to Section 13(a) of the Exchange Act. ¨
† The term “new
or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its
Accounting Standards Codification after April 5, 2012.
Indicate by check mark
which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP x
|
International Financial Reporting Standards as issued by
the International Accounting Standards Board ¨
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Other ¨
|
If “Other”
has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has
elected to follow.
¨ Item
17 ¨ Item
18
If this is an annual report,
indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
¨ Yes x No
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PAST FIVE YEARS)
Indicate by check mark
whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange
Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
¨ Yes ¨ No
TABLE OF CONTENTS
INTRODUCTION
Unless otherwise
indicated and except where the context otherwise requires, references in this annual report on Form 20-F to:
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•
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“we,” “us,” “our company,” “our,” “the Group”
or “Xinyuan” refers to Xinyuan Real Estate Co., Ltd., its predecessor entities and its subsidiaries;
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•
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“shares” or “common shares” refers to our common shares, par value US$0.0001
per share;
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•
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“ADSs” refers to our American depositary shares, each of which represents two common
shares, and “ADRs” refers to the American depositary receipts that evidence our ADSs;
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•
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“China” or “PRC” refers to the People’s Republic of China, excluding,
for the purposes of this Form 20-F only, Taiwan, Hong Kong and Macau;
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•
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“U.S.” or “United States” refers to the United States of America;
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“GFA” refers to gross floor area. The amounts for “total GFA” in this annual
report are the amounts of total saleable residential and commercial GFA and are derived on the following basis:
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•
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for properties that are sold, the stated GFA is based on the sales contracts relating to such property;
GFA may be adjusted based on final examination upon delivery of the property;
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o
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for unsold properties that are completed or under construction, the stated GFA is calculated based
on the detailed construction blueprint and the calculation method approved by the PRC government for saleable GFA, after necessary
adjustments; and
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o
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for properties that are under planning, the stated GFA is based on the land grant contract and
our internal projection;
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•
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“RMB” or “Renminbi” refers to the legal currency of China and “US$”
or “U.S. dollars” refers to the legal currency of the United States; and
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•
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“sq.m” refers to square meters used as unit of area.
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At present, there
is no uniform standard to categorize the different types and sizes of cities in China. In this annual report, we refer to certain
larger and more developed cities as tier I, tier II and tier III cities based on the categorization developed by China Business
Network Co., Ltd., a financial media group. Their ranking system relies on commercial data from over 170 brands, customer
behavior data from 19 internet companies, as well as big data from relevant statistics institutions.
Facts and statistics
in this annual report relating to China, the Chinese economy and the China property development industry are sourced from various
publicly available government and official sources, as indicated herein and may include projections based on a number of assumptions.
We believe that the sources of this information are appropriate sources for such information. However, we cannot independently
verify such information. Further, if one or more of the assumptions underlying the market data turn out to be incorrect, the actual
results may differ from the projections based on these assumptions.
This annual report
includes our audited consolidated financial statements for the years ended December 31, 2017, 2018 and 2019 and as of December
31, 2018 and 2019. Our financial statements and other financial data included in this annual report are presented in U.S. dollars.
Our business and operations are primarily conducted in China through our PRC subsidiaries. The functional currency of our PRC subsidiaries
is RMB. The functional currency of our U.S. subsidiaries is the U.S. dollar. The financial statements of our PRC subsidiaries are
translated into U.S. dollars, using published exchange rates in China, based on (i) year-end exchange rates for assets and liabilities
and (ii) average yearly exchange rates for revenues and expenses. Capital accounts are translated at historical exchange rates
when the transactions occurred. The effects of foreign currency translation adjustments are included as a component of accumulated
other comprehensive income in our shareholders’ equity. We make no representation that any RMB or U.S. dollar amounts could
have been, or could be, converted into U.S. dollar or RMB, as the case may be, at any particular rate or at all.
The RMB is not freely
convertible into foreign currency. The PRC government imposes control over its foreign currency reserves in part through direct
regulation of the conversion of the RMB into foreign exchange and through restrictions on foreign trade. Since 2005, the People’s
Bank of China (the “PBOC”), has allowed the RMB to fluctuate within a narrow and managed band against a basket of foreign
currencies, according to market demand and supply conditions.
Our common
shares are traded on the New York Stock Exchange (the “NYSE”), in the form of ADSs under the symbol
“XIN.” Each ADS represents two common shares. The closing price of our ADSs on the NYSE as of April 24, 2020
was US$2.41 per ADS.
FORWARD-LOOKING STATEMENTS
This annual report
contains forward-looking statements that involve risks and uncertainties. All statements other than statements of historical facts
are forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause
our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking
statements.
You can identify
these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “is
expected to,” “anticipate,” “aim,” “estimate,” “intend,” “plan,”
“believe,” “potential,” “continue,” “is/are likely to” or other similar expressions
or negatives of such expressions. These forward-looking statements include, among others, statements about:
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our anticipated growth strategies;
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our future business development, results of operations and financial condition;
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our expectations with respect to our ability to acquire adequate suitable land use rights for future
development; and
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•
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our belief with respect to market opportunities in, and growth prospects of, our target markets.
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We have based these
forward-looking statements largely on our current expectations and projections about future events and financial trends that we
believe may affect our financial condition, results of operations, business strategy and financial needs. However, a number of
known and unknown risks, uncertainties and other factors could affect the accuracy of these statements. Among the important factors
to consider in evaluating our forward-looking statements are:
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our ability to continue to implement our business model successfully;
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our ability to secure adequate financing for our project developments;
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•
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our ability to successfully sell or complete our property projects under construction and planning;
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our ability to enter into new geographic markets or new lines of business and expand our operations;
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the marketing and sales ability of our third-party sales agents;
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•
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the performance of our third party contractors;
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•
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laws, regulations and policies relating to real estate developers and the real estate industry
in the markets in which we operate;
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•
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our ability to obtain permits and licenses to carry on our business in compliance with applicable
laws and regulations;
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•
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competition from other real estate developers;
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•
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the growth of the real estate industry in the markets in which we operate; and
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•
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fluctuations in general economic and business conditions in the markets in which we operate, including the impact of the COVID-19 pandemic.
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You should read
thoroughly this annual report and the documents that we refer to herein with the understanding that our actual future results may
be materially different from and/or worse than what we expect. We qualify all of our forward-looking statements by these cautionary
statements. Other sections of this annual report include additional factors which could adversely impact our business and financial
performance, including the risks outlined under “Item 3. Key Information — D. Risk Factors.” Moreover, we
operate in an evolving environment. New risk factors emerge from time to time and it is not possible for our management to predict
all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination
of factors, may cause actual results to differ materially from those contained in any forward-looking statement.
You should not rely
upon forward-looking statements as predictions of future events. The forward-looking statements made in this annual report relate
only to events or information as of the date on which the statements are made in this annual report. We undertake no obligation
to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except
as otherwise required by applicable securities laws.
PART
I
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ITEM 1.
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IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
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Not Applicable.
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ITEM 2.
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OFFER STATISTICS AND EXPECTED TIMETABLE
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Not
Applicable.
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A.
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Selected financial data
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Our Selected Consolidated Financial
Data
The following selected
consolidated statements of comprehensive income and other financial data for the years ended December 31, 2017, 2018 and 2019,
other than earnings per ADS data, and the consolidated balance sheet data as of December 31, 2018 and 2019 have been derived from
our audited consolidated financial statements which are included elsewhere in this annual report. Our audited consolidated financial
statements have been prepared and presented in accordance with United States generally accepted accounting principles, or U.S.
GAAP. Except for changes in operating subsidiaries, our consolidated financial statements have been prepared as if our current
corporate structure had been in existence throughout the relevant periods.
Our
selected consolidated statements of comprehensive income data for the years ended December 31, 2015 and 2016 and our selected consolidated
balance sheet data as of December 31, 2015, 2016 and 2017 have been derived from our audited consolidated financial statements
included in prior years’ annual reports.
The selected consolidated financial
data should be read in conjunction with, and are qualified in their entirety by reference to, our audited consolidated financial
statements and related notes and “Item 5. Operating and Financial Review and Prospects” included elsewhere in this
annual report
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Years ended December 31,
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2015
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2016
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2017
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2018
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2019
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US$
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US$
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US$
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US$
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US$
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(in thousands except share, per share and per ADS data
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Consolidated Statements of Comprehensive Income
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Total revenue
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1,164,324
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|
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1,561,625
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|
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1,976,907
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|
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2,217,551
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|
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2,482,633
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Total costs of revenue
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(891,334
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)
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|
(1,203,636
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)
|
|
|
(1,517,279
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)
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(1,602,073
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)
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(1,922,323
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)
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Selling and distribution expenses
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(52,126
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)
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(58,214
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)
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(75,724
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)
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|
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(83,592
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)
|
|
|
(86,761
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)
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General and administrative expenses
|
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(115,329
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)
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|
(120,416
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)
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(136,845
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)
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(156,456
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)
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|
(163,687
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)
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Operating income
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105,535
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179,359
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247,059
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375,430
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|
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309,862
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Net income
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66,481
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79,463
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80,111
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105,952
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83,029
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Net loss/(income) attributable to non-controlling interest
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1
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(6,485
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)
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|
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(16,483
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)
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(32,917
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)
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|
|
(14,684
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)
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Net income attributable to Xinyuan Real Estate Co., Ltd. shareholders
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66,482
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72,978
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63,628
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73,035
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68,345
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Earnings per share
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-Basic
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0.47
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0.55
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0.49
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0.57
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0.60
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-Diluted
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0.45
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0.53
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0.48
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0.57
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0.60
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Shares used in computation
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|
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-Basic
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142,625,427
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133,261,510
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|
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128,704,610
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127,129,478
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|
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113,482,239
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-Diluted
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146,487,949
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137,653,029
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131,605,868
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129,140,830
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|
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114,100,896
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Earnings per ADS (1)
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-Basic
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|
0.93
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|
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1.10
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|
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0.99
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|
|
|
1.14
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1.20
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-Diluted
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|
0.91
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|
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1.06
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|
|
|
0.97
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|
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|
1.14
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1.20
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(1)
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Earnings per ADS are calculated based on each ADS representing two common shares.
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Years ended December 31,
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2015
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2016
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2017
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2018
|
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2019
|
|
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US$
|
|
|
US$
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|
|
US$
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|
|
US$
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|
|
US$
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Cash dividends declared per ADS
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0.20
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0.30
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0.40
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|
|
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0.40
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|
|
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0.40
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Years ended December 31,
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2015
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2016
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|
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2017
|
|
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2018
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|
|
2019
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|
Other Operating Data
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|
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|
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Number of projects launched
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6
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4
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5
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17
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|
|
|
4
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Aggregate GFA delivered (1) (m 2 )
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560,232
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|
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|
1,278,492
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|
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1,200,222
|
|
|
|
861,323
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|
|
|
744,040
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|
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(1)
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Delivery occurs when we have obtained all the completion acceptance certificates required by the
PRC government in respect of the apartment and deliver full access to the apartment, such as the keys, to the buyer.
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The following table presents
a summary of our consolidated balance sheet data as of December 31, 2015, 2016, 2017, 2018 and 2019:
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As of December 31,
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2015
|
|
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2016
|
|
|
2017
|
|
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2018
|
|
|
2019
|
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
|
(in thousands except share, per share and per ADS data)
|
|
Consolidated Balance Sheet Data (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Cash and cash equivalents
|
|
|
387,528
|
|
|
|
578,244
|
|
|
|
894,551
|
|
|
|
674,142
|
|
|
|
662,606
|
|
Restricted cash
|
|
|
363,137
|
|
|
|
328,499
|
|
|
|
566,676
|
|
|
|
511,875
|
|
|
|
326,980
|
|
Deposits for land use rights
|
|
|
46,199
|
|
|
|
153,252
|
|
|
|
103,716
|
|
|
|
42,254
|
|
|
|
26,375
|
|
Real estate property under development (2)
|
|
|
1,887,322
|
|
|
|
1,719,135
|
|
|
|
1,996,001
|
|
|
|
4,068,716
|
|
|
|
3,254,388
|
|
Total current assets
|
|
|
3,262,964
|
|
|
|
3,931,445
|
|
|
|
5,070,212
|
|
|
|
6,691,222
|
|
|
|
5,645,063
|
|
Total assets
|
|
|
3,561,387
|
|
|
|
4,236,445
|
|
|
|
6,384,434
|
|
|
|
8,033,713
|
|
|
|
7,421,664
|
|
Total current liabilities
|
|
|
1,650,883
|
|
|
|
2,060,609
|
|
|
|
3,674,819
|
|
|
|
5,069,869
|
|
|
|
4,484,572
|
|
Long-term bank loans
|
|
|
13,860
|
|
|
|
235,885
|
|
|
|
11,019
|
|
|
|
720,039
|
|
|
|
686,065
|
|
Other long-term debt
|
|
|
910,008
|
|
|
|
974,791
|
|
|
|
1,404,814
|
|
|
|
1,040,455
|
|
|
|
1,036,691
|
|
Common shares
|
|
|
15,835
|
|
|
|
16,051
|
|
|
|
16,314
|
|
|
|
16,399
|
|
|
|
16,410
|
|
Total Xinyuan Real Estate Co., Ltd. shareholders’ equity
|
|
|
935,970
|
|
|
|
900,260
|
|
|
|
992,572
|
|
|
|
680,370
|
|
|
|
690,302
|
|
|
(1)
|
Financial information for PRC subsidiaries is first prepared in RMB and then translated into U.S.
dollars for assets and liabilities at the year-end exchange rate and, for revenues and expenses at the yearly average exchange
rate. The rates used are set forth in the table below. Capital accounts are translated at their historical exchange rates when
the transactions occurred.
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As of and for the Year Ended December 31,
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2015
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2016
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2017
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2018
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2019
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Period-end US$: RMB exchange rate
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6.4936
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6.9370
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6.5342
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6.8632
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6.9762
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Period average US$: RMB exchange rate
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6.2272
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6.6401
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6.7547
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6.6118
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6.8967
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As of April 24, 2020,
the US$: RMB exchange rate was 7.0813.
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(2)
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Includes real estate property under development recorded under current assets and non-current assets.
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B.
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Capitalization and Indebtedness
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Not Applicable.
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C.
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Reasons for the Offer and Use of Proceeds
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Not Applicable.
Risks Related to Our Business
We are a holding company that depends
on dividend payments from our subsidiaries for funding.
We are a holding
company established in the Cayman Islands and operate most of our business and operations through our subsidiaries in China. Our
ability to pay dividends to our shareholders and to service our indebtedness outside of China depends significantly upon dividends
that we receive from our subsidiaries in China. To the extent our U.S., Malaysia and UK operations continue to grow, we may in
the future also depend on dividends from our U.S., Malaysia and UK subsidiaries. If our subsidiaries incur indebtedness or losses,
such indebtedness or losses may impair their ability to pay dividends or other distributions to us. As a result, our ability to
pay dividends and to service our indebtedness will be restricted. Regulations in China currently permit payment of dividends only
out of accumulated profits as determined in accordance with accounting standards and regulations in China. Each of our PRC subsidiaries,
including wholly foreign-owned enterprises and domestic companies, is required to set aside at least 10.0% of its after-tax profit
based on PRC accounting standards each year to its statutory capital reserve fund until the cumulative amount of such reserves
reaches 50.0% of its respective registered capital and, with the approval of a shareholder meeting or general shareholder meeting,
a PRC subsidiary may set aside a certain amount of after-tax profit to its discretionary general reserves. As of December 31, 2019,
our statutory reserves amounted to US$175.0 million. Our statutory reserves are not distributable as cash dividends. Dividends
paid by the PRC subsidiaries may also be subject to PRC withholding tax. In addition, restrictive covenants in bank credit facilities,
bonds, other long-term debt agreements, joint venture agreements or other agreements that we or our subsidiaries currently have
or may enter into in the future may also restrict the ability of our subsidiaries to make contributions to us and our ability to
receive distributions. Therefore, these restrictions on the availability and usage of our major source of funding may impact our
ability to pay dividends to our shareholders and to service our indebtedness.
Our business and prospects are heavily
dependent on and may be adversely affected by the performance of the PRC property markets, particularly in Zhengzhou.
Our business and prospects
depend on the performance of the PRC property market. As of December 31, 2019, we had a total of 100 property projects covering
20 cities in China at various stages of development. We intend to continue to enhance our presence in targeted high growth cities
in China. These property markets may be affected by local, regional, national and global factors, including economic and financial
conditions, speculative activities in local markets, demand for and supply of properties, investor confidence, availability of
alternative investment choices for property buyers, inflation, government policies, interest rates and availability of capital.
Any market downturn in China generally or in cities in which we have or expect to have operations may materially and adversely
affect our business, financial condition and results of operations. Moreover, any oversupply of properties or potential decline
in demand for or prices of properties in these cities could also have a material adverse impact on us. In particular, the PRC property
market is affected by the recent slowdown of China’s economic growth. There have been increasing concerns over the sustainability
of the real estate market growth in China. Any slowdown in PRC’s economic development could lead to tighter credit markets,
increased market volatility, sudden drops in business and consumer confidence and dramatic changes in business and consumer behaviors.
In response to their perceived uncertainty in economic conditions, consumers might delay, reduce or cancel purchases of homes,
and our homebuyers may also defer, reduce or cancel purchases of our units. We have experienced volatilities in demand from time
to time in the recent years due to the strict mortgage policy and other measures taken by the PRC government to slow down the rapid
increase in housing prices. To the extent any fluctuations in the Chinese economy significantly affect homebuyers’ demand
for our units or change their spending habits, our results of operations may be materially and adversely affected. The PRC economy
also faces challenges in the short to medium term. Continued turbulence in the international markets and prolonged declines in
consumer spending, including home purchases, as well as any slowdown of economic growth in China, may adversely affect our liquidity
and financial condition.
Our business requires access to substantial
financing. Our failure to obtain adequate financing in a timely manner could severely adversely restrict our ability to complete
existing projects, expand our business, or repay our obligations and affect our financial performance and condition.
Our property development
business is capital intensive. To date, we have funded our operations primarily through bank borrowings, proceeds from sales and
pre-sales of our properties and proceeds from issuance of equity and debt securities. We obtain commercial bank financing for our
projects through credit lines extended on a case-by-case basis. Our ability to secure sufficient financing for land use rights
acquisition and property development and repayment of our existing onshore and offshore debt obligations depends on a number of
factors that are beyond our control, including lenders’ perceptions of our creditworthiness, sufficiency of collateral, if
any, market conditions in the capital markets, investors’ perception of our securities, the PRC economy and PRC government
regulations that affect the availability and cost of financing for real estate companies or property purchasers.
Since 2003, PRC
commercial banks have been prohibited, under the guidelines of the PBOC, from advancing loans to fund the payment of land use rights.
We generate significant cash flow through pre-sales, which are subject to government restrictions. In particular, PRC regulations
on the pre-sales of properties generally provide that the proceeds from the pre-sales of a real estate project may only be used
for the construction of such project. Any additional potential government restrictions on pre-sales could significantly increase
our financing needs. Moreover, our ability to move cash through inter-company transfers or transfer funds from onshore subsidiaries
to our offshore parent company is limited by PRC government regulations, which limits our ability to use excess cash resources
in one subsidiary to fund the obligations of another subsidiary or our offshore parent company. In addition, reserve requirement
applicable to PRC commercial banks generally limit, and any increases in such reserve requirements could further limit, the amount
of commercial bank credit available to businesses in China, including us.
Furthermore,
various other PRC regulations restrict our ability to raise capital through external financing and other methods, including, without
limitation, the following:
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we cannot borrow from a PRC bank for a particular project if we do not have the land use rights
certificate for that project;
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we cannot pre-sell uncompleted residential units in a project prior to achieving certain development
milestones specified in related regulations;
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we cannot borrow from a PRC bank for a particular project unless we fund at least 35% of the total
investment amount of that project from our own capital;
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property developers are strictly restricted from using the proceeds from a loan obtained from a
local bank to fund property developments outside the region where that bank is located; and
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PRC banks are prohibited from accepting properties that have been vacant for more than three years
as collateral for loans.
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On February 13,
2017, the Asset Management Association of China issued the Administrative Rules for the Filing of Private Equity and Asset Management
Plans by Securities and Futures Institutions No. 4 — Investment in Real Estate Developers and Projects by Private Equity
and Asset Management Plans (“Rule 4”). Rule 4 provides that the Asset Management Association of China will temporarily
suspend accepting any private equity and asset management plan which makes a direct or indirect investment in any ordinary residential
property project located in specified cities where the property prices are considered to have risen too fast, including Beijing,
Shanghai, Guangzhou, Suzhou, Tianjin, Wuhan, Zhengzhou, Jinan and Chengdu, where the Company operates. In addition, a private equity
and asset management plan may not be used to finance any real estate developer, whether in the form of bank entrusted loans, trust
plans or transfers of beneficial interests in assets, for the purpose of acquiring land use rights or supplementing working capital.
In the United States,
we currently have three development projects in the Brooklyn, Manhattan and Queens boroughs of New York City. Pre-sale proceeds
(i.e., deposits and other sales proceeds received before the conveyance of title to the buyer) cannot be used to finance project
construction under local laws and regulations applicable to the New York projects, so we are financing their development through
internal funds and bank loans, causing us to utilize more of our own funds to undertake larger construction debt obligations and
to bear higher borrowing costs.
As of December 31,
2019, our contractual obligations amounted to US$5,004.9 million, primarily arising from contracted construction costs or other
capital commitments for future property developments and debt obligations. Of this amount, US$2,322.0 million was due within one
year.
There
can be no assurance that our internally generated cash flow and external financing will be sufficient for us to meet our contractual
and financing obligations in a timely manner. Due to the current measures imposed by the PRC government (as well as other measures
that may be imposed in the future) which limit our access to additional capital, as well as restrictions imposed on our conduct
under existing debt arrangements, we cannot assure you that we will be able to obtain sufficient funding to finance intended purchases
of land and land use rights, develop future projects or meet other capital needs as and when required at a commercially reasonable
cost or at all. Our failure to obtain adequate financing in a timely manner and on reasonable terms could severely adversely (1)
restrict our ability to complete existing projects, expand our business, or repay our obligations and (2) affect our cash flow,
liquidity, financial performance and condition.
If we are
unable to manage successfully our expansion into other cities in China, we will not be able to execute our business plan.
A key aspect of
our historical business plan has been to expand our residential property development operations into high growth cities in China,
from our initial focus on Zhengzhou. We plan to expand into new cities as suitable opportunities arise. The development of real
estate projects in other cities will impose significant demands on our management and other operational resources. Moreover, we
will face additional competition and will need to establish brand recognition and market acceptance for our developments in these
new markets. Each city has its unique market conditions, customer requirements and local regulations related to the local real
estate industry. If we are unable to successfully develop and sell projects outside of our existing markets, our future growth
may be limited and we may not generate adequate returns to cover our investments in these new markets. In addition, if we expand
our operations to other cities with higher land prices, our costs may increase, which may lead to a decrease in our profit margin,
or impairments resulting from land value decreases.
We are in the early stages of expanding
into markets outside of China in which we have limited or no development experience and which may require us to spend significant
resources, and there can be no assurance that we will be able to succeed in any such market.
While our primary
focus continues to be residential real estate markets in high-growth cities in China, we have begun expanding into other markets
on an opportunistic basis. In the US, we currently have a completed project in the Williamsburg neighborhood of Brooklyn, New York
(“New York Oosten Project”), an ongoing residential ground-up development project in Manhattan, New York, and an early
stage project in the Flushing neighborhood of Queens, New York. Any change in federal income tax laws that increase the effective
costs of owning a home would have an adverse effect on the demand for homes in the United States which could negatively affect
any properties we may develop in the United States.
In 2014, we acquired
100% of the shares of a Malaysian company, which owns offshore landfill development rights for a total area of 170 acres (approximately
687,966 square meters). As of the end of 2019, around 90.9 acres of the land has been reclaimed. We anticipate
that the entirety of the reclamation work will be completed in the first half of 2020. We have no development experience in Malaysia,
nor have we ever engaged in landfill reclamation projects. All of our prior operations have involved real estate development undertaken
on raw land, and we cannot assure you that we will be able to complete successfully the required landfill reclamation.
In 2018, we acquired
a 50% equity stake in MDL, the developer of the Madison Project, a 0.38 hectare (approximately 0.94 acre) development located adjacent
to Canary Wharf, in London, United Kingdom. Given the uncertainties relating to Britain leaving the European Union, the London
real estate market is unstable and it is difficult to estimate the impact to real estate business.
Given our limited
experience in markets outside of China market, it may be difficult for us to forecast accurately our future revenues and expenses
related to existing and future projects in the United States, the UK, or Malaysia. Further, locating appropriate future projects
in those and other non-China markets and generating future revenues from such projects may require us to expend significant capital
and management resources.
In addition, we
may not be able to develop a successful property development business in any given market. Our ability to develop a successful
property developments business in any given market will depend on a number of factors including many outside of our control, such
as the status of the country’s/region’s economy in general and in our target markets, consumer confidence levels, unemployment
levels, interest rates and the ability of potential purchasers to obtain mortgage financing.
Our business
is sensitive to the general economic conditions in the countries, city and specific target markets in which we operate. A severe
or prolonged downturn in the global economy generally and particularly in the countries or regions in which we have development
projects could materially and adversely affect our revenues and results of operations.
The
real estate market is sensitive to general economic conditions, financial conditions, including interest rates, availability of
capital, employment rates, and other economic and financial conditions in the local market and the broader region or country as
well as global economic conditions. Significant downturns and instability in the global economy or in the country and local markets
in which we operate or the perception that they could occur, could depress economic activity and restrict our access to capital.
In addition, any such events could negatively affect our customers in one or more markets, including their access to financing
or willingness to engage in a major financial transaction, such as purchasing a home. As a result, our business, financial condition
and results of operations could be negatively affected and affect our operations.
In our China markets,
any slowdown in China’s economic development could lead to tighter credit markets, increased market volatility, sudden drops
in business and consumer confidence and dramatic changes in business and consumer behaviors. In response to their perceived uncertainty
in economic conditions, consumers might delay, reduce or cancel purchases of homes, and our homebuyers may also defer, reduce or
cancel purchases of our units. We have experienced volatilities in demand from time to time in the recent years due to the strict
mortgage policy and other measures taken by the PRC government to slow down the rapid increase in housing prices. To the extent
any fluctuations in the Chinese economy significantly affect homebuyers’ demand for our units or change their spending habits,
our results of operations may be materially and adversely affected.
The PRC economy
also faces challenges in the short to medium term. Continued turbulence in the international markets and prolonged declines in
consumer spending, including home purchases, as well as any slowdown of economic growth in China, may adversely affect our liquidity
and financial condition.
Our US property
developments are sensitive to the general economic conditions in the United States and the condition of the U.S. housing market
in particular. The U.S. housing industry is highly cyclical and is significantly affected by changes in industry conditions, as
well as in global and local economic conditions, such as changes in employment and income levels, availability of financing for
buyers, interest rates, levels of new and existing homes for sale demographic, trends and housing demand. Deterioration in industry
conditions in the United States or in broader economic conditions could have additional material adverse effects on our business
expansion in the United States and financial results.
There have been
significant changes and proposed changes to U.S. trade policies, treaties, tariffs and taxes, including trade policies and tariffs
regarding China, which have created significant uncertainty about the future relationship between the United States and China,
as well as other countries, including with respect to the trade policies, treaties, government regulations and tariffs that could
apply to trade with those countries.
We may be unable to acquire desired
development sites at commercially reasonable costs.
Our revenue depends
on the completion and sale of our projects, which in turn depends on our ability to acquire development sites. Our land costs are
a major component of our cost of real estate sales and increases in such costs could diminish our gross margin. In China, the PRC
government controls the supply of land and regulates land sales and transfers in the secondary market. As a result, the policies
of the PRC government, including those related to land supply and urban planning, affect our ability to acquire, and our costs
of acquiring, land use rights for our projects. In recent years, the PRC government has introduced various measures attempting
to moderate investment in the property market in China. Although we believe that these measures are generally targeted at the luxury
property market and speculative purchases of land and properties, we cannot assure you that the PRC government will not introduce
other measures in the future that would adversely affect our ability to obtain land for development. We currently acquire our development
sites primarily by bidding for government land, supplemented in some instances by direct negotiations with local governments prior
to land auctions or by acquisition of local developers or by investment in an entity that holds land use rights or by cooperating
with our business partners through joint ventures and associated companies. Under current regulations, land use rights acquired
from government authorities for commercial and residential development purposes must be purchased through a public tender, auction
or listing-for-sale. Competition in these bidding processes has resulted in higher land use rights costs for us over the past few
years, and we may not successfully obtain desired development sites due to the increasingly intense competition in the bidding
processes. Moreover, the supply of potential development sites in any given city will diminish overtime, and we may find it increasingly
difficult to identify and acquire attractive development sites at commercially reasonable costs in the future.
We rely on
third-party contractors who may not perform at acceptable quality levels or in a timely manner.
Substantially all
of our project construction and related work are outsourced to third-party contractors their performance may not meet our level
of standards or specifications. Negligence, delay or poor work quality by contractors may result in defects in our buildings or
residential units, which could in turn cause us to suffer financial losses, harm our reputation or expose us to third-party claims.
If the performance of any third party contractor is not satisfactory or is delayed, we may need to replace such contractor or take
other actions to remedy the situation, which could adversely affect the cost and construction progress of our projects, and which
could cause the completion of our property developments to be delayed. We work with multiple contractors on different projects
and cannot guarantee that we can effectively monitor their work at all times. Although our construction and other contracts contain
provisions designed to protect us, we may be unable to successfully enforce these rights and, even if we are able to successfully
enforce these rights, the third-party contractors may not have sufficient financial resources to compensate us. Moreover, the contractors
may undertake projects from other property developers, engage in risky undertakings or encounter financial or other difficulties,
such as supply shortages, labor disputes or work accidents, which may cause delays in the completion of our property projects or
increases in our costs. In addition, consistent with what we believe is the customary industry practice in China, our contractors
typically do not maintain insurance coverage on our properties under construction.
We may be unable to complete our property
developments on time or at all and any construction delays, or failure to complete a project according to our planned specifications or budget, may delay
our property sales, which could adversely affect our revenues, cash flows and our reputation.
The progress and
costs for a development project can be adversely affected by many factors, including, without limitation:
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delays in obtaining necessary licenses, permits or approvals from government agencies or authorities;
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changes in government policies, rules or regulations;
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shortages of materials, equipment, contractors and skilled labor or increased labor or raw material
costs;
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disputes with our third-party contractors;
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failure by our third-party contractors to comply with our designs, specifications or standards;
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difficult geological situations or other geotechnical issues;
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onsite labor disputes or work accidents; and
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natural catastrophes or adverse weather conditions, including strong winds, storms, floods, and
earthquakes.
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Any construction
delays, or failure to complete a project according to our planned specifications or budget, may delay our property sales, which
could adversely affect our revenues, cash flows and our reputation.
Under PRC laws and
regulations and our pre-sale contracts, we are required to compensate purchasers for late delivery of or failure to complete our
pre-sold units. If the delay extends beyond the contractually specified period, the purchasers may become entitled to terminate
the pre-sale contracts and claim damages. We are also unable to guarantee that any legal proceedings or renegotiations resulting
from delays or failures to deliver will have a favorable outcome. For more information, see “—We may become involved
in legal and other proceedings from time to time and may suffer significant liabilities or other losses as a result”.
Proceeds from pre-sale
of our properties are an important source of financing for our property developments. Under PRC laws, we are not permitted to commence
pre-sales until we have completed certain stages of the construction process for a project. Consequently, a significant delay in
the construction of a project could restrict our ability to pre-sell our properties, which could extend the recovery period for
our capital outlay. This, in turn, could have an adverse effect on our cash flow, business and financial position.
Changes of
laws and regulations with respect to pre - sales may adversely affect our cash flow position and performance.
We
depend on cash flows from pre-sale of properties as an important source of funding for our property development projects. Under
current PRC laws and regulations, property developers must fulfill certain conditions before they can commence pre-sale of the
relevant properties and may only use pre-sale proceeds to finance the construction of the specific developments. In addition,
a number of cities in which we are operating business, such as Tianjin, Sichuan and Shandong, have established local rules and
conditions for the pre-sale permits application, especially for the custody of pre-sale funds. Such local regulatory measures
have not materially affected or restricted our operation or our use of pre-sale funds yet. However, we cannot assure you that
the PRC national government or the local governmental authorities will not implement further restrictions on the pre-sale of properties,
which may affect our cash flow position and force us to seek alternative sources of funding for much of our property development
business.
The results of our operations may
fluctuate from period to period as we derive our revenue principally from the sale of properties and we rely on our unsold inventory
of units.
We derive the majority
of our revenue from the sale of properties that we have developed. Our results of operations tend to fluctuate from period to period
due to a combination of factors, including the overall schedule of our property development projects, the timing of the sale of
properties that we have developed, the size of our land bank, our revenue recognition policies and changes in costs and expenses,
such as land acquisition and construction costs. The number of properties that we can develop or complete during any particular
period is limited due to the size of our land bank, the substantial capital required for land acquisition and construction, as
well as the development periods required before positive cash flows may be generated. For real estate sales contracts for which
we have an enforceable right to payment for performance completed to date, revenue is recognized over time by measuring the progress
towards complete satisfaction of that performance obligation. Otherwise, revenue is recognized at a point in time when the customer
obtains control of the asset. In addition, several properties that we have developed or that are under development are large scale
and developed in multiple phases over the course of one to several years. The selling prices of the residential units in larger
scale property developments tend to change over time, which may impact our sales proceeds and, accordingly, our revenues for any
given period. Furthermore, our property development projects may be delayed or adversely affected by a combination of factors beyond our
control, which may in turn adversely affect our revenue recognition and consequently our cash flows or results of operations.
As a result of the fluctuations in our operating results, our period-to-period comparisons of results of operations and cash
flow positions may not be indicative of our future results of operations and may nor be taken as meaningful measures of our
financial performance for any specific period.
The recognition of our real estate
revenue and costs is dependent upon our estimation of our total project revenue and costs.
For real estate
sales contracts for which we have an enforceable right to payment for performance completed to date, revenue is recognized over
time by measuring the progress towards complete satisfaction of that performance obligation. Otherwise, revenue is recognized at
a point in time when the customer obtains control of the asset. See “Item 5. Operating and Financial Review and Prospects
— A. Operating Results — Critical Accounting Policies.” Under both methods, revenue and costs are calculated
based on an estimation of total project costs and total project revenues, which are revised on a regular basis as the work progresses.
Any material deviation between actual and estimated total project revenues and costs may result in an increase, a reduction or
an elimination of reported revenues or costs from period to period, which will affect our gross profit and net income.
We face risks related to our back-to-back
loans.
With
our operations in the U.S. markets and now other non-PRC jurisdictions, we have seen and expect to continue to experience an increasing
need of non-RMB financings with respect to project developments and future expansions. We currently satisfy our non-RMB denominated
financing requirements through four ways: dividends distributions from our PRC subsidiaries, which are subject to 10% withholding
tax payment, back-to-back loan arrangements, high yield bond issuances and construction loan financing from local banks. Under
back-to-back loan arrangements, our PRC subsidiaries make deposits denominated in RMB into banks in China as collateral to request
the banks in China to issue standby letters denominated in U.S. dollars or other currencies in the same amount as the RMB collateral
to their outbound branches, and our project companies outside the PRC enter into loans denominated in U.S. dollars or other currencies
with such outbound branches in the same amount specified in such standby letters in accordance with to the Provisions on the Administration
of Foreign Exchange for Cross-border Guarantee issued by the State Administration of Foreign Exchange of the People’s Republic
of China (the “SAFE”), effective June 1, 2014. SAFE registration requirements apply to overseas back-to-back loan
arrangements and the use of proceeds of such loans must comply with certain requirements. Any change in laws or regulations to
restrict or forbid back-to-back loan transactions in the future may adversely affect our non-PRC companies’ financing. In
addition, we are exposed to exchange rate fluctuation and foreign exchange control risks under the current back-to-back loan model,
which may adversely affect our business condition and results of operation.
We are subject to certain restrictive
covenants and risks normally associated with debt financing which may limit our ability to take certain corporate actions, including
incurring additional debt, which could materially and adversely affect our business and financial condition.
We
are subject to certain restrictive covenants in our loan agreements with certain commercial banks. Certain loan agreements contain
covenants providing that, among other matters, we or our relevant PRC operating subsidiaries may not enter into mergers, joint
ventures or restructurings, decrease our registered share capital, transfer material assets, including shares of subsidiaries,
engage in material investments, liquidate, change our shareholding, or distribute dividends without the relevant lenders’
prior written consent or unless we fully settle the outstanding amounts under the relevant loan agreements. In addition, certain
of our loan agreements contain cross- default clauses. If any cross default occurs, these banks are entitled to accelerate payment
of all or any part of the loan under their relevant loan agreements and to enforce all or any of the security for such loans.
Further, the onshore corporate bonds issued by Xinyuan (China) Real Estate, Ltd. (“Xinyuan China”), our wholly-owned
PRC subsidiary, contain restrictions on certain business activities of Xinyuan China when in default on payment of interest or
principal, including, among others, limitations on distributions of net income, limitations on certain expenditures, or business
combination transactions. Our future bank and other borrowings may contain similar restrictions or cross-default provisions.
Our outstanding
debt securities also contain certain covenants that restrict our ability to take other corporate actions. The indentures governing
our Senior Secured Notes contain covenants that, among other things, restrict our ability and our restricted subsidiaries’
abilities (as defined in the relevant indenture) to incur additional debt or issue preferred stock, to make certain payments or
investments, to pay dividends, to purchase or redeem capital stock, sell assets, or make certain other payments, subject to certain
qualifications and exemptions and satisfaction of certain conditions.
As a result of any
such covenants in current or future financing documents, our ability to pay dividends or other distributions on our common shares
and ADSs may be limited. Such covenants may also restrict our ability to raise additional capital in the future through bank borrowings,
mortgage financings, and debt and equity issuances and may restrict our ability to engage in some transactions that we believe
to be of benefit to us. The occurrence of any of the above events may have a material adverse effect on our business, financial
condition and operating results, as well as cash flow and cash that is available for distributions.
In addition, our
obligations under our Senior Secured Notes are guaranteed by various of our subsidiaries, and the guarantee by our wholly-owned
subsidiary, Xinyuan Real Estate, Ltd., or Xinyuan Ltd, which indirectly holds all of our assets and operations in China is secured
by a pledge of our shares of the other guarantor subsidiaries subject to limited exceptions. If we default under any of the Senior
Secured Notes, the holders thereof may enforce their claims against those shares. In such an event, the holders of the Notes could
gain ownership of the shares of Xinyuan Ltd., and, as a result, own and control all of our subsidiaries in China. We conduct substantially
all of our operations in China, and if we default under any of the Notes, we could lose control or ownership of our assets and
operations in China.
We rely on our key management
members and the loss of their services or investor confidence in such personnel could have a material adverse effect on our business,
results of perations and financial condition.
We
depend on the services provided by key management members. Competition for management talent is intense in the property development
sector. In particular, we are highly dependent on Mr. Yong Zhang, our founder and Chairman. We do not maintain key employee insurance.
In the event that we lose the services of any key management member, we may be unable to identify and recruit suitable successors
in a timely manner or at all, which will adversely affect our business and operations. Moreover, we may need to employ and retain
more management personnel to support an expansion into high growth cities on a much larger geographical scale as well as our expansion
in the U.S., Malaysia, U.K. and other areas. If we cannot attract and retain suitable personnel, especially at the management
level, our business and future growth will be adversely affected.
We provide
guarantees for the mortgage loans of our customers in China which expose us to risks of default by our customers.
We pre-sell properties
before actual completion and, in accordance with PRC industry practice, our customers’ mortgage banks require us to guarantee
our customers’ mortgage loans. Typically, we provide guarantees to PRC banks with respect to loans procured by the purchasers
of our properties for the total mortgage loan amount until the completion of the registration of the mortgage with the relevant
mortgage registration authorities, which generally occurs within six to 12 months after the purchasers take possession of the relevant
properties. In line with what we believe to be industry practice, we rely on the credit evaluation conducted by mortgagee banks
and do not conduct our own independent credit checks on our customers. The mortgagee banks typically require us to maintain, as
restricted cash, up to 10% of the mortgage proceeds paid to us as security for our obligations under such guarantees. If a purchaser
defaults on its payment obligations during the term of our guarantee, the mortgagee bank may deduct the delinquent mortgage payment
from the security deposit. If the delinquent mortgage payments exceed the security deposit, the banks may require us to pay the
excess amount. If multiple purchasers’ default on their payment obligations, we will be required to make significant payments
to the banks to satisfy our guarantee obligations. Factors such as a significant decrease in housing prices, increase in interest
rates or the occurrence of natural catastrophes, among others, could result in a purchaser defaulting on its mortgage payment obligations.
If we are unable to resell the properties underlying defaulted mortgages on a timely basis or at prices higher than the amounts
of our guarantees and related expenses, we will suffer financial losses. We paid US$788,644, and US$1,659,652, and US$1,782,038
to satisfy guarantee obligations related to customer defaults for the years ended December 31, 2017, 2018 and 2019.
As of December 31,
2018 and 2019, our outstanding guarantees in respect of our customers’ mortgage loans amounted to US$1,988.6 million and
US$2,617.2 milllion, respectively. If substantial defaults by our customers occur and we are called upon to honor our guarantees,
our financial condition, cash flow and results of operations will be materially adversely affected.
Our level of indebtedness could have
an adverse effect on our financial condition, diminish our ability to raise additional capital to fund our operations and limit
our ability to explore business opportunities.
As of December 31,
2019, the outstanding balance of our total indebtedness amounted to US$3,215.1 million. Our level of indebtedness could have an
adverse effect on us. For example, it could:
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require us to dedicate a large portion of our cash flow from operations as well as the proceeds
of certain financings and asset dispositions to fund payments on our debt, thereby reducing the availability of our cash flow to
fund working capital, capital expenditures and other general corporate purposes;
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make it more difficult for us to satisfy our obligations under our debt securities and other indebtedness;
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increase our vulnerability to adverse general economic or industry conditions;
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limit our flexibility in planning for, or relating to, changes in our business or the industry
in which we operate;
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limit our ability to raise additional debt or equity capital in the future or increase the cost
of such funding;
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restrict us from making strategic acquisitions, exploring business opportunities or selling assets;
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place us at a competitive disadvantage compared to any competitors that have less debt; and
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make it more difficult for us to satisfy our obligations with respect to our debt.
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Our
ability to make payments on and to refinance our indebtedness will depend on our ability to generate cash in the future, which
in turn is dependent on various factors. For a discussion of these factors, see “Item 5. Operating and Financial Review
and Prospects — A. Operating Results — Principal Factors Affecting Our Results of Operations.”
Our financing costs are subject to
changes in interest rates.
The rates of interest
payable on our PRC long-term bank loans are adjustable based on the range of 160.42% to 315.79% of the PBOC benchmark rate, which
fluctuates from time to time. As of December 31, 2019, the principal amount of our aggregate outstanding variable rate debt was
US$1,006.1 miillion. A hypothetical 1% increase in annual interest rates would increase our interest expenses by US$10.1 million
based on our debt level at December 31, 2019. In connection with our U.S. projects and UK projects, we entering into U.S. dollar
and British pound denominated loans, which will subject us to additional interest rate fluctuation risks, including fluctuations
of the London Interbank Offered Rate (“LIBOR”).
We are subject to potential environmental
liability.
We are subject to
a variety of laws and regulations concerning the protection of health and the environment. The particular environmental laws and
regulations that apply to any given development site vary significantly according to the site’s location and environmental
condition, the present and former uses of the site and the nature of the adjoining properties. Environmental laws and conditions
may result in delays, may cause us to incur substantial compliance and other costs and can prohibit or severely restrict project
development activity in environmentally-sensitive regions or areas. Although the environmental investigations conducted by local
PRC environmental authorities have not revealed any environmental liability related to our China projects that we believe would
have a material adverse effect on our business, financial condition or results of operations to date, it is possible that these
investigations did not reveal all environmental liabilities and that there are material environmental liabilities of which we are
unaware. We cannot assure you that future environmental investigations will not reveal material environmental liability. Also,
we cannot assure you that the PRC, United States, Malaysian or UK governments will not change the existing laws and regulations
or impose additional or stricter laws or regulations, the compliance of which may cause us to incur significant capital expenditure.
See “Item 4. Information on the Company — B. Business Overview — Environmental Matters.”
Our business expansion and business
diversification requires proper allocation of our management resources and qualified employees.
In recent years, we expanded our operations into the U.S., Malaysia and the UK while also expanding our operations in China.
Such expansion, with more diversified business focuses in terms of market regions and types of business, demand proper allocation
of our management resources. In addition, our Malaysia acquisition which involves land reclamation activities, our acquisitions
of Beijing Ruizhuo Xitou Development Co., Ltd. ("Xitou"), Beijing Ruizhuo Xichuang Technology Development Co., Ltd.("Xichuang")
and Beijing I-Journey Science and Technology Development Co.,Ltd.("I-Journey"), which extends the group’s business to
provide real estate and property management related technology services, in which
we have no prior experience and which presents risks we have not previously encountered or dealt with, may require additional
skill sets on the part of our management. If our management fails to satisfy these increased demands, we may not be able to
carry out our business expansion and project development successfully. In addition, if we are unable to recruit or retain
a sufficient number of qualified employees for the continuation and expansion of our business, our business and prospects
may be adversely affected.
New lines of business or new products
and services may subject us to additional risks.
From
time to time, we may implement new lines of business or offer new products and services within existing lines of business. There
are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully
developed. There may be license and compliance requirements regarding new lines of business, including special requirements for
foreign-invested enterprises. The development and marketing of new lines of business or new products and services could distract
our management from our core business. In addition, we may invest significant time and resources into these new lines of business
or new products and services. Initial timetables for the introduction and development of new lines of business or new products
and services may not be achieved and price and profitability targets may not prove feasible. External factors, such as compliance
with regulations, competitive alternatives, and shifting market preferences, may also impact the successful implementation of
a new line of business or a new product or service. Furthermore, any new line of business or new product or service could have
a significant impact on the effectiveness of our system of internal control. Particularly, we cannot assure that our investment
in certain technology development activities, including our development smart home technology products, cloud-based enterprise
resource planning software and online property sales platform will be successful or have positive impacts on our business. Failure
to successfully manage these risks in the development and implementation of new lines of business or new products or services
could have a material adverse effect on our business, results of operations and financial condition.
Failure to
maintain the security of our information and technology networks, including personally identifiable and customer information and
proprietary business information, could significantly adversely affect us.
Security breaches
and other disruptions of our information and technology networks could compromise our information and expose us to liability, reputational
harm and significant remediation costs, which could cause material harm to our business and financial results. In the ordinary
course of our business, we collect and store sensitive data, including our proprietary business information, and information relating
to our customers and information of our employees, contractors and vendors, in our on our networks. Despite our security measures,
and those of our third-party service providers, our information technology and infrastructure may be vulnerable to attacks by third
parties or breached due to employee error, malfeasance or other disruptions. A significant theft, loss, corruption, exposure, fraudulent
use or misuse of customer, employee or other personally identifiable or proprietary business data, noncompliance with our contractual
or other legal obligations regarding such data could result in significant remediation and other costs, fines, litigation or regulatory
actions against us. Such an event could additionally disrupt our operations, harm our relationships with contractors and vendors,
damage our reputation, result in the loss of a competitive advantage, which could adversely affect our business, revenues, competitive
position and investor confidence. Additionally, we rely on third parties to support our information and technology networks, and
as a result have less direct control over our data and information technology systems. Such third parties are also vulnerable to
security breaches and compromised security systems, for which we may not be indemnified and which could materially adversely affect
us.
Interruption or failure of our information
technology, communications systems or data services could impair our ability to operate our business effectively, which could damage
our reputation and materially harm our operating results.
Our business requires
the continued operation of information technology and communication systems and network infrastructure. Our information technology
and communications systems are vulnerable to damage or disruption from fire, power loss, telecommunications failure, system malfunctions,
computer viruses, cyber-attacks, natural disasters such as hurricanes, earthquakes and floods, acts of war or terrorism, employee
errors or malfeasance, or other events which are beyond our control. We may be a target of cyberattacks and viruses, which could
expose us to liability, reputational harm and significant remediation costs and cause material harm to our business and financial
results. In addition, the operation and maintenance of our systems and networks is in some cases dependent on third-party service
providers for which there is no certainty of uninterrupted availability. Any of these events could cause system interruption, delays
and loss, corruption or exposure of critical data or intellectual property and may also disrupt our ability to interact with our
customers, contractors and vendors. Further, any such event could result in substantial recovery and remediation costs and liability
to customers and third parties.
We may fail to obtain or maintain,
or may experience material delays in obtaining, necessary government approvals for any major property development, which will adversely
affect our business.
The real estate
industry in China is strictly regulated by the PRC government. Property developers in China must abide by various laws and regulations,
including implementation rules implemented by local governments to enforce these laws and regulations. Before commencing, and during
the course of, development of a property project, we need to apply for or renew various licenses, permits, certificates and approvals,
including but not limited to, land use rights certificates, construction site planning permits, construction work planning permits,
construction permits, pre-sale permits and completion acceptance certificates. We need to satisfy various requirements to obtain
these approval certificates and permits, and to meet specific conditions in order for the government authorities to renew relevant
approval certificates and permits. We cannot guarantee that we will not encounter serious delays or difficulties in the future.
Some of our subsidiaries were not in compliance with certain construction or pre-sales related PRC laws and regulations, such as
commencing construction works and pre-sales before obtaining the requisite approvals or permits. Although we have improved our
internal control procedures, we cannot guarantee that we will be able to adapt to new rules and regulations that may come into
effect from time to time with respect to the property industry or that we will not encounter material delays or difficulties in
fulfilling the necessary conditions to obtain and/or renew all necessary certificates or permits for our operations in a timely
manner, or at all, in the future. In the event that we fail to obtain the necessary governmental approvals for any of our major
property projects, or a serious delay occurs in the government’s examination and approval process, we may not be able to
maintain our development schedule and our business and cash flows may be adversely affected.
Moreover, as the
real estate industry is closely monitored by the PRC government, we anticipate that new policies will be promulgated from time
to time in relation to the conditions for issuance or renewal of such approvals, licenses or permits. We cannot guarantee that
such new policies will not present unexpected obstacles toward our ability to obtain or renew the required permits, licenses and
certificates or that we will be able to overcome these obstacles in a timely manner, or at all. Loss of or failure to renew our
permits, licenses and certificates may stall the progress of our major property development projects.
Regulations
in the United States, Malaysia and the United Kingdom could increase the cost and limit the availability of our project development
in these jurisdictions and adversely affect our business or financial results.
As we expand our
business in the U.S., Malaysia and UK markets, we will continue to be subject to extensive and complex regulations in these jurisdictions
that affect land development and home construction, including zoning, density restrictions, building design and building standards,
as well as environmental laws. These regulations often provide broad discretion to the administering governmental authorities as
to the conditions we must meet prior to being approved, if approved at all. We are subject to determinations by these authorities
as to the adequacy of water and sewage facilities, roads and other local services. New housing developments may also be subject
to various assessments for public improvements. The project in Malaysia is at the stage of land reclamation, which is subject to
environment impact assessment and conditions imposed thereon by the regulatory bodies. Any of these regulatory issues can limit
or delay construction and increase our operating costs. We are also subject to a variety of local, state and/or federal laws and
regulations concerning protection of health, safety and the environment. These matters may result in delays, may cause us to incur
substantial compliance, remediation, mitigation and other costs or subject us to costs from fines, penalties and related litigation.
These laws and regulations can also prohibit or severely restrict development and homebuilding activity in environmentally sensitive
areas.
Increases in the price of raw materials
or labor costs may increase our cost of sales and reduce our earnings.
We outsource the
design and construction of our projects under development to third-party service providers. Our third-party contractors are responsible
for providing labor and procuring almost all of the raw materials used in our project developments. Our PRC construction contracts
typically provide for fixed or capped payments, but the payments are subject to changes in PRC government-suggested prices for
certain raw materials we use, such as steel and cement. In addition, China’s overall economy and the average wage in China
have increased in recent years and are expected to grow in the near future. The average wage level for the employees has also increased
for the past periods. Any increase in raw materials costs, labor costs or other costs which may result in adjustments in payments
under any of our construction contracts could result in an increase in our construction costs. In the event that the price of any
raw materials, including cement, concrete blocks and bricks, or labor cost increase in the future, such increase could be passed
on to us by our contractors, and our construction costs would increase accordingly. Passing such increased costs to our customers
may result in reduced sales and delay our ability to complete sales for our projects. Any input cost increase could reduce our
earnings to the extent we are unable to pass these increased costs to our customers.
Retail and commercial investment properties
and properties held for sale are generally illiquid investments and the lack of alternative uses of such properties could limit
our ability to respond to changes in the performance of our properties.
As of December
31, 2019, we had approximately 86,951, 116,288, 12,187, 18,936 and 3,904 square meters of retail investment properties in
Zhengzhou, Xi’an, Changsha Chengdu and Kunshan, in China, and approximately 28,090 square feet of retail investment
properties in New York, respectively. As of December 31, 2019, we also have four projects under construction at which we plan
to develop commercial property for lease with a planned GFA of approximately 203,270 square meters. We anticipate that we may
prudently and gradually increase our retail and commercial investment properties as appropriate opportunities arise in the
future. Any form of real estate investment is difficult to liquidate and, as a result, our ability to sell our properties in
response to changing economic, financial and investment conditions is limited. In addition, we may also need to incur
operating and capital expenditures to manage and maintain our properties, or to correct defects or make improvements to these
properties before selling them. We cannot assure you that we can obtain financing at a reasonable cost for such expenditures,
or at all.
Furthermore, aging
of retail and commercial investment properties or properties held for sale, changes in economic and financial conditions or changes
in the competitive landscape in the PRC or U.S. property markets, may adversely affect the amounts of rentals and revenue we generate
from, as well as the fair value of, these properties. However, our ability to convert any of these properties to alternative uses
is limited as such conversion requires extensive governmental approvals in the PRC or may require zoning or other approvals in
the United States and involves substantial capital expenditures for the purpose of renovation, reconfiguration and refurbishment.
We cannot assure you that such approvals and financings can be obtained when needed. These and other factors that impact our ability
to respond to adverse changes in the performance of our retail and commercial investment properties, as well as properties held
for sale, may adversely affect our business, financial condition, cash flow and results of operations.
We may be adversely affected by material
issues that affect our relationships or business ventures with our joint venture and associated company partners.
We have partnered with a number of business partners and established
joint ventures and associates with third parties and may continue to do so in the future. The performance of such business ventures
has affected, and will continue to affect, our results of operations and financial position. We and our business venture partners
provided capital to our jointly established project companies in proportion to our shareholding percentages in order to fund such
project companies’ land acquisition efforts and working capital requirements. Once these project companies commence pre-sale
and generate cash flow, they will repay such capital to us on demand. Therefore, the timing of such business ventures’ capital
requirements, the financial performance of these business ventures and their ability to repay may materially and adversely affect
our results of operations. With respect to our subsidiaries with minority interest holders, our consolidated financial results
may be directly impacted and the profit attributable to our Group may be diluted. With respect to joint ventures and associates,
we generally expect to incur share of loss in such joint ventures or associates until their respective development of property
projects completes and starts to contribute revenue. As of December 31, 2017, 2018 and 2019, we had a total of 9, 13 and 13 joint
ventures and associates, respectively.
We may engage
in joint ventures, which could result in unforeseen expenses or disruptive effects on our business.
From time to time,
we have engaged and may consider engaging in joint ventures with other businesses to develop a property. Any joint venture that
we determine to pursue will be accompanied by a number of risks. We may not be in a position to exercise sole decision-making authority
regarding the joint ventures. We may not be able to control the quality of products produced by the joint venture. Depending on
the terms of the joint venture agreement, we may require the consent of our joint venture partners for the joint venture to take
certain actions, such as making distributions to the partners. A joint venture partner may encounter financial difficulties and
become unable to meet obligations with regard to funding of the joint venture. In addition, our joint venture partners and the
joint ventures themselves may hold different views or have different interests from ours, and therefore may compete in the same
market with us, in which case our interest and future development may be materially adversely affected. Further, since we may not
have full control over the business and operations of our joint ventures and associated companies, we cannot assure that they will
be in strict compliance with all applicable PRC laws and regulations. We cannot assure you that we will not encounter problems
with respect to our joint ventures and associated companies or our joint ventures and associated companies will not violate PRC
laws and regulations, which may have an adverse effect on our business, results of operation and financial condition.
Any
future investments or acquisitions could expose us to unforeseen risks or place additional
strain on the management and other resources.
As part of our business
strategy, we regularly evaluate investments in, or acquisitions of, subsidiaries, joint ventures, and we expect that we will continue
to make such investments and acquisitions in the future. Any potential future acquisition may be accompanied by a number of risks,
including risks relating to the evolving legal landscape in China. An acquired business may underperform relative to expectations
or may expose us to unexpected liabilities. Acquisitions of entities that own real estate may involve risks in addition to the
risks inherent in a real estate acquisition, because the acquisition of an entity generally includes all of the liabilities of
the entity — known and unknown, fixed and contingent — rather than only the liabilities related to the real estate.
These liabilities, which could be material, may include liabilities not disclosed by the seller of the entity or not discovered
during our due diligence. In addition, the integration of any acquisition could require substantial management attention and resources.
If we were unable to successfully manage the integration and ongoing operations, or hire and retain additional personnel necessary
for the running of the expanded business, the results of our operations and financial performance could be adversely affected.
Acquisitions may
result in the incurrence and inheritance of debts and other liabilities, assumption of potential legal liabilities in respect of
the acquired businesses, and incurrence of impairment charges related to goodwill and other intangible assets, any of which could
harm our businesses, financial condition and results of operations. In particular, if any of the acquired businesses fails to perform
as we expect, we may be required to recognize a significant impairment charge, which may materially and adversely affect our businesses,
financial condition and results of operations. As a result, there can be no assurance that we will be able to achieve the strategic
purpose of any acquisition, the desired level of operational integration or our investment return target.
Our failure to successfully manage
our business expansion, would have a material adverse effect on our results of operations and prospects.
Our expansion has created, and will continue
to place, substantial demand on our resources. Managing our growth and integrating the acquired businesses will require us to,
among other things:
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comply with the laws, regulations and policies applicable to the acquired businesses, including
obtaining timely approval for the real estate construction as required under the PRC law;
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maintain adequate control on our business expansion to prevent, among other things, project delays
or cost overruns;
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manage relationships with employees, customers and business partners during the course of our business
expansion;
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attract, train and motivate members of our management and qualified workforce to support successful
business expansion;
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access debt, equity or other capital resources to fund our business expansion, which may divert
financial resources otherwise available for other purposes;
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divert significant management attention and resources from our other businesses; and
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strengthen our operational, financial and management controls, particularly those of our newly
acquired subsidiaries, to maintain the reliability of our reporting processes.
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Any difficulty meeting
the foregoing or similar requirements could significantly delay or otherwise constrain our ability to implement our expansion plans,
or result in failure to achieve the expected benefits of the combination or acquisition or write-offs of acquired assets or investments,
which in turn would limit our ability to increase operational efficiency, reduce costs or otherwise strengthen our market position.
Failure to obtain the intended economic benefits from the business expansion could adversely affect our business, financial condition,
results of operations and prospects. In addition, we may also experience mixed results from our expansion plans in the short term.
Regulations in the PRC may make it
more difficult for us to pursue growth through acquisitions.
A
number of PRC laws and regulations have established procedures and requirements that could make merger and acquisition activities
in China by foreign investors more time-consuming and complex, including the Regulations on Mergers and Acquisitions of Domestic
Companies by Foreign Investors, or the M&A Rules, which became effective on September 8, 2006 and was amended on June
22, 2009, and the Implementing Rules Concerning Security Review on the Mergers and Acquisitions by Foreign Investors of Domestic
Enterprises, or the Security Review Rules issued by the Ministry of Commerce of the People’s Republic of China (the
“MOFCOM”) in August 2011. These laws and regulations impose requirements in some instances that MOFCOM must be notified
in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise. In addition,
the Anti-Monopoly Law of PRC requires that MOFCOM be notified in advance of any concentration of undertaking if certain thresholds
are triggered. Moreover, the Security Review Rules specify that mergers and acquisitions by foreign investors involved in an industry
related to national security are subject to strict review by MOFCOM. These rules also prohibit any transactions attempting to
bypass such security review, including by controlling entities through contractual arrangements. We believe that our business
is not in an industry related to national security. However, we cannot preclude the possibility that MOFCOM or other government
agencies may publish interpretations contrary to our understanding or broaden the scope of such security review in the future.
Although we have no current plans to do so, we may elect to grow our business in the future in part by directly acquiring complementary
businesses in China.
Our development plan may be adversely
affected in the event that relocation issues related to government housing expropriations are not successfully settled by the relevant
PRC governmental authorities.
We acquire property
for development through bidding, auctions and listing procedures held by the government or through acquisitions of third parties.
Some of the property we acquire from the government may have been made available through expropriation. On January 21, 2011, the
PRC State Council issued the Regulations on the Expropriation and Compensation of Houses on State-owned Land, which provides
that government entities at the city and county level are responsible for overseeing housing expropriation and compensation within
their respective administrative regions. The regulations mandate that a compensation agreement be entered into between the relevant
housing expropriation department and the entities or individuals whose houses have been expropriated addressing, among others things,
the mode of payment and the amount of compensation, the period of payment, the removal expenses, temporary placement or transitional
housing expenses, losses from the closure of business operations, the time period within which the entities or individuals must
vacate the expropriated premises, the type of transitional accommodation and the period of transition. The compensation payable
may not be less than the market value of property of a similar nature as of the date when the expropriation notice was issued.
Under the regulations, property developers are prohibited from participating in the relocation arrangements. Given the fact that
the completion of the relocation procedures is the condition precedent for the relevant PRC governmental authorities to grant land
use rights, any failure of the PRC governmental authorities in handling the relocation issues may cause substantial delays in the
granting process of land use rights. If we cannot obtain the land use rights from the relevant governmental authorities in time,
our development plan may be delayed and we may not be able to complete the development and sell the property according to plan.
This will, in turn, adversely affect our business operations.
We do not
have insurance to cover potential losses and claims.
We do not maintain
insurance policies for properties that we have delivered to our customers, and we maintain only limited insurance coverage against
potential losses or damages with respect to our properties in the PRC before their delivery to customers. Although we require our
contractors to carry insurance, we believe most of our contractors do not comply with this requirement. Our contractors may not
be sufficiently insured themselves or have the financial ability to absorb any losses that arise with respect to our projects or
pay our claims. In addition, there are certain types of losses, such as losses due to earthquakes, which are currently uninsurable
in China. While we believe that our practice is in line with the general practice in the PRC property development industry, there
may be instances when we will have to internalize losses, damages and liabilities because of the lack of insurance coverage, which
may in turn adversely affect our financial condition and results of operations. In addition, while we carry limited insurance on
our operations in the United States, Malaysia and the UK, such insurance may not be adequate to compensate us for any losses, damages
and liabilities we might incur with regard to our properties.
We may suffer a penalty or even forfeit
land to the PRC government if we fail to comply with procedural requirements applicable to land grants from the government or the
terms of the land use rights grant contracts.
According
to the relevant PRC laws and regulations, if we fail to develop a property project according to the terms of the land use rights
grant contract, including those relating to the payment of land premiums, specified use of the land and the time for commencement
and completion of the property development, the PRC government may issue a warning, may impose a penalty or may order us to forfeit
the land. Specifically, under current PRC laws and regulations, if we fail to pay land premiums in accordance with the payment
schedule set forth in the relevant land use rights grant contract, the relevant PRC land bureau may issue a warning notice to
us, impose late payment penalties or even require us to forfeit the related land to the PRC government. The late payment penalties
are usually calculated based on the overdue days for the land premium payments. Furthermore, if we fail to commence development
within one year after the commencement date stipulated in the land use rights grant contract, the relevant PRC land bureau may
issue a warning notice to us and impose an idle land fee on the land of up to 20% of the land premium. If we fail to commence
development within two years, the land will be subject to forfeiture to the PRC government without any compensation, unless the
delay in development is caused by government actions or force majeure. Even if the commencement of the land development is compliant
with the land use rights grant contract, if the developed GFA on the land is less than one-third of the total GFA of the project
that should have been under construction and development or the total capital invested is less than one-fourth of the total investment
of the project and the suspension of the development of the land continues for more than one year without government approval,
the land will also be treated as idle land and be subject to penalty or forfeiture
We cannot assure
you that circumstances leading to significant delays in our own land premium payments or development schedules or forfeiture of
land will not arise in the future. If we pay a substantial penalty, we may not be able to meet pre-set investment targeted returns
for a given project and our financial conditions could be adversely affected. If any of our land is forfeited , we will not only
lose the opportunity to develop the property projects on such land, but may also lose a significant portion of the investment in
such land, including land premium deposits and the development costs incurred.
Any non-compliant GFA of our uncompleted
and future property developments will be subject to governmental approval and additional payments or even revocation of qualification
certificate.
The local government
authorities inspect property developments after their completion and issue the completion acceptance certificates if the developments
are in compliance with the relevant laws and regulations. If the total constructed GFA of a property development exceeds the GFA
originally authorized in the relevant land grant contracts or construction permit, or if the completed property contains built-up
areas that do not conform with the plan authorized by the construction permit, the property developer may be required to pay additional
amounts or take corrective actions with respect to such non-compliant GFA before a completion acceptance certificate can be issued
to the property development. Furthermore, if the total constructed GFA of a property development exceeds the constructed GFA limitation
specified in the real estate development qualification obtained by the property developer, the property developer may be fined
up to RMB100,000, or even have its qualification certificate and business license revoked.
We
have obtained completion acceptance certificates for all of our completed properties as of December 31, 2019. However, we cannot
be certain that local government authorities will not determine that the total constructed GFA upon completion of our existing
projects under development or any future property developments exceed the relevant authorized GFA. Any such non-compliance could
lead to additional payments or penalty, which would adversely affect our financial condition. We have not incurred material amounts
of any such payments or penalties since the founding of our company.
We may not be able to continue obtaining
qualification certificates, which will adversely affect our business.
Real
estate developers in the PRC must obtain a formal qualification certificate in order to carry on a property development business
in the PRC. According to the PRC regulations issued on the qualifications of property developers, a newly established property
developer must first apply for a temporary qualification certificate with a one-year validity, which can be renewed for not more
than two years. If, however, the newly established property developer fails to commence a property development project within
the one-year period during which the temporary qualification certificate is in effect, it will not be allowed to renew its temporary
qualification certificate. All qualification certificates are subject to inspection on an annual basis and shall be renewed upon
expiration. Under government regulations, developers must fulfill all statutory requirements before they may obtain or renew their
qualification certificates. In accordance with the provisions of the rules on the administration of qualifications, the real estate
developer qualifications are classified into four classes and the approval system for each class is tiered. A real estate developer
may only engage in the development and sale of real estate within the scope of its qualification certificate. See “Item
4. Information on the Company — B. Business Overview — Regulation — China — Regulations on Qualifications
of Developer.”
There can be no
assurance that some of our project companies that are in the process of applying for or renewing proper qualification certificates
will be able to obtain such certificates on a timely basis to commence their planned real estate projects development on schedule.
There can be no further assurance that we and our project companies will continue to be able to extend or renew the qualification
certificates or be able to successfully upgrade the current qualification class to a higher qualification. If we or our project
companies are unable to obtain or renew qualification certificates, the PRC government will refuse to issue pre-sale and other
permits necessary for the conduct of the property development business, and our results of operations, financial condition and
cash flows will be adversely affected. In addition, if any of our project companies engages in the development and sale of real
estate outside the scope of its qualification certificate, it may be ordered to rectify such conduct within a prescribed period,
be fined up to RMB100,000, or even have its qualification certificate and business license revoked.
Our
failure to assist our customers in applying for property ownership certificates in a
timely manner may lead to compensatory liabilities to our customers and our reputation
and results of operations may be thus adversely affected.
We are statutorily
required to assist our customers in their application process for property ownership certificates within 90 days after delivery
of property, or such other period contracted with our customers, including in the way of submitting required materials to the real
estate administration of the place where the house is located within 60 days from the day of delivery, passing various governmental
clearances, formalities and procedures. If we failed to submit required materials for property right registration within such period,
we may be given a disciplinary warning and be ordered to take remedial measures within specified time limit, or be fined not less
than RMB20,000 but not more than RMB30,000. Besides, under our typical sales contract, we are liable for any delay in the submission
of the required documents as a result of our failure to meet such requirements, and are required to compensate our customers for
delays. In the case of delays of submission of required documents, we are required under contracts with our customers to pay compensation
to our customers and our reputation and results of operations may be adversely affected.
The property development business
is subject to claims under statutory quality warranties.
Under PRC law, all
property developers in the PRC must provide certain quality warranties for the properties they construct or sell. We are required
to provide these warranties to our customers. Generally, we receive quality warranties from our third-party contractors with respect
to our property projects. If a significant number of claims were brought against us under our warranties and if we were unable
to obtain reimbursement for such claims from third-party contractors in a timely manner or at all, or if the money retained by
us to cover our payment obligations under the quality warranties was not sufficient, we could incur significant expenses to resolve
such claims or face delays in remedying the related defects, which could in turn harm our reputation, and materially adversely
affect our business, financial condition and results of operations.
We may become
involved in legal and other proceedings from time to time and may suffer significant liabilities or other losses as a result.
We
have in the past, and may in future, become involved in disputes with various parties relating to the acquisition of land use
rights, the development and sale of our properties or other aspects of our business and operations. These disputes may lead to
legal or other proceedings and may result in substantial costs and diversion of resources and management’s attention. Disputes
and legal and other proceedings may require substantial time and expense to resolve, which could divert valuable resources, such
as management time and working capital, delay our planned projects and increase our costs. Third parties that are found liable
to us may not have the resources to compensate us for our incurred costs and damages. We could also be required to pay significant
costs and damages if we do not prevail in any such disputes or proceedings. In addition, we may have disagreements with regulatory
bodies in the course of our operations, which may subject us to administrative proceedings and unfavorable decrees that result
in pecuniary liabilities and cause delays to our property developments. As of December 31, 2019, we were involved in disputes
with our local government enterprises, joint venture partners, contractors and property sales agents. Any unfavorable judgment
in our current legal proceedings or any involvement in further legal proceedings or disputes may materially and adversely affect
our business, financial condition and results of operations. See “Item 8. Financial Information — A. Consolidated
Statements and Other Financial Information — Legal Proceedings.”
The relevant PRC tax authorities may
challenge the basis on which we have been paying our land appreciation tax obligations and our results of operations and cash flows
may be affected.
Under PRC laws and
regulations, our PRC subsidiaries engaging in property development are subject to land appreciation tax (“LAT”), which
is levied by the local tax authorities. All taxable gains from the sale or transfer of land use rights, buildings and their attached
facilities in the PRC are subject to LAT at progressive rates ranging from 30% to 60%. Exemptions are available for the sale of
ordinary residential properties if the appreciation values do not exceed certain thresholds specified in the relevant tax laws.
Gains from the sale of commercial properties, luxury residential properties and villas are not eligible for this exemption.
We have accrued
LAT payable on our property sales and transfers in accordance with the progressive rates specified in relevant tax laws, less amounts
previously paid under the levy method applied by relevant local tax authorities. However, provision for LAT requires our management
to use a significant amount of judgment with respect to, among other things, the anticipated total proceeds to be derived from
the sale of the entire phase of the project or the entire project, the total appreciation of project value and the various deductible
items. Given the time gap between the point at which we make provisions for and the point at which we settle the full amount of
LAT payable, the relevant tax authorities may not necessarily agree with our apportionment of deductible expense or other bases
on which we calculate LAT. As a result, our LAT expenses as recorded in our financial statements of a particular period may require
subsequent adjustments. If the LAT provisions we have made are substantially lower than the actual LAT amounts assessed by the
tax authorities in the future, our results of operations and cash flows will be materially and adversely affected. For a range
of reasonably possible losses in excess of the amounts we have accrued for LAT, to the extent such estimates are determinable,
see Note 14 of our Consolidated Financial Statements in this report.
Our operations may be affected by
the real property taxes to be imposed by the PRC government.
In October 1986,
the Interim Regulations on Real Property Tax of the People's Republic of China was issued and provides that real property tax shall
be paid by the property owners based on the residual value of real property following a subtraction of 10% to 30% from the original
value of the property, and the specific range of subtraction, the tax payment period and the detailed implementing rules shall
be decided or formulated by the local governments of provinces.Although the PRC government has been considering imposing real property
tax on a nationwide scale, most of the provinces have not promulgated any detailed implementing rules about real property tax or
levy the real property tax yet. In another attempt to cool the real estate market, the PRC government has designated Shanghai and
Chongqing as trial regions to impose the real property tax, and in response, on January 27, 2011, both Shanghai and Chongqing implemented
local rules regarding the imposition of real property tax, with these rules taking effect on January 28, 2011, with Chongqing amending
its rules on January 13, 2017. On February 20, 2013, the PRC State Council, in an executive meeting, stated a new policy regarding
the real property tax that the government would select more trial regions for the real property tax that year, however, most provinces
still have not implemented any local rules regarding the imposition of real property tax yet. Real property tax regulations may
eventually be officially implemented at the national level; any such regulation could significantly impact the real estate market.
In light of these developments, we cannot guarantee that our operations will not be adversely affected.
Dividends
we receive from our PRC subsidiaries located in the PRC may be subject to PRC withholding tax.
The
Enterprise Income Tax Law of the PRC, or the EIT Law became effective as of January 1, 2008 and was amended on February 24, 2017
and December 29, 2018, and the Implementation for the EIT Law issued by the PRC State Council became effective as of January 1,
2008 and amended on April 23, 2019. The EIT Law provides that a maximum income tax rate of 20% may be applicable to dividends
payable to non-PRC investors that are “non-resident enterprises,” to the extent such dividends are derived from sources
within the PRC, and the State Council has reduced such rate to 10% through the Implementation for the EIT Law. We are a Cayman
Islands holding company and substantially all of our income may be derived from dividends we receive from our PRC subsidiaries.
Thus, dividends paid to us by our subsidiaries in China may be subject to the 10% income tax if we are considered a “non-resident
enterprise” under the EIT Law. If we are required under the EIT Law to pay income tax for any dividends we receive from
our PRC subsidiaries, it will materially and adversely affect the amount of dividends received by us from our PRC subsidiaries.
We may be deemed a PRC resident enterprise
under the EIT Law and be subject to the PRC taxation on our worldwide income.
The EIT Law also
provides that enterprises established outside of China whose “de facto management bodies” are located in China
are considered “resident enterprises” and are generally subject to the uniform 25% corporate income tax rate as to
their worldwide income (including dividend income received from subsidiaries). Under the Implementation for theEIT Law,
“de facto management body” is defined as a body that has material and overall management and control over the
manufacturing and business operations, personnel and human resources, finances and treasury, and acquisition and disposition of
properties and other assets of an enterprise. Under the Notice on the Issues Regarding Recognition of Overseas Incorporated
Domestically Controlled Enterprises as PRC Resident Enterprises Based on the De Facto Management Body Criteria, or Circular
82, which was retroactively effective as of January 1, 2008 and amended on November 8, 2013, January 29, 2014 and December 29,
2017, an overseas incorporated, domestically-controlled enterprise will be recognized as a PRC resident enterprise if it satisfies
certain conditions. Further, the State Administration of Taxation (the “SAT”) issued the Administrative Measures
of Enterprise Income Tax of Chinese-controlled Offshore Incorporated Resident Enterprises (Trial), or Bulletin 45, which became
effective on September 1, 2011, and was amended on April 17, 2015, June 28, 2016 and June 15,2018, to provide further
guidance on the implementation of Circular 82. Bulletin 45 clarified certain issues relating to the determination of PRC tax resident
enterprise status, post-determination administration and the authorities responsible for determining offshore-incorporated PRC
tax resident enterprise status. Bulletin 45 specifies that when provided with a copy of a Chinese tax resident determination certificate
issued by the in-charge tax authorities from an offshore-incorporated PRC tax resident enterprise, the payer should not withhold
10% income tax when paying Chinese-sourced dividends, interest and royalties to the offshore incorporated PRC tax resident enterprise.
However, as Circular 82 and Bulletin 45 only apply to enterprises incorporated under laws of foreign jurisdictions that are controlled
by PRC enterprises or groups of PRC enterprises, it remains unclear how the tax authorities will determine the location of “de
facto management bodies” for overseas incorporated enterprises that are controlled by individual PRC residents or non-PRC
enterprises such as our company. It is still unclear whether PRC tax authorities would require us to be treated as a PRC resident
enterprise. If we are treated as a resident enterprise for PRC tax purposes, we will be subject to PRC tax on our worldwide income
at the 25% uniform tax rate, which could have an impact on our effective tax rate and an adverse effect on our net income and results
of operations, although dividends distributed from our PRC subsidiaries to us could be exempt from Chinese dividend withholding
tax, since such income is exempted under the new EIT Law to a PRC resident recipient.
Dividends payable by us to our non-PRC
investors and gain on the sale of our ADSs may become subject to taxes under PRC tax laws.
Under the Implementation
for the EIT Law, a PRC income tax rate of 10% is applicable to dividends payable to investors that are “non-resident
enterprises,” which do not have an establishment or place of business in the PRC, or which have such establishment or place
of business but the relevant income is not effectively connected with the establishment or place of business, to the extent such
dividends have their sources within the PRC. Similarly, any gain realized on the transfer of ADSs by such investors is also subject
to 10% PRC income tax if such gain is regarded as income derived from sources within the PRC. For non-PRC individual investors,
under the PRC Individual Income Law, there could be a PRC income tax at a rate of 20% for such dividends or gains. If we are considered
a PRC “resident enterprise,” it is unclear whether dividends we pay with respect to our ADSs, or the gain you may realize
from the transfer of our ADSs, would be treated as income derived from sources within the PRC and be subject to PRC tax. If we
are required under the Implementation for the EIT Law to withhold PRC income tax on dividends payable to our non-PRC investors
that are “non-resident enterprises,” or non-PRC individuals, or if you are required to pay PRC income tax on the transfer
of our ADSs, the value of your investment in our ADSs may be materially and adversely affected.
Indirect Transfers
of Equity Interests in PRC Tax Resident Enterprises by Non-resident Enterprises May Cause Uncertainty on Tax Liabilities.
In accordance with
the Circular on issues of enterprise Income Tax on Indirect Transfer of Assets by Non-PRC Resident Enterprise, which is
issued by the SAT on February 3, 2015 and amended on October 17, 2017 and December 29, 2017, or Circular 7, where a non-resident
enterprise indirectly transfers equity interests or other properties of PRC tax resident enterprises, or PRC Taxable Property,
to avoid its tax liabilities by implementing arrangements without reasonable commercial purpose, such indirect transfer shall be
recharacterized and recognized as a direct transfer of PRC Taxable Property. As a result, gains derived from such indirect transfer
and attributable to PRC Taxable Property may be subject to PRC withholding tax at a rate of up to 10%. In addition, as a general
principle, the SAT also issued the Administration of General Anti-Tax Avoidance (Trial Implementation), or GATA, which became
effective on February 1, 2015 and empowers the PRC tax authorities to apply special tax adjustments for “tax avoidance arrangements.”
There is uncertainty
as to the application of Circular 7 and GATA. For example, it may be difficult to evaluate whether or not the transaction has a
reasonable commercial purpose, and such evaluation may be based on ambiguous criteria which have not been formally declared or
stated by tax authorities. As a result, any of our disposals or acquisitions of the equity interests of non-PRC entities which
indirectly hold PRC Taxable Property or any offshore transaction related to PRC Taxable Property, including potential overseas
restructuring, might be deemed an indirect transfer under PRC tax regulations. However, since Circular 7 specifies that it does
not apply if a non-resident enterprise obtains the proceeds from indirect transfer of Chinese taxable property by trading stocks
of a listed foreign enterprise in the open market, for most of our investors, who either are not enterprises, or are non-resident
enterprises but only trade stocks in the open market, they will not be required to pay tax under Circular 7, or GATA.
If the value of our brand or image
diminishes, it could have a material adverse effect on our business and results of operations.
We intend to continue
promoting the “Xinyuan” brand in selected cities in our target markets by delivering quality products and attentive
real estate-related services to our customers. Our brand is integral to our sales and marketing efforts. Our continued success
in maintaining and enhancing our brand and image depends to a large extent on our ability to satisfy customer needs by further
developing and maintaining the quality of our services across our operations, as well as our ability to respond to competitive
pressures. If we are unable to satisfy customer needs or if our public image or reputation were otherwise hindered, our business
transactions with our customers may decline, which could in turn adversely affect our results of operations.
We may be required to record impairment
charges in the future.
We record our real estate properties projects completed and
under development at the lower of carrying amounts or fair value less selling costs. In accordance with ASC 360, Property, Plant
and Equipment, real estate property projects completed and under development are subject to valuation adjustments when the carrying
amount exceeds fair value. An impairment loss is recognized if the carrying amount of the assets is not recoverable and exceeds
fair value. The carrying amount is not recoverable if it exceeds the sum of the undiscounted cash flows expected to be generated
by the assets. We have not recognized any fair value losses from our real estate properties projects completed and under development.
If the projected profitability of a given project deteriorates due to a decline in the pace of unit sales, a decline in selling
prices, or some other factor, such project is reviewed for possible impairment by comparing the estimated future undiscounted cash
flows for the project to its carrying value. If the estimated future undiscounted cash flows are less than the project’s
carrying value, the project is written down to its estimated fair value. If business conditions deteriorate, there is a potential
risk that impairment charges will be recorded, which may have a material adverse effect on our results of operation.
Failure
to protect our brand or trademark may adversely affect our business.
We own trademarks
for “鑫苑” in the form of Chinese characters
and our company logo in the PRC, United States, UK, EU, New Zealand, Australia, Singapore and Korea. We rely on those countries’
intellectual property and anti-unfair competition laws and contractual restrictions to protect brand name and trademarks. We believe
our brand, trademarks and other intellectual property rights are important to our success. Any unauthorized use of our brand, trademarks
and other intellectual property rights could harm our competitive advantages and business. Monitoring and preventing unauthorized
use is difficult. The measures we take to protect our intellectual property rights may not be adequate. Furthermore, the application
of laws governing intellectual property rights in China and abroad is uncertain and evolving, and could involve substantial risks
to us. If we are unable to adequately protect our brand, trademarks and other intellectual property rights, our reputation may
be harmed and our business may be adversely affected.
In
the PRC, the registration and protection of a company’s corporate name is regional and limited to its related industry.
Although we have registered our corporate name “Xinyuan” in certain provinces where we operate, we cannot prevent
others from registering the same corporate name in other provinces or in other industries. If another company is the first to
register “Xinyuan” as its corporate name in a province other than Beijing, Tianjin, Henan Province, Shandong Province,
Jiangsu Province, Anhui Province, Sichuan Province, Hunan Province, and Shaanxi Province or in another industry, we will have
to adopt another corporate name if we plan to enter that market or industry. Moreover, the use of "Xinyuan" by another
company may lead to confusion in the market place and reduce the value of our brandname.
We may be subject to additional payments
of statutory employee benefits.
According to PRC laws and local regulations, we are required
to pay various statutory employee benefits, including pensions, housing fund, medical insurance, work-related injury insurance,
unemployment insurance and childbearing insurance to designated government agents for the benefit of all our employees. Since the
Social Insurance Law of the PRC came into effect on July 1, 2011, which was amended on December 29, 2018, the legal framework regulating
employee social insurance has been further strengthened. The requirement of employee benefits has not been implemented consistently
by the local governments in China given the different levels of economic development in different locations.While we believe that
our PRC subsidiaries have appropriately accrued for and paid statutory employee benefits, we cannot be certain the revelant PRC
authorities may not interprete local requirements differentlyn and require payments of additional employee benefit amounts in the
future.
Our property development schedule
may be delayed and our development costs may increase as a result of delayed governmental demolition and resettlement processes
if we were to acquire land requiring demolition of existing properties.
According to the
Regulations on the Expropriation and Compensation of Houses on State-owned Land, local PRC governments are responsible for
the expropriation and compensation of houses on State-owned land and may authorize entities like us to carry out the expropriation
and compensation work. However, in practice, we may be required to pay the corresponding demolition and resettlement costs. If
the party subject to expropriation is not satisfied with the compensation, an administrative reconsideration or an administrative
action can be brought, which may delay the project. Our practice generally has been to acquire land where demolition of existing
properties and resettlement of residents is not required. However, if we were to acquire land where such actions are required,
issues in the demolition and resettlement processes may affect our reputation, increase our costs and delay the pre-sales of the
relevant project, which may in turn adversely affect our business, financial position and operational performance.
To
the extent demolition and resettlement are required in any of our future property developments, we may be required to compensate
existing residents an amount calculated in accordance with local resettlement compensations standards. These local standards may
change from time to time without advance notice. If such compensation standards are changed to increase the compensation we are
required to pay, our land acquisition costs may increase, which could adversely affect our financial condition and results of operations.
In respect of projects in which the resettlement cost are borne by us, if we or the local government fail to reach an agreement
over the amount of compensation with any existing owner or resident, any party may apply to the relevant authorities for a ruling
on the compensation amount. Dissenting owners and residents may also refuse to relocate or even initiate legal proceedings to challenge
our land use rights, permits or approvals. Any administrative process, legal proceedings, resistance or refusal to relocate may
delay our future project development schedules, and an unfavorable final ruling may result in us paying more than the amount required
by the local standards or even losing the relevant certificates, permits or approvals. Any occurrence of the above factors may
result in increases in our future development costs or delay the development schedule of the relevant project which can adversely
affect our cash flows, financial condition and results of operations.
We could be adversely affected by
potential violations of the United States Foreign Corrupt Practices Act.
The United States
Foreign Corrupt Practices Act, or FCPA, generally prohibits companies and their intermediaries from making improper payments to
public officials for the purpose of obtaining or retaining business. Our internal policies mandate compliance with these anti-corruption
laws. We operate and retain employees in China, the United States, Malaysia and the UK, and we rely on our management structure,
regulatory and legal resources and effective operation of our compliance program to direct, manage and monitor the activities of
our employees. Despite our training, oversight and compliance programs, we cannot assure you that our internal control policies
and procedures always will protect us from deliberate, reckless or inadvertent acts of our employees or agents that contravene
on compliance policies or violate applicable laws. Our continued expansion in China and the United States could increase the risk
of such violations in the future. Expansion into other countries could expose us to additional anti-bribery or anticorruption laws,
and we could face additional risks if expand our operations into countries where the compliance culture is less robust. Violations
of the FCPA, or allegations of such violations, could disrupt our business and result in a material adverse effect on our results
of operations or financial condition.
Risks Relating to the Residential
Property Industry in China
Our operations are highly subject
to government policies and regulations in the real estate market.
Since 2010 the PRC
government has been tightening its control of the real estate market with the aim of curbing increases in property prices while
also, since early 2015, trying to stimulate the market to reduce inventory. A number of rules and regulations have been set forth
by various PRC authorities concerning the real estate market. See “Item 4. Information on the Company — B. Business
Overview — Regulation — China” for more details on some of the PRC regulations.
Since 2016,
the local governments of several cities in the PRC have implemented a series of measures designed to stabilize the growth of
the property market on a more sustainable level. Such tightening measures have affected some of the cities where we operate,
including Zhengzhou, Suzhou, Chengdu, Jinan, Tianjin, Beijing, Xi’an and Changsha. These measures regulate various
aspects of the property market, including: (i) land acquisition financing, (ii) pre-sale management, (iii) sale price
restriction (for example, Suzhou requires developers to file sale prices at the price filing systems of relevant
authorities), (iv) purchaser qualification and (v) purchaser financing. These local measures may also cause adverse and
material impacts on our business operations and financial results.
However, the full
effect and extent of these policies on the real estate industry and our business will depend in large part on the implementation
and interpretation of the circulars by governmental agencies, local governments and banks in the real estate industry. The PRC
government’s policies and regulatory measures on the PRC real estate sector could limit our access to required financing
and other capital resources, adversely affect the property purchasers involved’ ability to obtain mortgage financing or significantly
increase the cost of mortgage financing, reduce market demand for our properties and increase our operating costs. We cannot be
certain that the PRC government will not issue additional and more stringent regulations or measures or that agencies and banks
will not adopt restrictive measures or practices in response to PRC governmental policies and regulations, which could substantially
reduce pre-sales of our properties and cash flow from operations and substantially increase our financing needs, which would in
turn materially and adversely affect our business, financial condition, results of operations and prospects.
The PRC government has adopted various
measures to regulate foreign investment in the property development industry and may adopt further restrictive measures in the
future.
The PRC government
has implemented a number of regulations and measures governing foreign investment in the property development industry.
In July 2006, the
Monitory of Construction, the National Development and Reform Commission (the “NDRC”), the PBOC, the State Administration
for Industry and Commerce, or the SAIC, and the SAFE, issued the Opinions on Regulating the Entry and Administration of Foreign
Investment in the Real Estate Market, amended on August 19, 2015, which impose significant requirements on foreign investment
in the PRC real estate sector. For instance, these opinions set forth requirements for the procedures to set up a foreign-invested
real estate enterprise (the “FIREE”) and the thresholds for a FIREE to borrow domestic or overseas loans. In addition,
since June 2007, a FIREE approved by local authorities is required to file such approvals with the MOFCOM or its provincial branches.
We cannot assure that any FIREE that we establish, or whose registered capital we increase, will be able to complete the filing
procedures with MOFCOM in time or otherwise fully comply with those specific requirements set for FIREEs.
The regulatory restrictions
imposed on foreign investment in real estate projects has been and continues to be evolving. Currently, on March 15, 2019, the
National People’s Congress adopted the Foreign Investment Law of the PRC, or the FIL, which became effective on January 1,
2020. The FIL grants national treatment to foreign invested entities, except for those foreign invested entities that operate in
industries deemed to be either “restricted” or “prohibited” in a “negative list”. On June 30,
2019, the MOFCOM and the NDRC promulgated the Special Administrative Measures on the Access of Foreign Investment (Negative List)
(2019 Edition), or the 2019 Negative List, which took effect on July 30, 2019, which provide there are no specific restrictions
for foreign investment in the real estate industry. However, as the FIL has not specified the 2019 Negative List is “negative
list” under the FIL, it is still unclear as to whether the “negative list” under the FIL will differ from the
2019 Negative List and impose other restrictions or limitations on foreign investment in real estate projects.
The PRC government’s
restrictive regulations and measures could increase our operating costs in adapting to these regulations and measures, limit our
access to capital resources or even restrict our business operations. We cannot be certain that the PRC government will not issue
additional and more stringent regulations or measures, which could further adversely affect our business and prospects.
We face intense competition from other
real estate developers.
The
property industry in the PRC is highly competitive. In the high-growth tier I and tier II cities we focus on, local and regional
property developers are our major competitors, and an increasing number of large state-owned and private national property developers
have started entering these markets. Many of our competitors, especially the state-owned and private national property developers,
are well capitalized and have greater financial, marketing and other resources than we have. Some also have larger land banks,
greater economies of scale, broader name recognition, a longer track record and more established relationships in certain markets.
In addition, the PRC government’s recent measures designed to reduce land supply has further increased competition for land
among property developers.
Competition among
property developers may result in increased costs for the acquisition of land for development, increased costs for raw materials,
shortages of skilled contractors, oversupply of properties, decrease in property prices in certain parts of the PRC, a slowdown
in the rate at which new property developments will be approved and/or reviewed by the relevant government authorities and an increase
in administrative costs for hiring or retaining qualified personnel, any of which may adversely affect our business and financial
condition. Furthermore, property developers that are better capitalized than we are may be more competitive in acquiring land through
the auction process. If we cannot respond to changes in market conditions as promptly and effectively as our competitors or effectively
compete for land acquisitions through the auction systems, our business and financial condition will be adversely affected.
In
addition, risk of property over-supply is increasing in parts of China, where property investment, trading and speculation have
become overly active. We are exposed to the risk that in the event of actual or perceived over-supply, property prices may fall
drastically, and our revenue and profitability will be adversely affected.
Our sales, revenues and operations
will be affected if our customers are not able to secure mortgage financing on attractive terms, if at all.
A majority of the
purchasers of our residential properties rely on mortgages to fund their purchases. If the availability or attractiveness of mortgage
financing is reduced or limited, many of our prospective customers may not desire or be able to purchase our properties and, as
a result, our business, liquidity and results of operations could be adversely affected. Among other factors, the availability
and cost of mortgage financing may be affected by changes in PRC regulations or policies or changes in interest rates. The circulars
issued by the PRC State Council and related measures taken by local governments and banks have restricted and may continue to restrict
the ability of purchasers to qualify for or obtain mortgage financing.
On March 30, 2015,
the PBOC, the Ministry of Housing and Urban-Rural Development (the “MOHURD”) and the CBRC jointly issued the Circular
on Issues concerning Individual Residential Mortgage Policies in an effort to stimulate the market. The circular specifies
the minimum down payment is 20% for purchasers of a first residential property for their households with their housing fund loans
and 40% for the purchasers of a second residential household property with housing fund loans with outstanding mortgages who apply
for another mortgage. On August 27, 2015, the MOHURD, the Ministry of Finance of the PRC (the “MOF”) and the PBOC jointly
issued the Circular on Adjusting the Minimum Down Payment for the Purchase of Houses by Individuals with the Housing Fund Loans,
which provides that the purchasers of a second residential household property with housing fund loans are only required to pay
a minimum down payment of 20% if all loans are settled on their first residential property, in addition, Beijing, Shanghai, Guangzhou,
and Shenzhen may, on the basis of the unified national policy and in accordance with local conditions, independently determine
the minimum down payment ratio for applying for housing fund loans to purchase a second residential household property. On February
1, 2016, the PBOC issued the Circular on Issues concerning Adjusting the Individual Housing Loan Policies, which provides that,
in the cities without restrictive measures for residential property purchase, the minimum down payment shall, in principle, be
25% of the house price with housing fund loans for a first residential property for purchasers’ households, while the minimum
down payment shall be at least 30% of the corresponding house price for a second residential household property. And in the cities
with restrictive measures for house purchase, the individual housing loan policies shall be subject to the previous provisions.
Furthermore, on April 12, 2019, the Circular on Matters relating to Adjusting the Policy for Individual Housing Loans via the Housing
Provident Fund to Further Upgrade Services was issued, which provides that the minimum down payment is 30% for purchasers of a
first residential property other than economically affordable house for their households with their housing fund loans, and 60%
for the purchasers of a second residential household property other than economically affordable house with housing fund loans.
We
cannot predict how long these policies will continue or what other action, if any, the banks in cities in which we operate may
take. In addition, from 2013, PRC banks have tightened the conditions on which mortgage loans are extended to homebuyers by comparing
the anticipated monthly repayment of the mortgage loan with the individual borrower’s monthly income and other measures.
Therefore, mortgage loans for home buyers have been subject to longer processing periods or even denied by the banks. We monitor
our homebuyers’ outstanding mortgage loans on an ongoing basis via our management reporting procedures and have taken the
position that contracts with underlying mortgage loans with processing periods exceeding one year cannot be recognized as revenue
on an over time basis. As a result, we reversed contracted sales of the amounts related to apartments for which mortgage loans
with processing periods exceeding one year when recognizing revenue on an over time basis.
Risks Relating to China
PRC economic, political and social
conditions as well as government policies can affect our business.
The PRC economy
differs from the economies of most developed countries in many aspects, including:
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control of foreign exchange; and
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allocation of resources.
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The PRC economy
has been transitioning from a centrally planned economy to a more market-oriented economy. For more than two decades, the PRC government
has implemented economic reform measures emphasizing utilization of market forces in the development of the PRC economy. Although
we believe these reforms will have a positive effect on China’s overall and long-term development, we cannot predict whether
changes in the PRC economic, political and social conditions, laws, regulations and policies will have any adverse effect on our
current or future business, financial condition or results of operations.
Changes in foreign exchange regulations
may adversely affect our ability to transfer funds and subsequently impact the results of our operations.
We currently receive
most of our revenues from operations in the PRC and such revenues are denominated in RMB. The PRC government regulates the conversion
between RMB and foreign currencies. Over the years, the PRC government has significantly reduced its control over routine foreign
exchange transactions under current accounts, including trade and service related foreign exchange transactions and payment of
dividends. However, foreign exchange transactions by our PRC subsidiaries under capital accounts continue to be subject to significant
foreign exchange controls and require the approval of, or registration with, PRC governmental authorities. There can be no assurance
that these PRC laws and regulations on foreign investment will not cast uncertainties on our financing and operating plans in China.
Under current foreign exchange regulations in China, subject to the relevant registration at the SAFE, we will be able to pay dividends
in foreign currencies, without prior approval from the SAFE, by complying with certain procedural requirements. However, there
can be no assurance that the current PRC foreign exchange policies regarding debt service and payment of dividends in foreign currencies
will continue in the future. Changes in PRC foreign exchange policies might have a negative impact on our ability to service our
foreign currency-denominated indebtedness and to distribute dividends to our shareholders in foreign currencies.
On March 30, 2015,
the SAFE issued the Circular on Reforming the Administration Approach Regarding the Foreign Exchange Capital Settlement of Foreign-invested
Enterprises, or Circular 19, which became effective on June 1, 2015 and amended on December 30, 2019. Circular 19 provides
that, the conversion of the Renminbi capital from foreign currency registered capital of foreign-invested enterprises may be at
foreign-invested enterprises’ discretion, which means that the foreign currency registered capital of foreign-invested enterprises
for which the rights and interests of monetary contribution has been confirmed by the local foreign exchange bureau (or the book-entry
of monetary contribution has been registered) can be settled at the banks based on the actual operational needs of the enterprises.
In addition, foreign-invested enterprises with investment as their primary business (including foreign-invested investment companies,
foreign-invested venture capital enterprises and foreign-invested equity investment enterprises) are permitted to directly settle
their foreign exchange capital or transfer the capital into Renminbi and then transfer the capital to the account of invested enterprises,
based on the actual investment scale and on the premise that the domestic investment project is authentic and compliant.
On
June 9, 2016, the SAFE issued the Circular on Reforming and Regulating Policies on the control over Foreign Exchange Settlements
under Capital Accounts, or Circular 16. Circular 16 provides that domestic enterprises may go through foreign exchange settlement
formalities for their foreign debts at their discretion. However, Circular 19 and Circular 16 do not materially influence the
restriction on the use of foreign currency registered capital for foreign-invested enterprises, including prohibit foreign-invested
enterprises from, among other things, using Renminbi capital converted from its foreign currency registered capital for expenditures
beyond its business scope.
On October 23, 2019,
the SAFE issued the Circular on Further Promoting Cross-border Trade and Investment Facilitation, or Circular 28. Circular 28 provides
that non-investment foreign-funded enterprises are also allowed to lawfully make domestic equity investments by using their capital
on the premise of no violation of prevailing special administrative measures for access of foreign investments and the authenticity
and compliance of domestic investment projects, and restrictions on foreign exchange settlement by using capital under domestic
asset realization accounts is canceled. However, it is still prohibited to use the capital of foreign-invested enterprises and
capital in Renminbi obtained by them from foreign exchange settlement for the following purposes: (i) directly or indirectly used
for the payment beyond the business scope of the enterprises or the payment prohibited by laws and regulations; (ii) directly or
indirectly used for investment in securities unless otherwise provided by laws and regulations; (iii) directly or indirectly used
for granting the entrust loans in Renminbi (unless permitted by the scope of business), repaying the inter-enterprise borrowings
(including advances by the third party) or repaying the bank loans in Renminbi that have been sub-lent to the third party; (iv)
used for paying the expenses related to the purchase of real estate not for self-use, except for the foreign-invested real estate
enterprises.
PRC regulations relating to the establishment
of offshore special purpose companies by PRC residents limit our ability to inject capital into our PRC subsidiaries, limit our
PRC subsidiaries’ ability to distribute profits to us or otherwise adversely affect us.
On July 4, 2014,
the SAFE issued the Circular of the State Administration of Foreign Exchange on Issues Concerning the Foreign Exchange Administration
over the Overseas Investment and Financing and Round-trip Investment by Domestic Residents via Special Purpose Vehicles, or
the SAFE Circular 37, which replaced the former circular commonly known as “Circular 75” implemented on October 21,
2005. The SAFE Circular 37 requires PRC residents to register with the competent local SAFE branch in connection with their direct
establishment or indirect control of an offshore special purpose vehicle, for the purpose of overseas investment and financing,
with such PRC residents’ legally owned assets or equity interests in domestic enterprises or offshore assets or interests.
The SAFE Circular 37 further requires amendment to the registration in the event of any significant changes with respect to the
special purpose vehicle, such as increase or decrease of capital contribution by PRC individuals, share transfer or exchange, merger,
division or other material event. In the event that a PRC shareholder holding interests in a special purpose vehicle fails to fulfill
the required SAFE registration, the PRC subsidiaries of that special purpose vehicle may be prohibited from making profit distributions
to the offshore parent and from carrying out subsequent cross-border foreign exchange activities, and the special purpose vehicle
may be restricted in its ability to contribute additional capital into its PRC subsidiary. Moreover, failure to comply with the
various SAFE registration requirements described above could result in liability under PRC law for evasion of foreign exchange
controls.
Additionally,
as a result of uncertainty concerning the reconciliation of these notices with other approval or registration requirements, it
remains unclear how these notices, and any future legislation concerning offshore or cross-border transactions, will be interpreted,
amended and implemented by the relevant government authorities. We believe that all of our shareholders who were PRC citizens
or residents at the time of our initial public offering completed their required registrations with the SAFE in accordance with
Circular 75 before the promulgation of SAFE Circular 37 prior to, and immediately after, the completion of our initial public
offering. As a publicly traded company in the United States, we may not at all times know of the identities of all of our beneficial
owners who are PRC citizens or residents, and we may have little control over either our present or prospective direct or indirect
PRC resident beneficial owners or the outcome of such registration procedures. We cannot assure that the SAFE registrations of
our present beneficial owners or future beneficial owners who are PRC citizens or residents have been or will be amended to reflect,
among others, the shareholding information or equity investments required by the SAFE Circular 37 and other SAFE requirements,
at all times. The failure or inability of these PRC resident beneficial owners to comply with applicable SAFE registration requirements
may subject us to the sanctions described above, including sanctions which may impede our ability to contribute the additional
capital from our proceeds of any future offerings to our PRC subsidiaries, and our PRC subsidiaries’ ability to pay dividends
or distribute profits to us.
We may be subject to fines or penalties
if we fail to comply with any applicable laws, regulations or rules.
Historically, we experienced certain
non-compliance incidents, some of our project companies commenced construction before obtaining construction work permits or construction
work planning permits. We believe these non-compliances did not have a material operational and financial impact on us. There is
no assurance that our internal control measures will be effective and there will not be any non-compliance incidents in the future.
In addition, PRC laws, regulations or
rules governing our industry have been evolving rapidly, we cannot assure you that we will not be subject to fines or penalties
arising from non-compliance incidents if we fail to adapt to the new regulatory regime in a timely manner, or at all, which may
have a material adverse effect on our business, financial condition and results of operation.
Certain portions of our property development
projects and investment properties are designated as civil air defense properties and transfer of the right to use such area is
subject to restrictions and uncertainties.
Certain portions of our property development
projects and investment properties are designated as civil air defense properties. According to the PRC laws and regulations, new
buildings constructed in cities should contain basement areas that can be used for civil air defense purposes in times of war.
Under the Civil Air Defense Law of the PRC promulgated by the SCNPC on October 29, 1996, as amended on August 27, 2009 and
Management Measures for Peacetime Development and Usage of Civil Air Defense Properties promulgated by the House Civil Air
Defense Office on November 2001, after obtaining the approval from the civil air defense supervising authority, a developer can
manage and use such areas designated as civil air defense properties at other time and generate profits from such use.We had entered
into contracts to transfer the right to use civil air defense properties in some of our property development projects to our customers
as car parks and we intend to continue such transfer. However, in times of war, such areas may be used by the government at no
cost. In the event of war and if the civil air defense area of our projects is used by the public, we may not able to use such
area as car parks, and such area will no longer be a source of our revenue. In addition, while our business operations have complied
with the laws and regulations on civil air defense property in all material aspects, we cannot assure you that such laws and regulations
will not be amended in the future which may make it more burdensome for us to comply with and increase our compliance cost. The
civil air defense areas of our projects are primarily used or to be used for car parks, representing an insignificant portion of
our property portfolio.
We may be subject to fines due to the
lack of registration of our leases.
Pursuant to relevant PRC regulations,
parties to a lease agreement are required to file the lease agreements for registration and obtain property leasing filing certificates
for their leases. We have leased certain properties from independent third-party landlords mainly for our office premises. However,
we failed to register some lease agreements under which we are the tenant. The failure to register the lease agreements does not
affect the validity of the lease agreements under the relevant PRC laws and regulations, or our rights or entitlements to lease
out the investment properties to tenants. However, we may be required by relevant government authorities to file the lease agreements
to complete the registration formalities and may be subject to a fine for non-registration within the prescribed time limit, which
may range from RMB1,000 to RMB10,000 per lease agreement. The imposition of the above fines could require us to make additional
efforts and/or incur additional expenses, any of which could materially and adversely impact our business, financial condition
and results of operations. The registration of these lease agreements to which we are a party requires additional steps to be taken
by the respective other parties to the lease agreement which are beyond our control. We cannot assure you that the other parties
to our lease agreements will be cooperative and that we can complete the registration of these lease agreements and any other lease
agreements that we may enter into in the future.
Interpretation
of PRC laws and regulations involves uncertainty.
Our
core business is conducted within China and is governed by PRC laws and regulations. The PRC legal system is based on written
statutes, and prior court decisions can only be used as a reference. Since 1979, the PRC government has implemented laws and regulations
in relation to economic matters such as foreign investment, corporate organization and governance, commerce, taxation and trade,
with a view to developing a comprehensive system of commercial law, including laws relating to property ownership and development.
However, due to the fact that these laws and regulations have not been fully developed, and because of the limited volume of published
cases and the non-binding nature of prior court decisions, interpretation of PRC laws and regulations involves a degree of uncertainty.
Some of these laws may be changed without being immediately published or may be amended with retroactive effect. Depending on
the government agency or how an application or case is presented to such agency, we may receive less favorable interpretations
of laws and regulations than our competitors, particularly if a competitor has long been established in the locality of, and has
developed a relationship with, such agency. In addition, any litigation in China may be protracted and result in substantial costs
and diversion of resources and management attention. All these uncertainties may cause difficulties in the enforcement of our
land use rights, entitlements under its permits, and other statutory and contractual rights and interests.
The PRC national and regional economies may
be adversely affected by a recurrence of epidemic.
The PRC national and regional economies have been adversely
affected by the recent novel coronavirus (COVID-19) outbreak, and may continue to be adversely affected by recurrences of COVID-19
or other epidemics. The recent coronavirus outbreak may continue to affect our industry and cause temporary suspension of projects
and shortage of labour and raw materials, which would severely disrupt our operations and have a material adverse effect on our
business, financial condition and results of operations. Our operations could also be disrupted if any of our employees or employees
of our subcontractors contracted or are thought to have contracted coronavirus or another disease that could cause an epidemic,
since this could require us and our subcontractors to quarantine some or all of these employees and temporarily close our works
sites and other facilities used for our operations. In addition, our revenue and profitability could also be reduced to the extent
coronavirus any or another epidemic harm the overall economy in China. These adverse impacts, particularly if they materialise
and persist for a substantial period, may significantly and adversely affect our business operation and financial performance.
Additionally, certain
areas of China, including the high growth cities where we operate, are susceptible to other epidemics such as Severe Acute Respiratory
Syndrome (“SARS”), avian or swine influenza. A recurrence of SARS, avian or swine influenza or any epidemic in these
cities or other areas of China could result in material disruptions to our property developments, which in turn could materially
and adversely affect our financial condition and results of operations.
We may face
PRC regulatory risks relating to our equity compensation plans.
On
February 15, 2012, the SAFE implemented the Notice on the Administration of Foreign Exchange Matters for Domestic Individuals
Participating in the Stock Incentive Plans of Overseas Listed Companies, or the Stock Option Notice. Under the Stock Option
Notice, if a PRC resident participates in any employee stock incentive plan of an overseas listed company, a qualified domestic
PRC agent or the PRC subsidiary of such overseas listed company must, among other things, file, on behalf of such individual,
an application with the SAFE or its local counterpart to obtain approval for an annual allowance with respect to the foreign exchange
in connection with the stock holding, unit holding, share option exercises, or the holding of other types of equities permitted
by PRC law. Concurrently, the qualified domestic PRC agent or the PRC subsidiary must also obtain approval from the SAFE or its
local counterpart to open a special foreign exchange account at a PRC domestic bank to hold the funds required in connection with
the stock acquisition or option exercise, any returned principal or profits upon the sale of shares, any dividends issued on the
stock and any other income or expenditures approved by the SAFE or its local counterpart. In addition, the PRC agent or the PRC
subsidiary is required to amend the SAFE registration with respect to the stock options or other awards granted if there is any
material change to the stock options or other awards, the PRC agent or the PRC subsidiary, the overseas listed company, or any
other material changes. If we, or any of these persons mentioned above, fail to comply with the relevant rules or requirements,
we may be subject to penalties, and may become subject to more stringent review and approval processes with respect to our foreign
exchange activities, such as our PRC subsidiaries’ dividend payment to us or borrowing foreign currency loans, all of which
may adversely affect our business and financial condition.
Our auditor, like other independent
registered public accounting firms operating in China, is not permitted to be subject to full inspection by the Public Company
Accounting Oversight Board, and as such, investors may be deprived of the benefits of such inspection.
Our independent
registered public accounting firm that issues the audit reports included in our annual reports filed with the U.S. Securities and
Exchange Commission (the “SEC”) as an auditor of companies that are traded publicly in the United States and a firm
registered with the Public Company Accounting Oversight Board (United States) (the “PCAOB”) is required by the laws
of the United States to undergo regular inspections by the PCAOB to assess its compliance with the laws of the United States and
professional standards. Because our auditor is located in China, a jurisdiction where the PCAOB is currently unable to conduct
full inspections without the approval of the PRC authorities, our auditor, like other independent registered public accounting
firms operating in China, is currently not subject to regular full inspections by the PCAOB.
Inspection of other
firms that the PCAOB has conducted outside of China have identified deficiencies in those firms’ audit procedures and quality
control procedures, which may be addressed as part of the inspection process to improve future auditor quality. The inability of
the PCAOB to conduct full inspections of independent registered public accounting firms operating in China makes it more difficult
to evaluate the effectiveness of our auditor’s audit procedures or quality control procedures. As a result, investors may
be deprived of the benefits of the PCAOB inspections. Investors may lose confidence in our reported financial information and procedures
and the quality of our financial statements.
We
may be adversely affected by the settlement order between the SEC and certain PRC-based accounting firms, including our independent
registered public accounting firm.
In December 2012,
the SEC instituted proceedings under Rule 102(e)(1)(iii) of the SEC’s Rules of Practice against five PRC-based accounting
firms, including our independent registered public accounting firm, alleging that these firms had violated U.S. securities laws
and the SEC’s rules and regulations thereunder by failing to provide to the SEC the firms’ work papers related to their
audits of certain PRC-based companies that are publicly traded in the United States. Rule 102(e)(1)(iii) grants the SEC the authority
to deny to any person, temporarily or permanently, the ability to practice before the SEC who is found by the SEC, after notice
and opportunity for a hearing, to have willfully violated any such laws or rules and regulations. On January 22, 2014, an initial
administrative law decision was issued, censuring these accounting firms and suspending four of the five firms from practicing
before the SEC for a period of six months. Four of these PRC-based accounting firms appealed to the SEC against this decision and,
on February 6, 2015, each of the four PRC-based accounting firms agreed to a censure and to pay a fine to the SEC to settle the
dispute and avoid suspension of their ability to practice before the SEC. The firms’ ability to continue to serve all their
respective clients is not affected by the settlement. The settlement requires the firms to follow detailed procedures to seek to
provide the SEC with access to Chinese firms’ audit documents via the CRSC. If the firms do not follow these procedures,
the SEC could impose penalties such as suspensions, or it could restart the administrative proceedings. The settlement did not
require the firms to admit to any violation of law and preserves the firms’ legal defenses in the event the administrative
proceeding is restarted. We are not involved in the proceedings brought by the SEC against the accounting firms. However, our independent
registered public accounting firm is one of the four accounting firms subject to the settlement order. We may therefore be adversely
affected by any failure of our independent registered public accounting firm to satisfy its obligations in accordance with the
settlement, along with other U.S.-listed companies audited by them.
In
addition, on May 26, 2015, the MOF issued Notice on the Interim Provisions on the Audits Conducted by Accounting Firms concerning
the Overseas Listing of Chinese Domestic Companies, or Circular 9, which became effective on July 1, 2015. In accordance with
Circular 9, auditors based outside of China, including our independent registered public accounting firm, are required to cooperate
with mainland Chinese auditors with requisite qualifications and enter into written arrangements with mainland Chinese auditors
in order to conduct audit work for overseas listed mainland Chinese companies, and auditors based outside of China shall undertake
the auditing responsibilities which may be incurred. Hence, our independent registered public accounting firm may need to establish
appropriate arrangements with mainland Chinese auditors in order to continue to audit our financial statements, which may be difficult
in light of the SEC’s administrative proceedings and the settlement described above. If our auditor were unable to have alternate
support or cooperation arrangements or otherwise were unable to address issues related to the production of documents in accordance
with the settlement order in the SEC proceedings and we were unable to timely find another independent registered public accounting
firm to audit and issue an opinion on our financial statements, our financial statements could be determined to not be in compliance
with the requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such a determination
could ultimately lead to delisting of our ADSs from the NYSE or deregistration from the SEC, or both.
Risks Related to Our ADSs
The
trading price of our ADSs has been and is likely to continue to be volatile, which could result in substantial losses to holders
of our ADSs.
The trading price
of our ADSs has been and is likely to continue to be volatile and could fluctuate widely in response to a variety of factors, many
of which are beyond our control. For example, the high and low sale prices of our ADSs in fiscal year 2019 were US$5.05 and US$3.66,
respectively. In addition, the performance and fluctuation of the market prices of other companies with business operations located
mainly in China that have listed their securities in Hong Kong and/or the U.S. may affect the volatility in the prices of and trading
volumes for our ADSs. Some of these companies have experienced significant volatility, including significant price declines after
their initial public offerings. The trading performances of these companies’ securities at the time of or after their offerings
may affect the overall investor sentiment towards other companies with business operations located mainly in China and listed in
Hong Kong and/or the U.S. and consequently may impact the trading performance of our ADSs. In addition to market and industry factors,
the prices and trading volumes for our ADSs may be highly volatile for specific business reasons, including:
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variations in our results of operations or earnings
that are not in line with market or research analyst expectations or changes in financial estimates by securities research analysts;
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publication of operating or industry metrics by third
parties, including government statistical agencies, that differ from expectations of industry or financial analysts;
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announcements made by us or our competitors of new
product and service offerings, acquisitions, strategic relationships, joint ventures or capital commitments;
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press and other reports, whether or not true, about
our business, including negative reports published by short sellers, regardless of their veracity or materiality to us;
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litigation and regulatory allegations or proceedings
that involve us;
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changes in pricing we or our competitors adopt;
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additions to or departures of our management;
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actual or perceived general industry, regulatory,
economic and business conditions and trends in China and globally, due to various reasons, including changes in geopolitical landscape,
as some investors or analysts may invest in or value our ADSs based on the economic performance of the Chinese economy, which
may not be correlated to our financial performance;
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political or market instability or disruptions, and
actual or perceived social unrest in the U.S., Hong Kong or other jurisdictions;
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fluctuations of exchange rates among the Renminbi,
the Hong Kong dollar and the U.S. dollar; and
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sales or perceived potential sales or other dispositions
of existing or additional ADSs or other equity or equity-linked securities.
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Any of these factors may result in large and sudden changes
in the volume and trading price of our ADSs. In addition, the stock market has from time to time experienced significant price
and volume fluctuations that are unrelated to the operating performance of particular companies and industries.
We may raise additional capital through
the sale of additional equity or debt securities, which could result in additional dilution to our shareholders, or impose upon
us additional financial obligations.
We may require additional
cash resources to finance our continued growth or other future developments, including any investments or acquisitions we may decide
to pursue. The amount and timing of such additional financing needs will vary depending on the timing of our property developments,
investments and/or acquisitions, and the amount of cash flow from our operations. If our resources are insufficient to satisfy
our cash requirements, we may seek to sell additional equity or debt securities. Sales of additional equity or convertible securities
could result in additional dilution to our shareholders. The incurrence of indebtedness would result in increased debt service
obligations and could result in operating and financing covenants that would restrict our operations, including our ability to
pay dividends or redeem stock. We cannot guarantee that financing will be available in amounts or on terms acceptable to us, if
at all.
Substantial
future sales or the perception of sales of our ADSs in the public market could cause the price of our ADSs to decline.
Sales of our ADSs
or common shares in the public market, or the perception that such sales could occur, could cause the market price of our ADSs
to decline. As of December 31, 2019, we had 107,875,468 common shares outstanding, including 74,405,372 common shares represented
by 37,202,686 ADSs. All ADSs are freely transferable without restriction or additional registration under the Securities Act of
1933, as amended, (the “Securities Act”), other than those held by affiliates which are subject to volume and other
restrictions as applicable under Rule 144 under the Securities Act. The remaining common shares outstanding are available for sale,
subject to any volume and other restrictions as applicable under Rule 144. The sale or perceived sale of a substantial amount of
our ADSs by any principal shareholder could adversely affect the prevailing market price for our ADSs. Such sales or perceived
sales also might make it more difficult for us to sell equity or equity-related securities in the future at a time and price that
we deem appropriate. To the extent that common shares (in the form of ADSs) are sold into the market, the market price of our ADSs
could decline.
The interests of our major shareholders
may not be aligned with the interests of our other shareholders.
As of April 1, 2020, Mr. Yong Zhang, Chairman of our board of
directors, and Ms. Yuyan Yang, also a board member, beneficially owned 29.14% and 26.45%, respectively of our share capital. Accordingly,
they each have substantial influence over our business, including decisions regarding mergers, consolidations and the sale of all
or substantially all of our assets, election of directors and other significant corporate actions. This concentration of ownership
by our major shareholders may result in actions being taken even if opposed by our other shareholders. In addition, it may discourage,
delay or prevent a change in control of our company, which could deprive our shareholders of an opportunity to receive a premium
for their shares as part of a sale of our company and might reduce the price of our ADSs.
If we fail to maintain an effective
system of internal controls over financial reporting, we may not be able to accurately report our financial results or prevent
fraud.
We are subject to
reporting obligations under U.S. securities laws, including the SEC’s disclosure rules relating to an effective system of
internal controls over financial reporting and of disclosure controls. If we fail to maintain effective internal control over financial
reporting in the future, our management and our independent registered public accounting firm may not be able to conclude that
we have effective internal control over financial reporting at a reasonable assurance level.
Moreover, effective
internal control over financial reporting is necessary for us to produce reliable financial reports and is important to help prevent
fraud. As a result, our failure to maintain effective internal control over financial reporting could result in the loss of investor
confidence in the reliability of our financial statements, which in turn could harm our business and negatively impact the trading
price of our ADSs. Furthermore, we have incurred and expect to continue to incur considerable costs and devote significant management
time and efforts and other resources to comply with Section 404 of the Sarbanes-Oxley Act.
We are a foreign private issuer with
the meaning of the rules under the Exchange Act, as such we are exempt from certain provisions applicable to U.S. domestic public
companies.
Because we qualify
as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and regulations
in the United States that are applicable to United States domestic issuers, including:
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the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form
10-Q or current report on Form 8-K;
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the section of the Exchange Act regulating the solicitation of proxies, consents or authorizations
respect of a security registered under the Exchange Act;
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the section of the Exchange Act requiring directors, officers and 10% holders to file public reporting
of their stock ownership and trading activities and imposing liability on insiders who profit from trades made in a short period
of time;
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the selective disclosure rules under Regulation FD restricting issuers from selectively disclosing
material nonpublic information.
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Accordingly, the
information we are required to file with or furnish to the SEC is less extensive and less frequent compared to that required to
be filed with the SEC by U.S. domestic issuers.
We are a foreign private issuer for
purposes of the NYSE corporate governance requirements, as a result of which public investors may not have as many protections
as they would if we were a U.S. domestic public company.
As a foreign private
issuer, we may rely on home country corporate governance practices instead of certain of the NYSE corporate governance requirements.
We are incorporated under the laws of the Cayman Islands. Under Cayman Islands law we are not required to adopt or maintain certain
of the NYSE corporate governance rules. The NYSE requirements with which we are not required to comply include rules requiring
that:
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a majority of our board of directors consist of independent directors;
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our compensation committee be composed entirely of independent directors;
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our governance and nominating committee be composed entirely of independent directors;
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the members of our audit committee satisfy certain independence criteria in addition to those of
Rule 10A-3 of the Exchange Act;
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our shareholders approve the adoption or material revision of any equity compensation plan; and
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our shareholders approve certain issuances of our equity securities.
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We are currently
following home country practice on the requirements described above. Accordingly, a majority of our board of directors is composed
of management or former management directors. Each of our compensation committee and governance and nominating committee include
non-independent directors. In addition, we are not required to put forward for a shareholder vote new equity plans or change to
existing equity plans or other significant share issuance. For a more detailed discussion of the ways in which our corporate governance
differs from that of a U.S. domestic company listed on the NYSE, see “Item 16G. Corporate Governance.” As a result
of our use of the “home country practice” exception from the NYSE corporate governance rules, you do not have same
shareholder protections as you would if we were a U.S. domestic public company.
We are not required to follow customary
practices applicable to U.S. domestic companies with respect to determining and disclosing executive compensation.
As a foreign private
issuer, we are not subject to many of the corporate governance requirements and disclosure requirements relating to executive compensation
matters under the U.S. securities laws. Under our compensation committee charter, only 50% of members of the committee at any time
(less than a majority) must be independent of management, while a U.S. domestic issuer is required to form a compensation committee
composing entirely of independent directors. We are also not required to and do not report compensation of senior management or
directors on an individual basis. As a result, investors are not able to access for themselves appropriateness or reasonableness
of the amount or form of compensation for individual executives. The SEC has a new adopted rule for disclosure of a chief executive
officer pay relative to that of the median total compensation for employees, does not apply to foreign private issuers.
We
have entered into agreements that provide for the payment of annual bonuses based on a percentage of net income to certain of
our executive officers. In other cases we have made arrangements or established bonus plans that provide for the payment of performance
bonuses to employees, including executive officers, based on assessment of their contributions to our business development, improvement
of operation management, and fund financing activities. These accrual and payments could result in a decrease of our net profit
attributable to public shareholders.
You may not have the same voting rights
as the holders of our common shares and may not receive voting materials in time to be able to exercise your right to vote.
Holders
of our ADSs will not be able to exercise voting rights attaching to the underlying common shares represented by our ADSs on an
individual basis. Holders of our ADSs appoint the depositary or its nominee as their representative to exercise the voting rights
attaching to the common shares represented by the ADSs. Holders of ADSs may not receive voting materials in time to instruct the
depositary to vote, and it is possible that you, or persons who hold their ADSs through brokers, dealers or other third parties,
will not have the opportunity to exercise a right to vote. As soon as practicable after the depositary receives from us a notice
of a shareholders’ meeting, the depositary will distribute to registered holders of ADRs a notice stating (a) such information
as is contained in such notice and any solicitation materials, (b) that each registered holder on the record date set for such
purpose will, subject to any applicable provisions of Cayman Islands law, be entitled to instruct the depositary as to the exercise
of the voting rights and (c) the manner in which such instructions may be given, including instructions to give a discretionary
proxy to a person designated by us. The depositary will not itself exercise any voting discretion in respect of any common shares
nor will it provide any instructions with respect to the common shares represented by any ADSs for which voting instructions were
not timely and properly received. There can be no guarantee that registered holders of ADRs will receive the notice described
above with sufficient time to enable them to return any voting instructions to the depositary in a timely manner. To the extent
you hold your ADSs through a bank, broker or other nominee, you will be relying upon such institutions with respect to voting
matters.
You may experience difficulties in
effecting service of legal process, enforcing foreign judgments or bringing original actions in China based on United States or
other foreign law against us or our management named in the annual report.
We are incorporated
in the Cayman Islands and conduct substantially all of our operations in China through our wholly-owned subsidiaries in China.
Most of our assets are located in China. In addition, many of our directors and senior executive officers reside within China and
some or all of the assets of those persons are located outside of the United States. As a result, it may not be possible to effect
service of process within the United States or elsewhere outside China upon our directors and senior executive officers, including
with respect to matters arising under U.S. federal securities law or applicable state securities law. Even if you are successful
in bringing an action of this kind, the respective law of the Cayman Islands and China may render you unable to enforce a judgment
against our assets or the assets of our directors and officers. Although there is no statutory enforcement in the Cayman Islands
of judgments obtained in the federal or state courts of the United States (and the Cayman Islands are not a party to any treaties
for the reciprocal enforcement or recognition of such judgments), the courts of the Cayman Islands will, at common law, recognize
and enforce a foreign money judgment of a foreign court of competent jurisdiction without any re-examination of the merits
of the underlying dispute based on the principle that a judgment of a competent foreign court imposes upon the judgment debtor
an obligation to pay the liquidated sum for which such judgment has been given, provided such judgment (i) is final and conclusive,
(ii) is not in respect of taxes, a fine or a penalty; and (iii) was not obtained in a manner and is not of a kind the
enforcement of which is contrary to natural justice or the public policy of the Cayman Islands. However, the Cayman Islands courts
are unlikely to enforce a judgment obtained from the U.S. courts under civil liability provisions of the U.S. federal securities
law if such judgment is determined by the courts of the Cayman Islands to give rise to obligations to make payments that are penal
or punitive in nature. A Cayman Islands court may stay enforcement proceedings if concurrent proceedings are being brought elsewhere.
Moreover, the PRC does not have treaties with the United States or many other countries providing for the reciprocal recognition
and enforcement of judgment of courts.
You may not
be able to participate in rights offerings and may experience dilution of your holdings as a result.
We may from time
to time distribute rights to our shareholders, including rights to acquire our securities. Under the deposit agreement for the
ADSs, the depositary will not offer those rights to ADS holders unless both the rights and the underlying securities to be distributed
to ADS holders are either registered under the Securities Act or are exempt from registration under the Securities Act with respect
to all holders of ADSs. We are under no obligation to file a registration statement with respect to any such rights or underlying
securities or to endeavor to cause such a registration statement to be declared effective. In addition, we may not be able to take
advantage of any exemptions from registration under the Securities Act. Accordingly, holders of our ADSs may be unable to participate
in our rights offerings and may experience dilution in their holdings as a result.
You may be subject to limitations
on transfer of your ADSs.
Your ADSs are transferable
on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when it deems
expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register
transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary deem
it advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the
deposit agreement, or for any other reason.
We are a Cayman Islands exempted company
and, because judicial precedent regarding the rights of shareholders is more limited under Cayman Islands law than under U.S. law,
you may have less protection of your shareholder rights than you would under U.S. law.
Our corporate affairs
are governed by our memorandum and articles of association and by the Companies Law of the Cayman Islands, as amended from time
to time, and the common law of the Cayman Islands. The rights of shareholders to take legal action against our directors and us,
actions by minority shareholders and the fiduciary responsibilities of our directors to us under Cayman Islands law are to a large
extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively
limited judicial precedent in the Cayman Islands as well as from English common law, which has persuasive, but not binding, authority
on a court in the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman
Islands law are not as clearly established as they would be under statutes or judicial precedents in the United States. In particular,
the Cayman Islands have a less developed body of securities laws as compared to the United States, and provide significantly less
protection to investors. In addition, Cayman Islands companies may not have standing to initiate a shareholder derivative action
before the federal courts of the United States.
In mergers and consolidations
where the merged company or consolidated company will continue to be a Cayman Islands entity, dissenting shareholders have the
right to be paid the fair value of their shares (which, if not agreed between the parties, will be determined by the Cayman Islands
courts) if they follow required procedures, subject to certain exceptions. However, these rights have never been tested before
the Cayman Islands court and as a result, they may not be comparable to the appraisal rights that would ordinarily be available
to dissenting shareholders of a U.S. company.
As a result of all
of the above, our public shareholders may have more difficulty in protecting their interests through actions against our management,
directors or major shareholders than would shareholders of a corporation incorporated in a jurisdiction in the United States.
Our articles of association may contain
anti-takeover provisions that could have a material adverse effect on the rights of holders of our common shares and ADSs.
Our amended and
restated articles of association contain provisions limiting the ability of others to acquire control of our company or cause us
to engage in change-of-control transactions. These provisions could have the effect of depriving our shareholders of an opportunity
to sell their shares at a premium over prevailing market prices by discouraging third parties from seeking to obtain control of
our company in a tender offer or similar transaction. For example, our board of directors has the authority, without further action
by our shareholders, to issue preferred shares in one or more series and to fix their designations, powers, preferences, privileges
and relative participating, optional or special rights and their qualifications, limitations or restrictions, including dividend
rights, conversion rights, voting rights, terms of redemption and liquidation preferences, any or all of which may be greater than
the rights associated with our common shares, in the form of ADSs or otherwise. Preferred shares could be issued quickly with terms
calculated to delay or prevent a change in control of our company or make removal of management more difficult. If our board of
directors decides to issue preferred shares, the price of our ADSs may fall and the voting and other rights of the holders of our
common shares and ADSs may be materially and adversely affected.
We may be classified as a passive
foreign investment company, which could result in adverse United States federal income tax consequences to U.S. holders of our
ADSs or common shares.
The rules governing
passive foreign investment companies (“PFICs”) can have adverse effects for United States federal income tax purposes.
The tests for determining PFIC status for a taxable year depend upon the relative values of certain categories of assets and the
relative amounts of certain kinds of income. The determination of whether we are a PFIC depends on the particular facts and circumstances
(such as the valuation of our assets, including goodwill and other intangible assets) and may also be affected by the application
of the PFIC rules, which are subject to differing interpretations. Based on our estimated gross income, the average value of our
assets, including goodwill and the nature of our business, although not free from doubt, we do not believe that we were classified
as a PFIC for United States federal income tax purposes for the taxable year ending December 31, 2019.
If we are a PFIC,
U.S. Holders of our ordinary shares or ADSs would be subject to adverse United States federal income tax consequences, such as
ineligibility for any preferred tax rates on capital gains or on actual or deemed dividends, interest charges on certain taxes
treated as deferred, and additional reporting requirements under United States federal income tax laws and regulations. A U.S.
Holder of our ordinary shares or ADSs may be able to mitigate some of the adverse United States federal income tax consequences
described above with respect to owning the ordinary shares or ADSs if we are classified as a PFIC, provided that such U.S. Holder
is eligible to make, and validly makes, a “mark-to-market” election. In certain circumstances, a U.S. Holder can make
a “qualified electing fund” election to mitigate some of the adverse tax consequences described with respect to an
ownership interest in a PFIC by including in income its share of the PFIC’s income on a current basis. However, we do not
currently intend to prepare or provide the information that would enable a U.S. Holder to make a qualified electing fund election.
See “Item
10. Additional Information — E. Taxation — U.S. Federal Income Taxation — Passive Foreign Investment Company.”
|
ITEM 4.
|
INFORMATION ON THE COMPANY
|
|
A.
|
History and Development of the Company
|
We are a Cayman
Islands holding company and conduct business primarily through our operating subsidiaries in China and, as to certain operations,
non-PRC based subsidiaries.
Our company was
incorporated in the Cayman Islands on March 26, 2007 as an exempted company. Our company operates under Cayman Islands Companies
Laws (2020 Revision). Our registered address is located at the offices of Maples Corporate Services Limited, PO Box 309, Ugland
House, Grand Cayman, KY1-1104 Cayman Islands. Our principal executive offices are located at 27/F, China Central Place, Tower II,
79 Jianguo Road, Chaoyang District, Beijing 100025, People’s Republic of China. Our telephone number at this address is (86)
10 8588-9200.
For a discussion
of our capital expenditures for the last three fiscal years, see “Item 5. Operating and Financial Review and Prospects —
B. Liquidity and Capital Resources — Capital Expenditures.”
The SEC maintains
a web site at www.sec.gov that contains reports, proxy and information statements, and other information regarding registrants,
including us, that make electronic filings with the SEC using its EDGAR system, our website is www.xyre.com. The information contained
on our website does not form part of this annual report.
We are a real estate
developer that strategically focuses on selected high growth cities in China and the United States. Our standardized and scalable
model emphasizes rapid asset turnover, efficient capital management and strict cost control.
We focus on developing
large scale quality residential projects, which typically consist of multiple residential buildings that include multi-layer apartment
buildings, sub-high-rise apartment buildings or high-rise apartment buildings. Several of our projects include auxiliary services
and amenities such as retail outlets, leisure and health facilities, kindergartens and schools. We also develop small-scale residential
properties. Our China developments aim at providing middle-class consumers with a comfortable and convenient community life. In
addition, we provide property management services for our developments and other real estate-related services to our customers.
We acquire development sites in China primarily through public auctions of government land and acquisitions of entities.
We
have expanded our business and operations significantly during the past three years. The number of projects we had under construction
increased from 17 projects with a total GFA of 3,566,254 square meters as of December 31, 2016, to 28 projects with a total GFA
of 4,018,171 square meters as of December 31, 2019. We have 12 additional projects with a total GFA of 3,201,119 square meters
under planning as of December 31, 2019. As of December 31, 2019, we have completed 60 projects with a total GFA of approximately
9,068,623 square meters and comprising a total of 104,129 units, more than 97.2% of which have been sold. For the three years
ended December 31, 2017, 2018 and 2019, our revenues were US$1,976.9 million, US$2,217.6 million, and US$2,482.6 respectively.
Our net income for the same periods was US$80.1 million, US$106.0 million, and US$83.0 respectively.
While our primary
focus has been in China, we see potential opportunities for residential real estate development in other jurisdictions that might
be attractive to both Chinese and U.S. buyers. In 2012, we acquired a 8,094 square meters parcel of land in the Williamsburg neighborhood
of Brooklyn, New York, for US$54.2 million, on which we built 216 condominium units with a net saleable floor area of approximately
30,855 square meters, the New York Oosten Project. Our New York Oosten Project started construction in November 2013 and delivered
it in December 2016. As of December 31, 2019, the project has recognized a total revenue of about US$260.1 million from the sales
of 177 units out of 216 total units. In January 2016, we also acquired a parcel of land in midtown Manhattan, New York, for US$57.5
million. As of December 31, 2019, we have completed superstructure construction, precast concrete facade, and windows installation
at the Hudson Garden project, BLOOM ON FORTY FIFTH. During the past year, the project’s design drawings were optimized, increasing
the number of residential units from 82 to 92. Of the total sellable 34,903 square feet of retail/commercial space, a total of
28,090 square feet have been leased to the U.S. department store retailer Target for a 20 year term and another 1,910 square feet
have been leased to a dermatologist's office for a 15 year lease term. The construction is currently ahead of schedule and under
budget. The building will have 92 condominium units from floors two through seven with a unit mix consisting of 17 studios, 45
one-bedroom units, 24 two-bedroom units, 2 three-bedroom duplex units, 2 three-bedroom pent house units, and 2 four-bedroom duplex
units. In August 2016, we acquired a parcel of land in the Flushing neighborhood of Queens, New York for US$66.0 million. The land
allows for a mixed use development comprising approximately 30,112 square meters with approved plans. At this RKO project in Flushing,
New York City, as of December 31, 2019, the have engaged an architect firm to develop new architectural plans, and completed the
schematic design for the condo and hotel mixed-use development.
In 2014, we acquired
100% share of a Malaysian company, which is engaged in land reclamation development for a total of 170 acres (approximately 687,966
square meters). The reclamation work was formally commenced in July 2018 and is expected to be completed in the first half of 2020.
On March 21, 2018,
we acquired from ED Group, a 50% equity stake in MDL, the developer of the Madison Project, via our wholly-owned subsidiary Xinyuan
International (HK) Property Investment Co., Limited for a total consideration of US$19.1 million. The Madison Project site extends
to 0.38 hectares (or approximately 0.94 acres) and is located adjacent to Canary Wharf, one of Europe’s largest commercial
centers. Permission was granted in March 2015 to develop a 53-story building comprised of 423 residential apartments, including
319 private apartments and 104 affordable apartments, with approximately 425 square meters of community facilities. Construction
is currently underway and completion of the project is expected to occur during for the third quarter of 2020. As of December 31,
2019, all of the 104 affordable apartments have been pre-sold. Of the remaining 319 apartments, 135 apartments have been sold,
representing 42.3% of the total number of units. We will continue to seek for high-growth opportunities globally.
We also plan
to retain and develop commercial portions of some of our properties such as shopping malls, supermarkets or hotels and to
lease and manage those properties ourselves. As of December 31, 2019, we have completed seven of such projects, including
Xinyuan Priority Lifestyle Shopping Center with a total GFA of approximately 47,000 square meters, located in Zhengzhou city,
Henan Province, Xi’an Xinyuan Metropolitan Shopping Center with a total GFA of approximately 116,000 square meters,
located in Xi’an city, Shaanxi Province, Xingyang Xindo Park Shopping Center with a total GFA of approximately 15,000
square meters, located in Xingyang city, Henan Province, Changsha Xindo Park Shopping Center with a total GFA of
approximately 12,000 square meters, located in Changsha city, Hunan Province, Chengdu Xindo Park Shopping Center with a total
GFA of approximately 19,000 square meters, located in Chengdu city, Sichuan Province, Zhengzhou Xindo Park Shopping Center
with a total GFA of approximately 24,000 square meters, located in Zhengzhou city, Henan Province, Kunshan Xindo Park
Shopping Center with a total GFA of approximately 4,000 square meters, located in Kunshan city, Jiangsu Province, and Target
Shopping Center with a total GFA of approximately 28,090 square feet, located in New York. As of Decemer 29, 2019, we have four
projects under construction in which we will retain approximately 203,000 square meters of GFA for development as commercial
properties held for lease.
In November
2019, the Group acquired Beijing Ruizhuo Xitou Development Co., Ltd. (“Xitou”), a related party, for a total
consideration of US$16,486,299, represents extinguishment of pre-existing receivable. Xitou is primarily engaged in provision
of online platform services for real estate project financing purposes. In November 2019, the Group acquired Beijing Ruizhuo
Xichuang Technology Development Co., Ltd. (“Xichuang”), a related party, for a total consideration of
US$11,212,797, represents extinguishment of pre-existing receivable. Xichuang is primarily engaged in the provision of online
platform services for sourcing, sale and purchase of real estate properties. In November 2019, the Group acquired Beijing
I-Journey Science and Technology Development Co,Ltd.("I-Journey"), a related party, for a total consideration of
US$21,062,847, represents extinguishment of pre-existing receivable. I-journey is primarily engaged in the sale of household
robots and provision of community cloud services. The acquisitions of Xitou, Xichuang and I-journey were in line with the
Group’s strategy to extend its business to provide real estate and property management related technology services.
In addition to real
estate development and sales, we offer a wide range of property management services covering the pre-delivery and post-delivery
phases to property developers, property owners and property occupants for their enjoyment of community life. We also lease and
manage certain properties such as shopping malls, supermarkets and hotels. Moreover, we are engaged in various other business activities
related to our property development operations, including the development and management of industrial parks, the operation of
a real estate private financing platform, the development of cloud-based enterprise resource planning software applications, the
development of smart home technology products and the development of an online property sales platform.
Our Markets
We currently operate
in 20 markets in China - Beijing, Shanghai, Tianjin, Chengdu in Sichuan Province, Hefei in Anhui Province, Jinan and Qingdao in
Shandong Province, Suzhou, Kunshan and Xuzhou in Jiangsu Province, Zhengzhou in Henan Province, Changsha in Hunan Province, Sanya
in Hainan Province, Xi’an in Shaanxi Province, Zhuhai and Foshan in Guangdong Province, Dalian in Liaoning Province, Wuhan
in Hubei Province and Huzhou and Taizhou in Zhejiang Province. During 2019, we also operated in three locations in the United States
- Irvine, California; Reno, Nevada; the neighborhoods of Williamsburg, Brooklyn and Flushing, Queens, New York; in Malaysia and
in the United Kingdom.
The
following table sets forth the numbers of our projects and the total GFA in each location indicated as of December 31, 2019:
|
|
Properties
under
Construction
(m 2 )
|
|
|
Properties
under
planning
(m 2 )
|
|
|
Properties
held for
sale (m 2 )
|
|
|
Completed
projects (m 2 )
|
|
|
Total
number
of projects
|
|
|
Total
GFA (m 2 )
|
|
China
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beijing
|
|
|
-
|
|
|
|
102,300
|
|
|
|
–
|
|
|
|
133,095
|
|
|
|
2
|
|
|
|
235,395
|
|
Chengdu
|
|
|
741,874
|
|
|
|
-
|
|
|
|
–
|
|
|
|
651,420
|
|
|
|
4
|
|
|
|
1,393,294
|
|
Zhengzhou
|
|
|
1,636,254
|
|
|
|
1,585,800
|
|
|
|
–
|
|
|
|
4,090,124
|
|
|
|
48
|
|
|
|
7,312,178
|
|
Jinan
|
|
|
566,431
|
|
|
|
-
|
|
|
|
–
|
|
|
|
1,192,388
|
|
|
|
7
|
|
|
|
1,758,819
|
|
Hefei
|
|
|
-
|
|
|
|
-
|
|
|
|
–
|
|
|
|
145,455
|
|
|
|
1
|
|
|
|
145,455
|
|
Suzhou
|
|
|
165,388
|
|
|
|
156,653
|
|
|
|
–
|
|
|
|
781,456
|
|
|
|
10
|
|
|
|
1,103,497
|
|
Kunshan
|
|
|
107,935
|
|
|
|
-
|
|
|
|
–
|
|
|
|
867,541
|
|
|
|
4
|
|
|
|
975,476
|
|
Xuzhou
|
|
|
-
|
|
|
|
-
|
|
|
|
–
|
|
|
|
232,602
|
|
|
|
2
|
|
|
|
232,602
|
|
Sanya
|
|
|
-
|
|
|
|
-
|
|
|
|
–
|
|
|
|
117,585
|
|
|
|
1
|
|
|
|
117,585
|
|
Shanghai
|
|
|
-
|
|
|
|
-
|
|
|
|
–
|
|
|
|
57,770
|
|
|
|
1
|
|
|
|
57,770
|
|
Changsha
|
|
|
72,257
|
|
|
|
-
|
|
|
|
–
|
|
|
|
342,644
|
|
|
|
3
|
|
|
|
414,901
|
|
Xi’an
|
|
|
-
|
|
|
|
226,000
|
|
|
|
–
|
|
|
|
285,997
|
|
|
|
2
|
|
|
|
511,997
|
|
Zhuhai
|
|
|
-
|
|
|
|
70,000
|
|
|
|
–
|
|
|
|
-
|
|
|
|
1
|
|
|
|
70,000
|
|
Tianjin
|
|
|
144,581
|
|
|
|
-
|
|
|
|
–
|
|
|
|
139,691
|
|
|
|
2
|
|
|
|
284,272
|
|
Qingdao
|
|
|
156,531
|
|
|
|
380,000
|
|
|
|
–
|
|
|
|
–
|
|
|
|
2
|
|
|
|
536,531
|
|
Dalian
|
|
|
103,845
|
|
|
|
44,500
|
|
|
|
–
|
|
|
|
–
|
|
|
|
2
|
|
|
|
148,345
|
|
Wuhan
|
|
|
-
|
|
|
|
185,000
|
|
|
|
–
|
|
|
|
–
|
|
|
|
1
|
|
|
|
185,000
|
|
Huzhou
|
|
|
,118,436
|
|
|
|
-
|
|
|
|
–
|
|
|
|
–
|
|
|
|
1
|
|
|
|
118,436
|
|
Foshan
|
|
|
194,404
|
|
|
|
262,400
|
|
|
|
–
|
|
|
|
–
|
|
|
|
2
|
|
|
|
456,804
|
|
Taizhou
|
|
|
–
|
|
|
|
158,354
|
|
|
|
–
|
|
|
|
–
|
|
|
|
1
|
|
|
|
158,354
|
|
Sub Total
|
|
|
4,007,936
|
|
|
|
3,171,007
|
|
|
|
–
|
|
|
|
9,037,768
|
|
|
|
97
|
|
|
|
16,216,711
|
|
United States
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Irvine (1)
|
|
|
–
|
|
|
|
–
|
|
|
|
2,865
|
|
|
|
–
|
|
|
|
1
|
|
|
|
2,865
|
|
Nevada (2)
|
|
|
–
|
|
|
|
–
|
|
|
|
N/A
|
|
|
|
–
|
|
|
|
1
|
|
|
|
N/A
|
|
New York
|
|
|
10,235
|
|
|
|
30,112
|
|
|
|
–
|
|
|
|
30,855
|
|
|
|
3
|
|
|
|
71,202
|
|
Total
|
|
|
4,018,171
|
|
|
|
3,201,119
|
|
|
|
2,865
|
|
|
|
9,068,623
|
|
|
|
102
|
|
|
|
16,290,778
|
|
|
(1)
|
The finished condominium project is located in Irvine, California, United States. We acquired 15
units with a total GFA of 2,865 square meters of the total 72 units from a major United States developer in August 2012. All units
were sold as of December 31, 2015.
|
|
(2)
|
Northern Nevada Land Portfolio is a project portfolio comprised of 325 finished lots and 185 acres
of undeveloped land at eight different sites in the northern Nevada region near the Reno-Spark metropolitan area. All lots and
acres were sold as of December 31, 2015.
|
For
a discussion of revenues from each geographical segment in each of 2018 and 2019, see “Item 5. Operating and Financial Review
and Prospects — A. Operating Results — Discussion of Segment Operations.”
Our Property Projects
Overview
We offer the following
four main types of real estate property products:
|
•
|
multi-layer apartment buildings, which, in China, are typically 6 stories or less and normally
require 9 to 12 months to construct after we obtain the related construction permit;
|
|
•
|
sub-high-rise apartment buildings, which, in China, are typically to 11 stories and normally require
12 to 18 months to construct after we obtain the related construction permit;
|
|
•
|
high-rise apartment buildings, which, in China, are typically 12 to 33 stories and normally require
18 to 24 months to construct after we obtain the related construction permit; and
|
|
•
|
offices, mixed-use and commercial properties which we have offered since 2012.
|
Our projects are
in one of the following five stages:
|
•
|
properties under construction, comprising properties for which the construction permits
have been obtained;
|
|
•
|
properties under planning, comprising properties for which we have entered into land
grant contracts and are in the process of obtaining the required permits to begin construction;
|
|
•
|
completed projects, comprising projects for which construction has been completed;
|
|
•
|
properties held for lease, comprising projects for which construction has been completed
and which we plan to hold and manage and;
|
|
•
|
properties held for sale, comprising land and properties which we purchase and hold
for sale.
|
Properties
under Construction and Properties under Planning
The following table
sets forth each of our properties currently under construction or planning as of December 31, 2019:
Project Name
|
|
Location
|
|
Type of
Products (1)
|
|
Construction
Commencement
Date
|
|
Pre-sale
Commencement
Date (2)
|
|
Total
Site Area (m 2 )
|
|
|
Total
GFA (m 2 )
|
|
|
Total
Number Of
Units (3)
|
|
|
Number Of
Units Sold
|
|
|
GFA
Sold (m 2 )
|
|
Jinan Royal Palace
|
|
Jinan
|
|
H
|
|
02/2014
|
|
06/2014
|
|
|
140,155
|
|
|
|
449,613
|
|
|
|
6,512
|
|
|
|
5,307
|
|
|
|
435,862
|
|
Zhengzhou Fancy City II (North)
|
|
Zhengzhou
|
|
C
|
|
05/2017
|
|
10/2017
|
|
|
30,175
|
|
|
|
108,724
|
|
|
|
3,070
|
|
|
|
2,965
|
|
|
|
101,889
|
|
Zhengzhou International New City III A
|
|
Zhengzhou
|
|
H
|
|
11/2017
|
|
12/2017
|
|
|
22,225
|
|
|
|
96,018
|
|
|
|
864
|
|
|
|
862
|
|
|
|
95,996
|
|
Hudson Garden project
|
|
New York
|
|
S
|
|
07/2017
|
|
04/2020
|
|
|
2,323
|
|
|
|
10,235
|
|
|
|
92
|
|
|
|
-
|
|
|
|
-
|
|
Changsha Furong Thriving Family
|
|
Changsha
|
|
MU
|
|
07/2017
|
|
07/2018
|
|
|
23,418
|
|
|
|
72,257
|
|
|
|
705
|
|
|
|
701
|
|
|
|
72,145
|
|
Kunshan Xinyu Jiayuan
|
|
Kunshan
|
|
MU
|
|
12/2017
|
|
09/2018
|
|
|
18,068
|
|
|
|
107,935
|
|
|
|
874
|
|
|
|
474
|
|
|
|
54,138
|
|
Tianjin Spring Royal Palace II
|
|
Tianjin
|
|
M/H
|
|
10/2015
|
|
01/2018
|
|
|
133,499
|
|
|
|
144,581
|
|
|
|
1,076
|
|
|
|
628
|
|
|
|
81,623
|
|
Zhengzhou International New City III B
|
|
Zhengzhou
|
|
H
|
|
11/2017
|
|
04/2018
|
|
|
26,102
|
|
|
|
118,780
|
|
|
|
1,336
|
|
|
|
1,332
|
|
|
|
117,966
|
|
Zhengzhou International New City III D
|
|
Zhengzhou
|
|
H/C
|
|
08/2017
|
|
06/2018
|
|
|
15,119
|
|
|
|
46,074
|
|
|
|
448
|
|
|
|
448
|
|
|
|
45,178
|
|
Zhengzhou Hangmei International Wisdom City I
|
|
Zhengzhou
|
|
H
|
|
03/2018
|
|
05/2018
|
|
|
73,300
|
|
|
|
143,181
|
|
|
|
1,538
|
|
|
|
1,011
|
|
|
|
94,215
|
|
Project Name
|
|
Location
|
|
Type of
Products (1)
|
|
Construction
Commencement
Date
|
|
Pre-sale
Commencement
Date (2)
|
|
Total
Site Area (m 2 )
|
|
|
Total
GFA (m 2 )
|
|
|
Total
Number Of
Units (3)
|
|
|
Number Of
Units Sold
|
|
|
GFA
Sold (m 2 )
|
|
Chengdu Xinyuan City
|
|
Chengdu
|
|
MU
|
|
06/2018
|
|
09/2018
|
|
|
200,906
|
|
|
|
741,874
|
|
|
|
TBD
|
|
|
|
2,111
|
|
|
|
196,001
|
|
Xingyang Splendid IV
|
|
Zhengzhou
|
|
H
|
|
05/2018
|
|
09/2018
|
|
|
9,976
|
|
|
|
151,835
|
|
|
|
985
|
|
|
|
657
|
|
|
|
60,805
|
|
Qingdao Royal Dragon Bay
|
|
Qingdao
|
|
MU
|
|
08/2018
|
|
11/2018
|
|
|
64,442
|
|
|
|
156,531
|
|
|
|
809
|
|
|
|
619
|
|
|
|
92,978
|
|
Jinan Royal Spring Bay
|
|
Jinan
|
|
M/H
|
|
09/2018
|
|
12/2018
|
|
|
69,587
|
|
|
|
116,818
|
|
|
|
1,925
|
|
|
|
410
|
|
|
|
46,676
|
|
Xinyuan Golden Water View City
|
|
Zhengzhou
|
|
H/C
|
|
10/2017
|
|
11/2018
|
|
|
45,067
|
|
|
|
331,369
|
|
|
|
6,558
|
|
|
|
755
|
|
|
|
74,863
|
|
Zhengzhou Fancy City III
|
|
Zhengzhou
|
|
H
|
|
03/2018
|
|
10/2018
|
|
|
27,599
|
|
|
|
80,603
|
|
|
|
747
|
|
|
|
723
|
|
|
|
73,882
|
|
Zhengzhou International New City III C
|
|
Zhengzhou
|
|
H
|
|
06/2018
|
|
10/2018
|
|
|
27,231
|
|
|
|
82,290
|
|
|
|
1,749
|
|
|
|
1,587
|
|
|
|
69,422
|
|
Zhengzhou International New City IV
|
|
Zhengzhou
|
|
H
|
|
09/2018
|
|
12/2018
|
|
|
50,966
|
|
|
|
199,651
|
|
|
|
1,710
|
|
|
|
1,666
|
|
|
|
179,214
|
|
Suzhou Galaxy Bay
|
|
Suzhou
|
|
H/C
|
|
07/2018
|
|
12/2018
|
|
|
21,183
|
|
|
|
76,546
|
|
|
|
718
|
|
|
|
711
|
|
|
|
72,765
|
|
Suzhou Gusu Shade I
|
|
Suzhou
|
|
M
|
|
09/2018
|
|
11/2018
|
|
|
10,063
|
|
|
|
11,957
|
|
|
|
78
|
|
|
|
65
|
|
|
|
8,532
|
|
Dalian International Health Technology Town I
|
|
Dalian
|
|
M/H
|
|
10/2018
|
|
12/2018
|
|
|
58,740
|
|
|
|
103,845
|
|
|
|
933
|
|
|
|
54
|
|
|
|
33,054
|
|
Xingyang Splendid V
|
|
Zhengzhou
|
|
H
|
|
04/2019
|
|
07/2019
|
|
|
34,308
|
|
|
|
80,486
|
|
|
|
527
|
|
|
|
496
|
|
|
|
54,266
|
|
Zhengzhou International New City IV B10
|
|
Zhengzhou
|
|
H
|
|
07/2018
|
|
12/2018
|
|
|
35,181
|
|
|
|
92,294
|
|
|
|
1,432
|
|
|
|
1,288
|
|
|
|
51,211
|
|
Zhengzhou International New City A04
|
|
Zhengzhou
|
|
H
|
|
04/2018
|
|
11/2019
|
|
|
19,200
|
|
|
|
104,949
|
|
|
|
663
|
|
|
|
512
|
|
|
|
22,117
|
|
Foshan Xinchuang AI International Science and Technology Innovation Valley I
|
|
Foshan
|
|
H
|
|
05/2019
|
|
10/2019
|
|
|
66,665
|
|
|
|
194,404
|
|
|
|
540
|
|
|
|
103
|
|
|
|
12,671
|
|
Suzhou Suhe Bay (4)
|
|
Suzhou
|
|
H
|
|
04/2018
|
|
08/2018
|
|
|
16,627
|
|
|
|
62,561
|
|
|
|
479
|
|
|
|
479
|
|
|
|
62,561
|
|
Suzhou Gusu Shade II (5)
|
|
Suzhou
|
|
M
|
|
10/2018
|
|
05/2019
|
|
|
10,219
|
|
|
|
14,324
|
|
|
|
96
|
|
|
|
54
|
|
|
|
6,909
|
|
Huzhou Silk Town (6)
|
|
Huzhou
|
|
MU
|
|
08/2019
|
|
12/2019
|
|
|
84,166
|
|
|
|
118,436
|
|
|
|
1,262
|
|
|
|
87
|
|
|
|
21,883
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
|
|
|
|
|
|
|
|
1,336,510
|
|
|
|
4,018,171
|
|
|
|
37,726
|
|
|
|
26,105
|
|
|
|
2,238,822
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tongzhou Xinyuan Royal Palace
|
|
Beijing
|
|
H
|
|
TBD
|
|
TBD
|
|
|
46,769
|
|
|
|
102,300
|
|
|
|
TBD
|
|
|
|
–
|
|
|
|
–
|
|
Xinyuan Chang’an Royal Palace
|
|
Xi’an
|
|
MU
|
|
TBD
|
|
TBD
|
|
|
80,673
|
|
|
|
226,000
|
|
|
|
TBD
|
|
|
|
–
|
|
|
|
–
|
|
Zhengzhou International New City (pending staging)
|
|
Zhengzhou
|
|
TBD
|
|
TBD
|
|
TBD
|
|
|
206,728
|
|
|
|
1,393,100
|
|
|
|
TBD
|
|
|
|
–
|
|
|
|
–
|
|
Zhuhai Xin World
|
|
Zhuhai
|
|
MU
|
|
TBD
|
|
TBD
|
|
|
14,107
|
|
|
|
70,000
|
|
|
|
TBD
|
|
|
|
–
|
|
|
|
–
|
|
Lingshan Bay Dragon Seal
|
|
Qingdao
|
|
M/H
|
|
TBD
|
|
TBD
|
|
|
340,400
|
|
|
|
380,000
|
|
|
|
TBD
|
|
|
|
–
|
|
|
|
–
|
|
Zhengzhou Hangmei Project (pending staging)
|
|
Zhengzhou
|
|
TBD
|
|
TBD
|
|
TBD
|
|
|
205,201
|
|
|
|
192,700
|
|
|
|
TBD
|
|
|
|
–
|
|
|
|
–
|
|
Wuhan Canglong Royal Palace
|
|
Wuhan
|
|
MU
|
|
TBD
|
|
TBD
|
|
|
53,787
|
|
|
|
185,000
|
|
|
|
TBD
|
|
|
|
–
|
|
|
|
–
|
|
Dalian International Health Technology Town II
|
|
Dalian
|
|
M/H
|
|
TBD
|
|
TBD
|
|
|
37,078
|
|
|
|
44,500
|
|
|
|
TBD
|
|
|
|
–
|
|
|
|
–
|
|
Foshan Xinchuang AI International Science and Technology Innovation Valley II
|
|
Foshan
|
|
MU
|
|
TBD
|
|
TBD
|
|
|
86,775
|
|
|
|
262,400
|
|
|
|
TBD
|
|
|
|
–
|
|
|
|
–
|
|
Taizhou Yihe Yayuan (7)
|
|
Taizhou
|
|
H
|
|
TBD
|
|
TBD
|
|
|
61,107
|
|
|
|
158,354
|
|
|
|
TBD
|
|
|
|
–
|
|
|
|
–
|
|
Suzhou He'an Garden (8)
|
|
Suzhou
|
|
H
|
|
TBD
|
|
TBD
|
|
|
118,667
|
|
|
|
156,653
|
|
|
|
TBD
|
|
|
|
–
|
|
|
|
–
|
|
Flushing Project
|
|
New York
|
|
MU
|
|
TBD
|
|
TBD
|
|
|
3,895
|
|
|
|
30,112
|
|
|
|
TBD
|
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
|
|
|
|
|
|
|
|
1,255,187
|
|
|
|
3,201,119
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
2,591,697
|
|
|
|
7,219,290
|
|
|
|
37,726
|
|
|
|
26,105
|
|
|
|
2,238,822
|
|
|
(1)
|
“M” refers to multi-layer buildings, “H” refers to high-rise
buildings, “S” refers to sub-high-rise buildings, “C” refers to commercial properties and
“MU” refers to office, mixed-use and commercial properties.
|
|
(2)
|
Pre-sale commencement dates refer to dates on which we began or expect to begin pre-sale activities
after receiving the relevant pre-sale permits.
|
|
(3)
|
“TBD” refers to “to be determined” as of December 31, 2019.
|
|
(4)
|
The Company owns 16.66% equity interest in a joint venture, Suzhou Hengwan Real Estate Co., Ltd.
which develops Suzhou Suhe Bay. The Company accounts for its investment under the equity method.
|
|
(5)
|
The Company owns a 19.99% equity interest in Suzhou Litai Real Estate Co., Ltd., which develops
Suzhou Gusu Shade II. The Company accounts for its investment under the equity method.
|
|
(6)
|
The Company owns 78.46% equity interest in a joint venture, Huzhou Xinhong Town Construction and
Development Co., Ltd. which develops Huzhou Silk Town. The Company accounts for its investment under the equity method.
|
|
(7)
|
The Company owns 40% equity interest in Taizhou Yiju Real Estate Co., Ltd. which develops Taizhou
Yihe Yayuan. The Company accounts for its investment under the equity method.
|
|
(8)
|
The Company owns 24% equity interest in Suzhou Kairongchen Real Estate Co., Ltd. which develops
Suzhou He'an Garden. The Company accounts for its investment under the equity method.
|
Properties under Construction
Zhengzhou,
Henan Province
Zhengzhou Fancy
City II (North). The land is located west of Songshan Road within the 4th Ring Road in Zhengzhou. This project covers a site
area of 30,175 square meters and is expected to have a total GFA of 108,724 square meters, of which 100,380 square meters are for
multi-layer buildings and 8,344 square meters are for retail stores. We acquired the site in April 2016 and commenced construction
in May 2017, and expect to deliver units in 2019. This project, when completed, will consist of 3,070 units. We started pre-sales
in October 2017, and as of December 31, 2019, we had sold 2,965 units with a total GFA of 101,889 square meters.
Zhengzhou International
New City III A. The land is located within the south 3rd Ring Road in Zhengzhou. This project covers a site area of 22,225
square meters and is expected to have a total GFA of 96,018 square meters, of which 95,504 square meters are for high-rise buildings
and 514 square meters are for retail stores. We acquired the site in May 2017 and commenced construction in November 2017, and
expect to deliver units in 2020.This project, when completed, will consist of 864 units. We started pre-sale in December 2017,
and as of December 31, 2019, we had sold 862 units with a total GFA of 95,996 square meters.
Zhengzhou
International New City III B. The land is located within the south 3rd Ring Road in Zhengzhou. This project covers a site area
of 26,102 square meters and is expected to have a total GFA of 118,780 square meters, of which 118,780 square meters are for high-rise
buildings. We acquired the site in May 2017 and commenced construction in November 2017, and expect to deliver units in 2020.This
project, when completed, will consist of 1,336 units. We started pre-sale in April 2018, and as of December 31, 2019, we had sold
1,332 units with a total GFA of 117,966 square meters.
Zhengzhou International
New City III D. The land is located within the south 3rd Ring Road in Zhengzhou. This project covers a site area of 15,119
square meters and is expected to have a total GFA of 46,074 square meters, of which 44,293 square meters are for high-rise buildings,
885 square meters are for retail stores, and 896 square meters are for basements. We acquired the site in August 2016 and commenced
construction in August 2017, and expect to deliver units in 2020.This project, when completed, will consist of 448 units. We started
pre-sale in June 2018, and as of December 31, 2019, we had sold 448 units with a total GFA of 45,178 square meters.
Zhengzhou Hangmei
International Wisdom City I. The land is located in Xinzheng District in Zhengzhou. This project covers a site area of 73,300
square meters and is expected to have a total GFA of 143,181 square meters, of which 143,181 square meters are for high-rise buildings.
We acquired the site in December 2017 and commenced construction in March 2018, and expect to deliver units in 2020.This project,
when completed, will consist of 1,538 units. We started pre-sale in May 2018, and as of December 31, 2019, we had sold 1,011 units
with a total GFA of 94,215 square meters.
Xingyang
Splendid IV. The land is located southwest of Guangwu Road and Wangcun Road in Xingyang. This project covers a site area of
9,976 square meters and is expected to have a total GFA of 151,835 square meters, of which 136,658 square meters are for high-rise
buildings and 15,177 square meters are for retail stores. We acquired the site in September 2014 and commenced construction in
May 2018, and expect to deliver units in 2021. This project, when completed, will consist of 985 units. We started pre-sales in
September 2018. As of December 31, 2019, we had sold 657 units with a total GFA of 60,805 square meters.
Xinyuan Golden
Water View City. The land is located Heizhuzhuang of Jinshui District in Zhengzhou. This project covers a site area of 45,067
square meters and is expected to have a total GFA of 331,369 square meters, of which 298,095 square meters are for high-rise buildings,
24,526 square meters are for public rental housing, 3,161square meters are for retail stores, and 5,587 square meters are for basements.
We acquired the site in June 2017 and commenced construction in October 2017, and expect to deliver units in 2021. This project,
when completed, will consist of 6,558 units. We started pre-sales in November 2018. As of December 31, 2019, we had sold 755 units
with a total GFA of 74,863 square meters.
Zhengzhou Fancy
City III. The land is located west of Songshan Road within the 4th Ring Road in Zhengzhou. This project covers a site area
of 27,599 square meters and is expected to have a total GFA of 80,603 square meters, of which 78,075 square meters are for high-rise
buildings, 1,048square meters are for retail stores, and 1,480square meters are for basements. We acquired the site in December
2017 and commenced construction in March 2018, and expect to deliver units in 2020. This project, when completed, will consist
of 747 units. We started pre-sales in October 2018. As of December 31, 2019, we had sold 723 units with a total GFA of 73,882 square
meters.
Zhengzhou International
New City III C. The land is located within the south 3rd Ring Road in Zhengzhou. This project covers a site area of 27,231
square meters and is expected to have a total GFA of 82,290 square meters, of which 74,327 square meters are for high-rise buildings,
and 7,962 square meters are for retail stores. We acquired the site in Feburary 2017 and commenced construction in June 2018, and
expect to deliver units in 2021.This project, when completed, will consist of 1,749 units. We started pre-sale in October 2018,
and as of December 31, 2019, we had sold 1,587 units with a total GFA of 69,422 square meters.
Zhengzhou International
New City IV. The land is located within the south 3rd Ring Road in Zhengzhou. This project covers a site area of 50,966 square
meters and is expected to have a total GFA of 199,651 square meters, of which 191,584 square meters are for high-rise buildings,
and 8,067 square meters are for retail stores. We acquired the site in May 2018 and commenced construction in September 2018, and
expect to deliver units in 2021.This project, when completed, will consist of 1,710 units. We started pre-sale in December 2018,
and as of December 31, 2019, we had sold 1,666 units with a total GFA of 179,214 square meters.
Xingyang Splendid
V. The land is located southwest of Guangwu Road and Wangcun Road in Xingyang. This project covers a site area of 34,308 square
meters and is expected to have a total GFA of 80,486 square meters, of which 78,220 square meters are for high-rise buildings,
and 2,266 square meters are for retail stores. . We acquired the site in September 2014 and commenced construction in Apirl 2019,
and expect to deliver units in 2021. This project, when completed, will consist of 527 units. We started pre-sales in July 2019.
As of December 31, 2019, we had sold 496 units with a total GFA of 54,266 square meters.
Zhengzhou International
New City IV B10. The land is located within the south 3rd Ring Road in Zhengzhou. This project covers a site area of 35,181
square meters and is expected to have a total GFA of 92,294 square meters, of which 91,425 square meters are for high-rise buildings,
and 869 square meters are for retail stores. We acquired the site in July 2018 and commenced construction in September 2018, and
expect to deliver units in 2021.This project, when completed, will consist of 1,432 units. We started pre-sale in December 2018,
and as of December 31, 2019, we had sold 1,288 units with a total GFA of 51,211 square meters.
Zhengzhou International
New City A04. The land is located within the south 3rd Ring Road in Zhengzhou. This project covers a site area of 19,200 square
meters and is expected to have a total GFA of 104,949 square meters, of which 102,919 square meters are for high-rise buildings,
and 2,030 square meters are for retail stores. We acquired the site in May 2018 and commenced construction in September 2018, and
expect to deliver units in 2021.This project, when completed, will consist of 663 units. We started pre-sale in November 2019,
and as of December 31, 2019, we had sold 512 units with a total GFA of 22,117 square meters.
Jinan, Shandong
Province
Jinan Royal Palace.
The land is located south of Qingyuan Road and east of Lashanhe Road in the Huaiyin District in Jinan. This project covers a site
area of 140,155 square meters and is expected to have a total GFA of 449,613 square meters, of which 399,903 square meters are
for high-rise buildings, 26,081 square meters are for retail stores and 23,629 square meters are for basements. We acquired the
site in November 2013, commenced construction of this project in February 2014, and began to deliver units in 2016. This project,
when completed, will consist of 6,512 units. We started pre-sales in June 2014, and as of December 31, 2019, we had sold 5,307
units with a total GFA of 435,862 square meters.
Jinan
Royal Spring Bay. The land is located in Zhangqiu District in Zhangqiu. This project covers a site area of 69,587 square meters
and is expected to have a total GFA of 116,818 square meters, of which 83,983 square meters are for high-rise buildings, 27,798
square meters are for multi-layer buildings, 987 square meters are for retail stores and 4,050 square meters are for basements.
We acquired the site in June 2018, commenced construction of this project in September 2018, and expect to deliver units in 2020.
This project, when completed, will consist of 1,925 units. We started pre-sales in December 2018, and as of December 31, 2019,
we had sold 410 units with a total GFA of 46,676 square meters.
Qingdao, Shandong Province
Qingdao Royal
Dragon Bay. The land is located in Huangdao District in Qingdao. This project covers a site area of 64,442 square meters and
is expected to have a total GFA of 156,531 square meters, of which 118,788 square meters are for high-rise buildings, 2,805 square
meters are for retail stores, and 34,938 square meters are for multi-layer buildings. We acquired the site in July 2018, commenced
construction in August 2018, and expect to deliver units in 2021. This project, when completed, will consist of 809 units. We started
pre-sales in November 2018, and as of December 31, 2019, we had sold 619 units with a total GFA of 92,978 square meters.
Kunshan, Jiangsu Province
Kunshan Xinyu
Jiayuan. The land is located in Huaqiao District South of Kunshan. This project covers a site area of 18,068 square meters
and is expected to have a total GFA of 107,935 square meters, of which 103,046 square meters are for high-rise buildings, and 4,889
square meters are for office buildings. We acquired the site in July 2017 and commenced construction of this project in December
2017, and expect to deliver units in 2020. This project, when completed, will consist of 874 units. We started pre-sales in September
2018, and as of December 31, 2019, we had sold 474 units with a total GFA of 54,138 square meters.
Suzhou, Jiangsu Province
Suzhou Galaxy
Bay. The land is located in Taicang District in Suzhou. It will cover a site area of 21,183 square meters and is expected to
have a total GFA of 76,546 square meters, of which 73,452 square meters are for high-rise buildings, and 3,094 square meters are
for retail stores. We acquired the site in December 2017 and commenced construction of this project in July 2018, and expect to
deliver units in 2020. This project, when completed, will consist of 718 units. We started pre-sales in December 2018, and as of
December 31, 2019, we had sold 711 units with a total GFA of 72,765 square meters.
Suzhou Gusu
Shade I. The land is located in Gusu District in Suzhou. It will cover a site area of 10,063 square meters and is expected
to have a total GFA of 11,957 square meters, of which 11,957 square meters are for multi-layer buildings. We acquired the site
in March 2018 and commenced construction of this project in September 2018, and expect to deliver units in 2020. This project,
when completed, will consist of 78 units. We started pre-sales in November 2018, and as of December 31, 2019, we had sold 65 units
with a total GFA of 8,532 square meters.
Suzhou Gusu Shade
II. The land is located in Gusu District in Suzhou. It will cover a site area of 10,219 square meters and is expected to have
a total GFA of 14,324 square meters, of which 14,324 square meters are for multi-layer buildings. We acquired the site in June
2018 and commenced construction of this project in Octember 2018, and expect to deliver units in 2020. This project, when completed,
will consist of 96 units. We started pre-sales in May 2019, and as of December 31, 2019, we had sold 54 units with a total GFA
of 6,909 square meters.
Suzhou Suhe Bay.
The land is located in Wujiang District in Suzhou. It will cover a site area of 16,627 square meters and is expected to have a
total GFA of 62,561 square meters, of which 62,561 square meters are for multi-layer buildings. We acquired the site in Apirl 2018
and commenced construction of this project in autumn 2018, and expect to deliver units in 2020. This project, when completed, will
consist of 479 units. We started pre-sales in November 2018, and as of December 31, 2019, we had sold 479 units with a total GFA
of 62,561 square meters.
Changsha, Hunan Province
Changsha Furong
Thriving Family. The land is located in Shanmu Road of East Coast Town in Changsha. This project covers a site area of 23,418
square meters and is expected to have a total GFA of 72,257 square meters of which 69,729 square meters are for high-rise buildings,
and 2,528 square meters are for retail stores. We acquired the site in January 2017 and commenced construction of the project in
July 2017, and expect to deliver units in 2020. This project, when completed, will consist of 705 units. We started pre-sales in
July 2018, and as of December 31, 2019, we had sold 701 units with a total GFA of 72,145 square meters.
Tianjin
Tianjin
Spring Royal Palace II. The land is located in Sicundian Town in the Wuqing District
of Tianjin. This project covers a site area of 133,499 square meters and is expected
to have a total GFA of 144,581 square meters, of which 71,602 square meters are for high-rise
buildings, 1,291 square meters are for retail stores, and 71,688 square meters are for
multi-layer buildings. We acquired the site in November 2014, commenced construction
in October 2015, and expect to deliver units in 2020. This project, when completed, will
consist of 1,076 units. We started pre-sales in January 2018, and as of December 31,
2018, we had sold 628 units with a total GFA of 81,623 square meters.
Chengdu, Sichuan Province
Chengdu
Xinyuan City. The land is located in Pidu District in Chengdu. This project covers a site area of 200,906 square meters and
is expected to have a total GFA of 741,874 square meters, of which 716,713 square meters are for high-rise buildings, and 25,161
square meters are for retail stores. We acquired the site in Decmber 2017, commenced construction in June 2018, and expect to
deliver units in 2020. We started pre-sales in September 2018, and as of December 31, 2018, we had sold 2,111 units with a total
GFA of 196,001 square meters.
Dalian, Liaoning Province
Dalian
International Health Technology Town I. The land is located in Lvshunkou District
in Dalian. This project covers a site area of 58,740 square meters and is expected to
have a total GFA of 103,845 square meters, of which 71,676 square meters are for high-rise
buildings, 5,112 square meters are for retail stores, 27,077 square meters are for multi-layer
buildings. We acquired the site in August 2018, commenced construction in October 2018,
and expect to deliver units in 2020. This project, when completed, will consist of 933
units. We started pre-sales in December 2018, and as of December 31, 2019, we had sold
54 units with a total GFA of 33,054 square meters.
Foshan, Guangdong
Province
Foshan Xinchuang
AI International Science and Technology Innovation Valley I. The land is located in Gaoming District in Foshan. This project
covers a site area of 66,665 square meters and is expected to have a total GFA of 194,404 square meters, of which 190,514 square
meters are for high-rise buildings, 3,890 square meters are for retail stores. We acquired the site in May 2019, commenced construction
in May 2019, and expect to deliver units in 2021. This project, when completed, will consist of 540 units. We started pre-sales
in October 2019, and as of December 31, 2019, we had sold 103 units with a total GFA of 12,671 square meters.
Huzhou, Zhejiang Province
Huzhou Silk
Town. The land is located in Wuxing District in Huzhou. This project covers a site area of 84,166 square meters and is expected
to have a total GFA of 118,436 square meters, of which 113,905 square meters are for high-rise buildings, 4,530 square meters
are for retail stores. We acquired the site in Autunm 2019, and expect to deliver units in 2021. This project, when completed,
will consist of 1,262 units. We started pre-sales in December 2019, and as of December 31, 2019, we had sold 87 units with a total
GFA of 21,883 square meters.
U.S.
Hudson Garden
project. The land is located on 10th Avenue and between 44th Street and 45th Street in Manhattan, New York. This project is
expected to have a total GFA of 10,235 square meters. We acquired the site in April 2016 and commenced construction in July 2017.
This project, when completed, will consist of 92 units. We anticipate starting pre-sales in the First half of 2020.
Properties under Planning
Tongzhou Xinyuan
Royal Palace. The land is located in Liyuan Town in the southern area of Tongzhou District in Beijing, and is currently under
planning. It will cover a site area of 46,769 square meters and is expected to have a total GFA of 102,300 square meters. We acquired
the site in April 2016.
Xinyuan Chang’an
Royal Palace. The land is located southwest corner of Shenzhou 3th Road and Aerospace Middle Road in Xi’an Aerospace
Base, and is currently under planning. It will cover a site area of 80,673 square meters and is expected to have a total GFA of
226,000 square meters. We acquired the site in May 2017.
Zhengzhou International
New City (pending staging). The land is located within the south 3rd Ring Road in Zhengzhou, and is currently under planning.
It will cover a site area of 206,728 square meters and is expected to have a total GFA of 1,393,100 square meters. We acquired
the site in 2017.
Lingshan Bay
Dragon Seal. The land is located in Huangdao District in Qingdao. It will cover a site area of 340,400 square meters and is
expected to have a total GFA of 380,000 square meters. We acquired the site in July 2017.
Zhengzhou Hangmei
Project (pending staging). The land is located in Xinzheng District in Zhengzhou. It will cover a site area of 205,201 square
meters and is expected to have a total GFA of 192,700 square meters. We acquired the site in December 2017.
Wuhan Canglong
Royal Palace. The land is located in Jiangxia District in Wuhan. It will cover a site area of 53,787 square meters and is expected
to have a total GFA of 185,000 square meters. We acquired the site in May 2018.
Dalian International
Health Technology Town II. The land is located in Lvshunkou District in Dalian. It will cover a site area of 37,078 square
meters and is expected to have a total GFA of 44,500 square meters. We acquired the site in August 2018.
Foshan
Xinchuang AI International Science and Technology Innovation Valley II. The land is located in Gaoming District in Foshan.
It will cover a site area of 86,775 square meters and is expected to have a total GFA of 262,400 square meters. We acquired the
site in June 2019.
Taizhou Yihe
Yayuan. The land is located in Luqiao District in Taizhou. It will cover a site area of 61,107 square meters and is expected
to have a total GFA of 158,354 square meters. We acquired the site in May 2019.
Suzhou He'an
Garden. The land is located in New District in Suzhou. It will cover a site area of 118,667 square meters and is expected to
have a total GFA of 156,653 square meters. We acquired the site in May 2019.
U.S. Flushing
Project. The land is located at 135-35 Northern Blvd in Flushing, Queens, New York, and is currently under planning. It is
expected to have a total GFA of 30,112 square meters. We acquired the site in August 2016.
Completed Projects
The following table
sets forth each of our completed projects as of December 31, 2019.
Project Name
|
|
Location
|
|
Type of
Products
|
|
Completion
Date
|
|
Total Site
Area (m 2 )
|
|
|
Total
GFA (m 2 )
|
|
|
Total
Number of
Units
|
|
|
Number
of Units
Sold
|
|
|
GFA
Sold (m 2 )
|
|
Zhengzhou Longhai Star Garden
|
|
Zhengzhou
|
|
M/H/S
|
|
12/2000
|
|
|
11,719
|
|
|
|
39,975
|
|
|
|
239
|
|
|
|
239
|
|
|
|
39,975
|
|
Zhengzhou Xinyuan Splendid:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zhengzhou Xinyuan Splendid 1A
|
|
Zhengzhou
|
|
M/S
|
|
07/2002
|
|
|
35,444
|
|
|
|
62,623
|
|
|
|
484
|
|
|
|
484
|
|
|
|
62,623
|
|
Zhengzhou Xinyuan Splendid 1B
|
|
Zhengzhou
|
|
M
|
|
04/2004
|
|
|
21,800
|
|
|
|
43,673
|
|
|
|
333
|
|
|
|
333
|
|
|
|
43,673
|
|
Zhengzhou Xinyuan Splendid 2A
|
|
Zhengzhou
|
|
M
|
|
04/2003
|
|
|
23,460
|
|
|
|
39,996
|
|
|
|
271
|
|
|
|
271
|
|
|
|
39,996
|
|
Zhengzhou Xinyuan Splendid 2B
|
|
Zhengzhou
|
|
M
|
|
06/2004
|
|
|
19,295
|
|
|
|
27,041
|
|
|
|
86
|
|
|
|
86
|
|
|
|
27,041
|
|
Zhengzhou Xinyuan Splendid 2C
|
|
Zhengzhou
|
|
S
|
|
04/2004
|
|
|
9,968
|
|
|
|
21,748
|
|
|
|
132
|
|
|
|
132
|
|
|
|
21,748
|
|
Zhengzhou Xinyuan Splendid 3A3B3C
|
|
Zhengzhou
|
|
M/S
|
|
08/2005
|
|
|
51,014
|
|
|
|
114,774
|
|
|
|
792
|
|
|
|
792
|
|
|
|
114,774
|
|
Zhengzhou Xinyuan Splendid Haojinge
|
|
Zhengzhou
|
|
H
|
|
11/2004
|
|
|
8,298
|
|
|
|
31,089
|
|
|
|
166
|
|
|
|
166
|
|
|
|
31,089
|
|
Zhengzhou Xinyuan Splendid City Homestead
|
|
Zhengzhou
|
|
M
|
|
08/2005
|
|
|
23,606
|
|
|
|
45,378
|
|
|
|
369
|
|
|
|
369
|
|
|
|
45,378
|
|
Zhengzhou Xinyuan Splendid Subtotal
|
|
|
|
|
|
|
|
|
192,885
|
|
|
|
386,322
|
|
|
|
2,633
|
|
|
|
2,633
|
|
|
|
386,322
|
|
Zhengzhou City Manor
|
|
Zhengzhou
|
|
M
|
|
03/2006
|
|
|
63,089
|
|
|
|
118,716
|
|
|
|
1,633
|
|
|
|
1,633
|
|
|
|
118,716
|
|
Zhengzhou City Family
|
|
Zhengzhou
|
|
M
|
|
12/2006
|
|
|
21,380
|
|
|
|
39,226
|
|
|
|
720
|
|
|
|
720
|
|
|
|
39,226
|
|
Zhengzhou Central Garden-East
|
|
Zhengzhou
|
|
M/H/S
|
|
09/2007
|
|
|
60,849
|
|
|
|
165,206
|
|
|
|
1,624
|
|
|
|
1,624
|
|
|
|
165,206
|
|
Zhengzhou Central Garden-West
|
|
Zhengzhou
|
|
M/H/S
|
|
09/2007
|
|
|
79,464
|
|
|
|
190,384
|
|
|
|
1,796
|
|
|
|
1,796
|
|
|
|
190,384
|
|
Jinan City Family
|
|
Jinan
|
|
M
|
|
11/2007
|
|
|
47,411
|
|
|
|
61,065
|
|
|
|
785
|
|
|
|
785
|
|
|
|
61,065
|
|
Suzhou Lake Splendid
|
|
Suzhou
|
|
M/H/S
|
|
01/2009
|
|
|
130,945
|
|
|
|
198,113
|
|
|
|
2,326
|
|
|
|
2,326
|
|
|
|
198,113
|
|
Hefei Wangjiang Garden
|
|
Hefei
|
|
M/H
|
|
04/2009
|
|
|
51,939
|
|
|
|
145,455
|
|
|
|
1,649
|
|
|
|
1,649
|
|
|
|
145,455
|
|
Suzhou Colorful Garden
|
|
Suzhou
|
|
M/H
|
|
04/2009
|
|
|
41,365
|
|
|
|
81,506
|
|
|
|
970
|
|
|
|
970
|
|
|
|
81,506
|
|
Jinan Elegant Scenery
|
|
Jinan
|
|
H/S
|
|
06/2009
|
|
|
61,502
|
|
|
|
100,386
|
|
|
|
1,127
|
|
|
|
1,127
|
|
|
|
100,386
|
|
Zhengzhou Finance Square
|
|
Zhengzhou
|
|
H
|
|
06/2009
|
|
|
8,410
|
|
|
|
67,225
|
|
|
|
917
|
|
|
|
917
|
|
|
|
67,225
|
|
Zhengzhou Yipin Xiangshan Phase I
|
|
Zhengzhou
|
|
M/S
|
|
12/2009
|
|
|
57,289
|
|
|
|
94,249
|
|
|
|
979
|
|
|
|
979
|
|
|
|
94,249
|
|
Jinan International City Garden
|
|
Jinan
|
|
H/S
|
|
01/2010
|
|
|
93,928
|
|
|
|
264,357
|
|
|
|
4,672
|
|
|
|
4,639
|
|
|
|
263,585
|
|
Zhengzhou Xinyuan Colorful Garden
|
|
Zhengzhou
|
|
M/H
|
|
01/2010
|
|
|
74,462
|
|
|
|
191,781
|
|
|
|
2,233
|
|
|
|
2,233
|
|
|
|
191,781
|
|
Xuzhou Colorful Garden
|
|
Xuzhou
|
|
M/H
|
|
01/2012
|
|
|
46,777
|
|
|
|
101,762
|
|
|
|
858
|
|
|
|
858
|
|
|
|
101,762
|
|
Suzhou International City Garden
|
|
Suzhou
|
|
H
|
|
12/2011
|
|
|
119,089
|
|
|
|
204,872
|
|
|
|
2,436
|
|
|
|
2,435
|
|
|
|
204,147
|
|
Chengdu Xinyuan Splendid I
|
|
Chengdu
|
|
H
|
|
06/2011
|
|
|
34,007
|
|
|
|
231,032
|
|
|
|
4,081
|
|
|
|
4,081
|
|
|
|
231,032
|
|
Chengdu Xinyuan Splendid II
|
|
Chengdu
|
|
H
|
|
10/2012
|
|
|
30,497
|
|
|
|
217,009
|
|
|
|
2,782
|
|
|
|
2,782
|
|
|
|
217,009
|
|
Zhengzhou Modern City
|
|
Zhengzhou
|
|
H/S
|
|
12/2012
|
|
|
60,556
|
|
|
|
231,905
|
|
|
|
2,934
|
|
|
|
2,934
|
|
|
|
231,905
|
|
Kunshan International City Garden
|
|
Kunshan
|
|
M/H
|
|
12/2012
|
|
|
200,008
|
|
|
|
497,948
|
|
|
|
5,133
|
|
|
|
5,132
|
|
|
|
497,948
|
|
Zhengzhou Yipin Xiangshan Phase II
|
|
Zhengzhou
|
|
M/S
|
|
01/2013
|
|
|
81,345
|
|
|
|
200,164
|
|
|
|
2,209
|
|
|
|
2,209
|
|
|
|
200,164
|
|
Zhengzhou Century East A
|
|
Zhengzhou
|
|
M/H
|
|
12/2013
|
|
|
22,418
|
|
|
|
76,588
|
|
|
|
765
|
|
|
|
764
|
|
|
|
76,469
|
|
Project Name
|
|
Location
|
|
Type of
Products
|
|
Completion
Date
|
|
Total Site
Area (m 2 )
|
|
|
Total
GFA (m 2 )
|
|
|
Total
Number of
Units
|
|
|
Number
of Units
Sold
|
|
|
GFA
Sold (m 2 )
|
|
Zhengzhou Century East B
|
|
Zhengzhou
|
|
H
|
|
08/2013
|
|
|
51,372
|
|
|
|
166,470
|
|
|
|
1,709
|
|
|
|
1,707
|
|
|
|
166,470
|
|
Zhengzhou Royal Palace
|
|
Zhengzhou
|
|
M/H
|
|
06/2014
|
|
|
45,716
|
|
|
|
135,920
|
|
|
|
2,061
|
|
|
|
2,061
|
|
|
|
135,920
|
|
Suzhou Xin City
|
|
Suzhou
|
|
H
|
|
09/2015
|
|
|
51,246
|
|
|
|
127,291
|
|
|
|
1,334
|
|
|
|
1,334
|
|
|
|
127,291
|
|
Jinan Xinyuan Splendid
|
|
Jinan
|
|
M/H
|
|
10/2015
|
|
|
200,180
|
|
|
|
572,170
|
|
|
|
7,387
|
|
|
|
7,371
|
|
|
|
566,092
|
|
Beijing Xindo Park
|
|
Beijing
|
|
MU
|
|
11/2015
|
|
|
57,862
|
|
|
|
133,095
|
|
|
|
1,446
|
|
|
|
1,397
|
|
|
|
123,971
|
|
Zhengzhou Xin City
|
|
Zhengzhou
|
|
H
|
|
03/2016
|
|
|
61,078
|
|
|
|
210,724
|
|
|
|
2,639
|
|
|
|
2,518
|
|
|
|
208,230
|
|
Xingyang Splendid I
|
|
Zhengzhou
|
|
H
|
|
03/2016
|
|
|
40,782
|
|
|
|
115,431
|
|
|
|
1,427
|
|
|
|
1,164
|
|
|
|
113,690
|
|
Zhengzhou Thriving Family
|
|
Zhengzhou
|
|
H
|
|
04/2016
|
|
|
44,169
|
|
|
|
131,510
|
|
|
|
1,913
|
|
|
|
1,536
|
|
|
|
129,550
|
|
Suzhou Lake Royal Palace
|
|
Suzhou
|
|
M/H
|
|
06/2016
|
|
|
114,624
|
|
|
|
169,674
|
|
|
|
1,569
|
|
|
|
1,569
|
|
|
|
169,674
|
|
Shanghai Royal Palace
|
|
Shanghai
|
|
H
|
|
07/2016
|
|
|
28,600
|
|
|
|
57,770
|
|
|
|
622
|
|
|
|
535
|
|
|
|
46,406
|
|
Chengdu Thriving Family
|
|
Chengdu
|
|
H
|
|
08/2017
|
|
|
75,008
|
|
|
|
203,379
|
|
|
|
2,515
|
|
|
|
2,462
|
|
|
|
195,263
|
|
Sanya Yazhou Bay No.1
|
|
Sanya
|
|
MU
|
|
10/2017
|
|
|
78,765
|
|
|
|
117,585
|
|
|
|
1,605
|
|
|
|
1,553
|
|
|
|
114,620
|
|
Kunshan Royal Palace
|
|
Kunshan
|
|
M/S/H
|
|
11/2017
|
|
|
145,776
|
|
|
|
280,591
|
|
|
|
2,658
|
|
|
|
2,603
|
|
|
|
278,922
|
|
Changsha Xinyuan Splendid
|
|
Changsha
|
|
H/C
|
|
12/2017
|
|
|
89,460
|
|
|
|
251,652
|
|
|
|
2,952
|
|
|
|
2,923
|
|
|
|
246,191
|
|
Xi’an Metropolitan
|
|
Xi’an
|
|
MU
|
|
11/2017
|
|
|
85,118
|
|
|
|
285,997
|
|
|
|
2,602
|
|
|
|
2,463
|
|
|
|
271,807
|
|
Jinan Xin Central
|
|
Jinan
|
|
MU
|
|
11/2017
|
|
|
51,352
|
|
|
|
194,410
|
|
|
|
2,715
|
|
|
|
2,645
|
|
|
|
186,844
|
|
Zhengzhou Xindo Park
|
|
Zhengzhou
|
|
C
|
|
12/2018
|
|
|
40,218
|
|
|
|
134,064
|
|
|
|
2,170
|
|
|
|
2,160
|
|
|
|
133,457
|
|
Henan Xin Central I
|
|
Zhengzhou
|
|
H
|
|
09/2018
|
|
|
86,781
|
|
|
|
261,492
|
|
|
|
3,177
|
|
|
|
3,012
|
|
|
|
253,634
|
|
Zhengzhou Fancy City I
|
|
Zhengzhou
|
|
H
|
|
12/2018
|
|
|
50,656
|
|
|
|
166,709
|
|
|
|
1,725
|
|
|
|
1,477
|
|
|
|
159,285
|
|
Zhengzhou Fancy City II (South)
|
|
Zhengzhou
|
|
H
|
|
12/2018
|
|
|
27,486
|
|
|
|
84,274
|
|
|
|
766
|
|
|
|
765
|
|
|
|
82,531
|
|
Kunshan Xindo Park
|
|
Kunshan
|
|
H/C
|
|
10/2018
|
|
|
47,523
|
|
|
|
89,002
|
|
|
|
1,077
|
|
|
|
1,052
|
|
|
|
86,209
|
|
New York Oosten
|
|
New York
|
|
S
|
|
12/2016
|
|
|
8,094
|
|
|
|
30,855
|
|
|
|
216
|
|
|
|
177
|
|
|
|
21,657
|
|
Xingyang Splendid II
|
|
Zhengzhou
|
|
MU
|
|
12/2019
|
|
|
60,556
|
|
|
|
118,530
|
|
|
|
1,575
|
|
|
|
1,456
|
|
|
|
98,019
|
|
Xuzhou Colorful City
|
|
Xuzhou
|
|
M/H
|
|
06/2019
|
|
|
45,046
|
|
|
|
130,840
|
|
|
|
1,453
|
|
|
|
1,302
|
|
|
|
122,503
|
|
Tianjin Spring Royal Palace I
|
|
Tianjin
|
|
M/H
|
|
12/2019
|
|
|
131,021
|
|
|
|
139,691
|
|
|
|
1,050
|
|
|
|
1,045
|
|
|
|
131,544
|
|
Zhengzhou International New City I
|
|
Zhengzhou
|
|
H
|
|
12/2019
|
|
|
89,088
|
|
|
|
356,587
|
|
|
|
3,135
|
|
|
|
3,046
|
|
|
|
350,630
|
|
Henan Xin Central II
|
|
Zhengzhou
|
|
H
|
|
12/2019
|
|
|
37,126
|
|
|
|
109,522
|
|
|
|
1,360
|
|
|
|
1,128
|
|
|
|
103,987
|
|
Xingyang Splendid III
|
|
Zhengzhou
|
|
H
|
|
09/2019
|
|
|
47,709
|
|
|
|
121,113
|
|
|
|
1,518
|
|
|
|
1,084
|
|
|
|
118,864
|
|
Changsha Mulian Royal Palace
|
|
Changsha
|
|
H
|
|
12/2019
|
|
|
32,158
|
|
|
|
90,992
|
|
|
|
694
|
|
|
|
694
|
|
|
|
90,992
|
|
Zhengzhou International New City II
|
|
Zhengzhou
|
|
H
|
|
12/2019
|
|
|
41,821
|
|
|
|
176,037
|
|
|
|
1,558
|
|
|
|
1,495
|
|
|
|
170,027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
3,557,725
|
|
|
|
9,068,623
|
|
|
|
104,129
|
|
|
|
101,199
|
|
|
|
8,907,910
|
|
As
of December 31, 2019, we have completed 60 projects with a total GFA of approximately 9,068,623 square meters and comprising a
total of 104,129 units, more than 97.2% of which have been sold. The status of completed projects in the last three years is discussed
below.
Zhengzhou Xin
City. The land is located south of Yongping Road and east of Kangping Road in the New-East-Zheng District of Zhengzhou. This
project covers a site area of 61,078 square meters and is expected to have a total GFA of 210,724 square meters, of which 195,537
square meters are for high-rise buildings, 10,467 square meters are for retail stores, 4,720 square meters are for basements. We
acquired the site in December 2011, commenced construction of this project in March 2013, and began to deliver units in 2015. This
project consists of 2,639 units. We started pre-sales in September 2013, and as of December 31, 2019, we had sold 2,518 units with
a total GFA of 208,230 square meters.
Zhengzhou Thriving
Family. The land is located south of Bairong Road and east of Nangang Road in Zhengzhou. This project covers a site area of
44,169 square meters and is expected to have a total GFA of 131,510 square meters, of which 113,753 square meters are for high-rise
buildings, 1,135 square meters are for retail stores, 3,159 square meters are for basements and 13,463 square meters are for public
rental housing. We acquired the site in September 2013, commenced construction of this project in April 2014, and delivered it
in 2016. This project consists of 1,913 units. We started pre-sales in June 2014, and as of December 31, 2019, we had sold 1,536
units with a total GFA of 129,550 square meters.
Xingyang Splendid
I. The land is located south of Zhengshang Road in Xingyang. This project covers a site area of 40,782 square meters and is
expected to have a total GFA of 115,431 square meters, of which 115,431 square meters are for high-rise buildings. We acquired
the site in November 2013, commenced construction of this project in April 2014, and began to deliver units in 2016. This project
consists of 1,427 units. We started pre-sales in May 2014, and as of December 31, 2019, we had sold 1,164 units with a total GFA
of 113,690 square meters.
Suzhou Lake Royal
Palace. The land is located east of Yinshanhu Road and north of Xingguo Road in the Wuzhong economic development zone in Suzhou.
This project covers a site area of 114,624 square meters and is expected to have a total GFA of 169,674 square meters, of which
117,517 square meters are for high-rise buildings, 50,747 square meters are for multi-layer buildings and 1,410 square meters are
for retail stores. We acquired the site in September 2013, commenced construction of this project in April 2014, and began to deliver
units in 2016. This project consists of 1,569 units. We started pre-sales in July 2014, and as of December 31, 2018, we had sold
1,569 units with a total GFA of 169,674 square meters.
Shanghai Royal
Palace. The land is located in Zhaoxiang Town in the Qingpu District of Shanghai. This project covers a site area of 28,600
square meters and is expected to have a total GFA of 57,770 square meters, of which 45,652 square meters are for high-rise buildings
and 12,118 square meters are for retail stores. We acquired the site in April 2014, commenced construction of this project in August
2014, and began to deliver units in 2016. This project consists of 622 units. We started pre-sales in January 2015, and as of December
31, 2019, we have sold 535 units with a total GFA of 46,406 square meters.
Chengdu
Thriving Family. The land is located in the Huayangyixin Community of Chengdu. This project covers a site area of 75,008 square
meters and is expected to have a total GFA of 203,379 square meters, of which 176,477 square meters are for high-rise buildings
and 26,902 square meters are for retail stores. We acquired the site in January 2014, commenced construction of this project in
June 2014, and began to deliver units in 2016. This project, when completed, will consist of 2,515 units. We started pre-sales
in September 2014, and as of December 31, 2019, we had sold 2,462 units with a total GFA of 195,263 square meters.
Sanya Yazhou Bay
No.1. The land is located in the Creative Industry Park in the Yacheng Town of Sanya. This project covers a site area of 78,765
square meters and is expected to have a total GFA of 117,585 square meters, of which 105,569 square meters are for high-rise buildings,
9,808 square meters are for multi-layer buildings and 2,208 square meters are for retail stores. We acquired the site in January
2014, commenced construction of this project in November 2014, and began to deliver units in 2016. This project, when completed,
will consist of 1,605 units. We started pre-sales in November 2014, and as of December 31, 2019, we had sold 1,553 units with a
total GFA of 114,620 square meters.
Kunshan Royal Palace.
The land is located east of Xihuan Road and south of Guiyi Road in the Huaqiao Town in Kunshan. This project covers a site area
of 145,776 square meters and is expected to have a total GFA of 280,591 square meters, of which 65,178 square meters are for multi-layer
buildings, 205,445 square meters are for high-rise buildings, 640 square meters are for basements and 9,328 square meters are for
retail stores. We acquired the site in October 2013, commenced construction of this project in October 2013, and began to deliver
units from 2015. This project, when completed, will consist of 2,658 units. We started pre-sales in November 2013, and as of December
31, 2019, we had sold 2,603 units with a total GFA of 278,922 square meters.
Changsha Xinyuan
Splendid. The land is located on Dongfanghong South Road in the Yuelu District of Changsha. This project covers a site area
of 89,460 square meters and is expected to have a total GFA of 251,652 square meters, of which 229,366 square meters are for high-rise
buildings and 22,286 square meters are for retail stores. We acquired the site in March 2014, commenced construction of this project
in August 2014, and began to deliver units in 2016. This project, when completed, will consist of 2,952 units. We started pre-sales
in November 2014, and as of December 31, 2019, we had sold 2,923 units with a total GFA of 246,191 square meters.
Xi’an Metropolitan.
The land is located north of Fenghe Road in Xi’an. This project covers a site area of 85,118 square meters and is expected
to have a total GFA of 285,997 square meters, of which 207,080 square meters are for high-rise buildings, 16,119 square meters
are for retail stores, and 62,798 square meters are for office buildings. We acquired the site in July 2014, commenced construction
of this project in December 2014, and began to deliver units in 2016. This project, when completed, will consist of 2,602 units.
Pre-sales started in December 2014, and as of December 31, 2019, we had sold 2,463 units with a total GFA of 271,807 square meters.
Jinan Xin Central.
The land is located south of Huayuan Road and west of Huaxin Road in Jinan. This project covers a site area of 51,352 square meters
and is expected to have a total GFA of 194,410 square meters, of which 99,284 square meters are for high-rise buildings, 32,371
square meters are for retail stores, 51,022 square meters are for office buildings, 6,231 square meters are for public rental housing
and 5,502 square meters are for basements. We acquired the site in March 2015, commenced construction of this project in May 2015,
and began to deliver units in 2016. This project, when completed, will consist of 2,715 units. We started pre-sales in May 2015,
and as of December 31, 2019, we had sold 2,645 units with a total GFA of 186,844 square meters.
Zhengzhou
Xindo Park (commercial). The land is located south of Bairong Road and west of Daxue Road in Zhengzhou. This project covers
a site area of 40,218 square meters and is expected to have a total GFA of 134,064 square meters, of which 109,948 square meters
are for office buildings and 24,116 square meters are for retail stores. We acquired the site in September 2013, commenced construction
of this project in January 2015, and began to deliver units in 2017. This project, when completed, will consist of 2,170 units.
We started pre-sales in April 2015, and as of December 31, 2019, we had sold 2,160 units with a total GFA of 133,457 square meters.
Henan Xin Central
I. The land is located south of Bairong Road and east of Xingyuan Road in Zhengzhou. This project covers a site area of 86,781
square meters and is expected to have a total GFA of 261,492 square meters, of which 210,939 square meters are for high-rise buildings,
16,028square meters are for retail stores, 26,040 square meters are for public rental housing and 8,485 square meters are for basements.
We acquired the site in December 2014 and commenced construction in July 2015, and began to deliver units in 2017. This project,
when completed, will consist of 3,177 units. We started pre-sales in July 2015, and as of December 31, 2019, we had sold 3,012
units with a total GFA of 253,634 square meters.
Zhengzhou Fancy
City I. The land is located south of Dingsheng Road and west of Siji Road, in Zhengzhou. This project covers a site area of
50,656 square meters and is expected to have a total GFA of 166,709 square meters, of which 134,039 square meters are for high-rise
buildings, 10,167 square meters are for retail stores, 16,741 square meters are for public rental housing and 5,762 square meters
are for basements. We acquired the site in December 2014 and commenced construction in September 2015, and began to deliver units
in 2017. This project, when completed, will consist of 1,725 units. We started pre-sales in October 2015, and as of December 31,
2019, we had sold 1,477 units with a total GFA of 159,285 square meters.
Zhengzhou Fancy
City II (South). The land is located west of Songshan Road within the 4th Ring Road in Zhengzhou. This project covers a site
area of 27,486 square meters and is expected to have a total GFA of 84,274 square meters, of which 78,445 square meters are for
high-rise buildings, 3,628 square meters are for retail stores and 2,201 square meters are for basements. We acquired the site
in April 2016 and commenced construction in June 2016, and expect to deliver units in 2018. This project, when completed, will
consist of 766 units. We started pre-sales in June 2016, and as of December 31, 2019, we had sold 765 units with a total GFA of
82,531 square meters.
Kunshan Xindo Park.
The land is located in the Huaqiao area of Kunshan, which is within the Shanghai Outer Ring Expressway. This project covers a site
area of 47,523 square meters and is expected to have a total GFA of 89,002 square meters, of which 72,750 square meters are for
high-rise buildings and 16,252 square meters are for retail stores. We acquired the site in April 2016, commenced construction
of this project in July 2016, and expect to deliver units in 2018. This project, when completed, will consist of 1,077 units. We
started pre-sales in July 2016, and as of December 31, 2018, we had sold 1,052 units with a total GFA of 86,209 square meters.
Xingyang
Splendid II. The land is located south of Zhengshang Road in Xingyang. This project covers a site area of 60,556 square meters
and is expected to have a total GFA of 118,530 square meters, of which 118,530 square meters are for high-rise buildings. We acquired
the site of 7,577 square meters in November 2013 and 52,979 square meters in August 2014, commenced construction of this project
in December 2014, and began to deliver units in 2017. This project, when completed, will consist of 1,575 units. We started pre-sales
in December 2014, and as of December 31, 2019, we had sold 1,456 units with a total GFA of 98,019 square meters.
Xuzhou Colorful
City. The land is located south of Kuangshan Road in the Quanshan District in Xuzhou. This project covers a site area of 45,046
square meters and is expected to have a total GFA of 130,840 square meters, of which 17,600 square meters are for multi-layer buildings,
93,889 square meters are for high-rise buildings 6,972 square meters are for retail stores and 12,379 square meters are for basements.
We acquired the site in December 2011, commenced construction of this project in June 2013, and began to deliver units in 2016.
This project, when completed, will consist of 1,453 units. We started pre-sales in November 2013, and as of December 31, 2019,
we had sold 1302 units with a total GFA of 122,503 square meters.
Tianjin
Spring Royal Palace I. The land is located in Sicundian Town in the Wuqing District of Tianjin. This project covers a site
area of 131,021 square meters and is expected to have a total GFA of 139,691 square meters, of which 73,383 square meters are
for high-rise buildings, 5,328 square meters are for retail stores, and 60,979 square meters are for multi-layer buildings. We
acquired the site in November 2014, commenced construction in October 2015, and began to deliver units in 2017. This project,
when completed, will consist of 1,050 units. We started pre-sales in October 2015, and as of December 31, 2019, we had sold 1,045
units with a total GFA of 131,544 square meters.
Zhengzhou International
New City I. The land is located within the south 3rd Ring Road in Zhengzhou. This project covers a site area of 89,088 square
meters and is expected to have a total GFA of 356,587 square meters, of which 292,330 square meters are for high-rise buildings,
21,896 square meters are for retail stores, 36,789 for public rental housing and 5,573 square meters are for basements. We acquired
the site in February 2016 and commenced construction in August 2016, and expect to deliver units in 2018. This project, when completed,
will consist of 3,135 units. We started pre-sales in September 2016, and as of December 31, 2019, we had sold 3,046 units with
a total GFA of 350,630 square meters.
Henan
Xin Central II. The land is located south of Bairong Road and Xingyuan Road in Zhengzhou. This project covers a site area
of 37,126 square meters and is expected to have a total GFA of 109,522 square meters, of which 92,687 square meters are for high-rise
buildings, 3,947 square meters are for retail stores, 1,654 square meters are for basements and 11,234 square meters are for public
rental housing. We acquired the site in December 2014 and commenced construction in September 2016, and expect to deliver units
in 2018. This project, when completed, will consist of 1,360 units. We started pre-sales in October 2016, and as of December 31,
2019, we had sold 1,128 units with a total GFA of 103,987 square meters.
Xingyang Splendid
III. The land is located south of Zhengshang Road in Xingyang. This project covers a site area of 47,709 square meters and
is expected to have a total GFA of 121,113 square meters, of which 117,505 square meters are for high-rise buildings and 3,608
square meters are for retail stores. We acquired the site in September 2013 and commenced construction in June 2017, and expect
to deliver units in August 2019. This project, when completed, will consist of 1,518 units. We started pre-sales in June 2017.
As of December 31, 2019, we had sold 1,084 units with a total GFA of 118,864 square meters.
Changsha Mulian
Royal Palace. The land is located in the Yuhua District of Changsha. This project covers a site area of 32,158 square meters
and is expected to have a total GFA of 90,992 square meters, of which 57,033 square meters are for high-rise buildings, 32,351
square meters are for multi-layer building and 1,608 square meters are for retail stores. We acquired the site in October 2016
and commenced construction in May 2017, and expect to deliver units in August 2019. This project consisted of 694 units. We started
pre-sales in August 2017, and all of the 694 units have been sold.
Zhengzhou
International New City II. The land is located within the south 3rd Ring Road in Zhengzhou. This project covers a site area
of 41,821 square meters and is expected to have a total GFA of 176,037 square meters, of which 159,563 square meters are for high-rise
buildings, 12,708 square meters are for retail stores and 3,766 square meters are for basements. We acquired the site in July
2016 and commenced construction in July 2017, and expect to deliver units in 2019. This project, when completed, will consist
of 1,558 units. We started pre-sale in August 2017, and as of December 31, 2019, we had sold 1,495 units with a total GFA of 170,027
square meters.
New
York Oosten. The land is located in the Williamsburg neighborhood of Brooklyn, New York, United States. This project covers
a site area of 8,094 square meters and is expected to have a total GFA of 30,855 square meters for sub-high-rise buildings. We
acquired the site in September 2012, commenced construction of this project in November 2013, and began to deliver units in 2016.
This project consists of 216 units. Presales started in June 2014, and as of December 31, 2019, 177 units with a total GFA of
21,657 square meters had been sold.
Properties Held
for Lease
Xinyuan Priority
Lifestyle Shopping Center. In 2012, we began to hold and manage our first retail property, Xinyuan Priority Lifestyle Shopping
Center, located in Zhengzhou city, Henan Province. As part of the Zhengzhou Modern City project, the shopping center has a construction
GFA of 47,109 square meters. The shopping center formally opened in September 2013 and provided retail services, including fashion
and jewelry, leisure and entertainment, food and beverage, a supermarket, children’s education and other ancillary services,
appealing to mid-to-high income customers within a radius of three to five kilometers. We have already set up a team specialized
in commercial space planning and execution under the administration of Henan Xinyuan Priority Commercial Management Co., Ltd.,
one of our subsidiaries that specializes in retail property management.
Xi’an Xinyuan
Metropolitan Shopping Center. In 2016, we completed the Xi’an Xinyuan Metropolitan Shopping Center, located in Xi’an,
Shaanxi Province. As part of the Xi’an Metropolitan project, the shopping center has a construction GFA of 116,288 square
meters. The Xi’an Metropolitan Shopping Center formally opened in December 2016 and provides retail services including fashion,
food and beverage, family activities, jewelry and clothing, a movie theater, and education, among other services, appealing to
customers within a radius of three to five kilometers. The shopping center is managed by Xi’an Xinyuan Metropolitan Business
Management Co. Ltd., one of our subsidiaries that specializes in retail property management.
Xingyang Xindo
Park Shopping Center. In 2017, we completed the Xingyang Xindo Park Shopping Center, located in Xingyang, Henan Province. As
part of the Xingyang Splendid II project, the shopping center has a construction GFA of 15,419 square meters. The Xingyang Xindo
Park Shopping Center formally opened in October 2017 and provides retail services including a supermarket, food and beverage, jewelry
and clothing, leisure and entertainment, family activities, a movie theater and other ancillary services, appealing to customers
within a radius of three to five kilometers. The shopping center is managed by Henan Xinyuan Priority Commercial Management Co.,
Ltd., one of our subsidiaries that specializes in retail property management.
Changsha Xindo
Park Shopping Center. In 2017, we completed the Changsha Xindo Park Shopping Center, located in Changsha, Hunan Province. As
part of the Changsha Xinyuan Splendid project, the shopping center has a construction GFA of 12,187 square meters. The Changsha
Xindo Park Shopping Center formally opened in August 2017 and will provide retail services including children’s education,
a supermarket, food and beverage, a beauty and fitness center and other ancillary services, appealing to customers within a radius
of three to five kilometers. The shopping center is managed by Hunan Huaiwei Business Management Co., Ltd., one of our subsidiaries
that specializes in retail property management.
Chengdu Xindo
Park Shopping Center. In 2017, we completed the Chengdu Xindo Park Shopping Center, located in Chengdu, Sichuan Province. As
part of the Chengdu Thriving Family project, the shopping center has a construction GFA of 18,936 square meters. The Chengdu Xindo
Park Shopping Center formally opened in October 2018 and provides retail services including a supermarket, clothing, food and beverage,
leisure and entertainment, children’s education, a movie theater and other ancillary services, appealing to customers within
a radius of three to five kilometers. The shopping center is managed by Chengdu Xinyuan Commercial Management Co., Ltd., one of
our subsidiaries that specializes in retail property management.
Zhengzhou
Xindo Park Shopping Center. In 2018, we completed the Zhengzhou Xindo Park Shopping Center, located in Zhengzhou, Henan Province.
As part of the Zhengzhou Xindo Park project, the shopping center has a construction GFA of 24,423 square meters. The Zhengzhou
Xindo Park Shopping Center formally opened in October 2018 and provides retail services including a supermarket, food and beverage,
leisure and entertainment, children’s education, a movie theater and other ancillary services, appealing to customers within
a radius of three to five kilometers. The shopping center is managed by Henan Xinyuan Priority Commercial Management Co., Ltd.,
one of our subsidiaries that specializes in retail property management.
Kunshan
Xindo Park Shopping Center. In 2018, we completed the Kunshan Xindo Park Shopping Center, located in Kunshan, Jiangsu Province.
As part of the Kunshan Xindo Park project, the shopping center has a construction GFA of 3,904 square meters. The Kunshan Xindo
Park Shopping Center formally opened in March 2019 and provides retail services including a supermarket, food and beverage, children’s
education, a movie theater and other ancillary services, appealing to customers within a radius of three to five kilometers.
Target
Shopping Center. Target will occupy approximately 28,090 square feet, or 81%, of the retail space to operate a
full-service Target store featuring both their retail department store as well as their grocery store. Target has taken
possession of the space and is currently building out their store with a plan to open for business this summer.
Our Property
Development Operations in China
We have a systematic
and standardized process to project development in China, which we implement through several well-defined phases. A significant
portion of our process is dedicated to land acquisition, which is segmented into three stages: (i) opportunity identification,
(ii) initial planning and budgeting and (iii) land acquisition. The following diagram sets forth the key stages of our property
development process.
LAND ACQUISITION PROCESS
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Project Planning
and Design
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Project Construction
and Management
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Pre-sale, Sale
and Marketing
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After-sale
and Delivery
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Opportunity
Identification
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Initial Planning
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Land
Acquisition
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- Strategic planning
- Geographic and
market analysis
- Auction opportunity
research
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- Feasibility
study
- Preliminary
design
- Costing
and financial evaluation
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- Financial projection
- Internal approval
- Bidding process
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- Outsource architectural
and engineering design
- Design management
- Arrange financing
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- Outsource
construction
- Construction
supervision
- Quality control
- Completion
inspection
- Landscaping
and fixture installation
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- Pre-sale
- Marketing
- Advertising
- Customer financing
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- Delivery
- Registration
assistance
- Feedback collection
- Property management
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Opportunity Identification
The first stage
of our development process involves the identification of new opportunities for upcoming land auctions or acquisition of entities
in our selected high growth cities around China. Our Land Development Department prepares a strategic plan that specifies our future
project development plans and land acquisition requirements. They also conduct in-depth demographic and market research regarding
our selected cities. We have formulated a set of criteria in selecting suitable high growth cities to expand our operations based
on certain indicators, including, among others:
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middle to upper rankings in economic strength;
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populations greater than five million;
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clear city development and planning;
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sustainable land supply at reasonable prices for future developments;
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acceptable competition levels in the real estate market; and
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lower level of property speculation.
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Initial Planning and Budgeting
Once an upcoming
land auction or acquisition has been identified, our Land Development Department will conduct a feasibility study based on our
collected data as well as preliminary design and pre-planning of the proposed development project on the land site. We will also
budget costs and financial requirements for the proposed project to identify whether the land site is suitable for our requirements.
The key factors
we consider in land site selection are:
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site area and suitability;
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location within the city;
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neighboring environment and amenities;
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existing or planned infrastructure;
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announced government planning for the vicinity; and
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projected cost, investment and financial return ratios.
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We evaluate
projects through a rigorous planning and approval process. We consider detailed input from each of our Land Development
Department, Planning-Design Department, Operations Department, Financial Department and local team. The proposed project,
once vetted and approved by various departments, will be submitted to the investment committee of our board for
approval.
Land Acquisition
Once we receive
approval for a proposed project, we will proceed to bid for the land site. We acquire land for development primarily through the
governmental auction process, or acquisition of entities. When deciding to whom the land use rights should be granted, the relevant
authorities and entities may consider not only the bidding price, but also the bidder’s real estate development experience,
development track record, credit history, qualification and development proposal in connection with their local zoning, urbanization
and development plans.
If
opportunities arise, we will also consider obtaining land use rights from third parties through negotiation, co-development
or other joint venture arrangements. We decide on whether to develop by ourselves or to partner with third business partners
through joint ventures or associations, by taking into account various factors, such as estimated land acquisition costs, the
development scales of the potential projects, the specialty and resources possessed by the potential business partner, as
well as the expected commercial terms available to us upon negotiation. With portions of initial capital contributed by the
third-party business partners, we can invest in property projects with relatively lower capital outlay.
Project Planning and Design
Our project planning
and design process includes concept and architectural design, budgeting, quality control, output examination as well as customer
experience after delivery review. We believe careful planning is essential to control costs, build quality and improve efficiency
of our development schedule.
We outsource substantially
our design work to reputable third-party design firms. Our design team works closely with our external designers and architects
to ensure that our designs comply with PRC laws and regulations, and meet our design, smart house and other project objectives.
Our senior management is also actively involved in the process, especially in the master planning and architectural design of our
projects.
Project Construction and Management
We outsource all
of our construction work to independent construction companies which are selected mainly through our invitation to tender bids
for the project. We generally hire more than one contractor for each of our projects, with each contractor responsible for a designated
portion of the project on a “turnkey” basis. We have established a selection procedure in order to ensure compliance
with our quality and workmanship standards. We closely supervise and manage the entire project construction process, utilizing
our enterprise resource planning systems to monitor and analyze information regarding the process on a real-time basis. We collect
information throughout the development cycle on the entire project, including information from our third-party contractors, to
avoid unanticipated delays and cost overruns.
Pre-Sales, Sales and Marketing
Like other developers,
we pre-sell properties prior to the completion of their construction in mainland China. Under PRC pre-sales regulations, property
developers must satisfy specific conditions before they can pre-sell their properties under construction. The major mandatory conditions
include:
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the land premium must have been paid in full;
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the land use rights certificate, the construction site planning permit, the construction work planning
permit and the construction permit must have been obtained;
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at least 25% of the total project development cost must have been incurred;
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the progress and the expected completion and delivery date of the construction must be fixed;
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the pre-sale permit must have been obtained; and
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certain milestones in the construction processes specified by the local government authorities
must have been completed.
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These major mandatory
conditions are designed to require a certain level of capital expenditure and substantial progress in project construction before
the commencement of pre-sales. Generally, the local governments also require developers and property purchasers to use standard
pre-sale contracts prepared under the auspices of the government. Developers are required to file all pre-sale contracts with local
land bureaus and real estate administrations after entering into such contracts.
We maintain an internal
marketing and sales force for our development projects and also use outside sales agencies for all of our projects and some of
our projects also utilize our internal sales. Our marketing and sales teams work closely with each other and with our external
sales agents to survey the demographics for a particular project area to determine the appropriate advertising, promotion, and
selling plans for that project. We develop customer awareness through our marketing and promotion efforts and through referrals
from satisfied customers. A sales team at each project is responsible for following through on the entire sales process including
setting monthly sales targets, controlling prices, implementing special promotions, monitoring external sales agency performance,
and processing customer feedback.
Most of our customers
purchase our properties using mortgage financing. The maximum loan-to-value ratio of the mortgage loan is also subject to change
according to the economic policies of the central and local governments and banks in China. A typical sales transaction in which
a portion of the purchase price is financed by a mortgage loan consists of three steps. First, the customer pays a deposit to us.
Within seven days after paying the deposit, the customer will sign a purchase contract with us and make down payment to us in cash.
After making the down payment, the customer arranges for a mortgage loan for the balance of the purchase price. Once the loan is
approved, the mortgage loan proceeds are paid to us directly by the bank. Finally, we deliver the property to the customer. Legal
title, as evidenced by a property ownership certificate issued by local land and construction bureaus, may not pass for a period
of six to twelve months following delivery and acceptance.
After-Sale Services and Delivery
We assist customers
in arranging for and providing information relating to financing. We also assist our customers in various title registration procedures
relating to their properties, and we have set up an ownership certificate team to assist purchasers to obtain their property ownership
certificates. We offer various communication channels to customers to provide their feedback about our products or services. We
also cooperate with property management companies that manage our properties and ancillary facilities, such as schools and clubhouses,
to handle customer feedback.
We endeavor to deliver
the units to our customers on a timely basis. We closely monitor the progress and quality of construction of our property projects
and conduct pre-delivery property inspections to ensure timely and qualified delivery. The time frame for delivery is set out in
the sale and purchase agreements entered into with our customers, and according to purchase agreements, we are subject to penalty
payments to the purchasers for delay in delivery caused by us. Once a property development has been completed, has passed the requisite
government inspections and is ready for delivery, we notify our customers and hand over keys and possession of the properties.
To ensure quality
property management, we provide property management services to purchasers until they have become statutorily entitled to elect
their own property management companies. As of December 31, 2019, owners of all of our developments who had become statutorily
entitled to elect their property management companies had continued to choose us to manage their properties.
Our property management
services include security, landscaping, building management and management of public facilities and equipment, and additional services,
such as cultural activities, housekeeping and repair. We are currently managing approximately 20.06 million square meters, comprising
more than 126,539 residential units.
Our U.S.
Property Development Operations
We expanded into
the United States market in 2012. Investment decisions with respect to the United States market are carried out through the investment
committee of our board of directors. We currently seek investment opportunities mainly through off-market transactions, including
resales and distressed sales. We currently consider the following factors when selecting a project:
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Geographic location. We intend to focus in areas that are economically active and diversified,
and attractive to immigrants on the east and the west coasts.
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Risk adjusted financial returns.
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We set up a specialized
United States project team in 2012, comprised of U.S. local consultants and employees with substantial experience and understanding
in various areas of the U.S. real estate market. As of December 31, 2019, we have a team of about seven people in the United States.
Their major responsibilities include project research, land valuation, property development management, contracts, and contract
terms verification. We also work with outside consultants and agents familiar with the United States markets.
To date, our acquisitions
in the United States have been opportunistic and have not followed a specific development model. Our first property development
project in the United States, named the New York Oosten Project, is in the Williamsburg neighborhood of Brooklyn, New York. We
commenced construction of the development project in November 2013. We started marketing and pre-sale of our property upon receiving
approval from the state attorney general in March 2014. As of December 31, 2019, we delivered 177 of 216 units with a total GFA
of 21,657 square meters for a total of US$260.1 million.
In January 2016,
we also acquired a parcel of land in midtown Manhattan, New York, for US$57.5 million. The land allows for approximately 10,235
sellable & rentable square meters. Our Hudson Garden project in Manhattan, New York has completed construction up to the 6th
floor. With design drawing optimization, the total number of units increased from 82 to 92.
In August 2016,
we acquired a parcel of land in the Flushing neighborhood of Queens, New York for US$66.0 million. The land allows for approximately
30,112 sellable & rentable square meters. We continue to progress the planning, governmental approvals and pre-development
activities of our ground-up development project of a landmarked property in Flushing, New York. We continue to execute on planning,
governmental approvals, and pre-development of our ground-up development project in Flushing, New York. After the Landmark Protection
Committee’s approval on our landmark protection plan, we were awarded with a Certificate of Appropriateness.
Our Leased Properties and Real
Estate Related Services
Ancillary to our
property development operations, we also lease certain properties, including an elementary school, two basements, seven clubhouses,
thirteen parking facilities, fifteen kindergartens, seven shopping malls and a department. The rental income of our lease operations
represented approximately 0.4%, 0.4% and 0.7% respectively, of our revenues for the years ended December 31, 2017, 2018 and 2019.
We provide property
management services through Xinyuan Science and Technology Service Co., Ltd. For the years ended December 31, 2017, 2018 and 2019,
revenues from our real estate related services represented 2.1%, 2.9% and 2.7% of our total revenue for those periods, respectively.
Quality Control
We emphasize quality
control to ensure that our buildings and residential units meet our standards and provide high quality service. We select only
experienced design and construction companies. We provide customers with warranties covering the building structure and certain
fittings and facilities of our property developments in accordance with the relevant regulations. To ensure construction quality,
our construction contracts contain quality warranties and penalty provisions for poor work quality. In the event of delay or poor
work quality, the contractor may be required to pay pre-agreed penalties, damages, as well as compensation we paid to customers
for late delivery, under our construction contracts. Our construction contracts do not allow our contractors, without prior consent
from us, to subcontract or transfer their contractual arrangements with us to third parties. We typically withhold 5% of the agreed
construction amount for two to five years after completion of the construction as a deposit to guarantee quality, which provides
us assurance for our contractors’ work quality.
Our contractors
are also subject to our quality control procedures, including examination of materials and supplies, on-site inspection and production
of progress reports. We require our contractors to comply with relevant laws and regulations of the jurisdictions in which we operate,
as well as our own standards and specifications. We also employ independent surveyors to supervise the construction progress. In
addition, the construction of real estate projects is regularly inspected and supervised by PRC governmental authorities and the
relevant authorities of the jurisdictions in which we operate.
Competition
The real estate
industry in China is highly competitive. We compete primarily with local and regional property developers, but an increasing number
of large national property developers have also started to enter these markets. Competitive factors include the geographical location
of the projects, the types of products offered, brand recognition, price, design and quality. See “Item 3. Key Information
— D. Risk Factors — Risks Relating to the Residential Property Industry in China — We face intense competition
from other real estate developers.” In the cities in which we operate,
our major competitors include China Overseas Property Ltd., China Vanke Co., Ltd., Sunshine 100, China Resources Land Limited,
Sunac China Holding Limited, Henan Zhengshang Real Estate Co., Ltd., Evergrand
Group, Longfor Real Estate Co., Ltd, Greenland
Group, China Overseas Property, Country
Garden, and KWG Property Holding Ltd.
In the United States,
we anticipate that our direct competition may come from developers of adjacent projects or other property developers in target
markets. In addition, we may also face competition from other Chinese real estate developers expanding or establishing their business
in the United States.
Intellectual Property Rights
We rely on a combination
of trademarks, service marks, domain name registrations, copyright protection and contractual restrictions to establish and protect
our brand name and logos, marketing designs and internet domain names.
We have registered
the trademark of “鑫苑” and the associated
logo for the real estate related service in the PRC. We have also applied the same trademark to other goods and services directly
or indirectly related to our business operations, to strengthen the protection of our trademark and brand. All these trademark
applications are registered or pending examination and approval. We have also registered the Internet domain name “www.xyre.com”
and other related domain names.
We own trademarks
for “鑫苑” in the form of Chinese characters
and our company logo in the United States, UK, EU, New Zealand, Australia, Singapore, Korea, Hong Kong and Cayman Islands. We also
hold the international registration of our company logo issued by the International Trademark System.
In the PRC, the
registration and protection of a company’s corporate name is regional and limited to its related industry. Although we have
registered our corporate name “Xinyuan” in the provinces where we operate, we cannot prevent others from registering
the same corporate name in other provinces or in other industries. If a company first registers “Xinyuan” as its corporate
name in a province other than Henan Province, Shandong Province, Jiangsu Province, Anhui Province and Sichuan Province or in another
industry, we will have to adopt another corporate name if we plan to enter that market or industry.
Insurance
We obtain insurance
against losses or damage to our PRC properties during the construction phase of our projects. We do not maintain insurance policies
for properties that we have delivered to our customers. Although we require our contractors to maintain insurance coverage on our
properties under construction, typically they do not do so, which we believe is customary practice in China. We believe that third-party
contractors should bear liabilities from tortious acts or other personal injuries on our project sites, and we do not maintain
insurance coverage against such liabilities. There are certain types of losses, such as losses from natural disasters, terrorist
attacks, construction delays and business interruptions, for which insurance is either not available or not available at a reasonable
cost. We believe our practice is consistent with the customary industry practice in China.
With respect to
our U.S. operations, we follow local requirements and maintain insurance coverage for projects through the end of the construction.
Environmental Matters
As a developer of
property in the PRC, we are subject to various environmental laws and regulations set by the PRC national, provincial and municipal
governments. These include regulations on air pollution, noise emissions, as well as water and waste discharge. We have never been
required to pay any penalties associated with the breach of any such laws and regulations in the past. Compliance with existing
environmental laws and regulations has not had a material adverse effect on our financial condition and results of operations,
and we do not believe it will have such an impact in the future.
Our projects are
normally required to undergo an environmental impact assessment by government-appointed third parties, and a report of such assessment
needs to be submitted to the relevant environmental authorities in order to obtain their approval before commencing construction.
Upon completion of each project, the relevant environmental authorities inspect the site to ensure the applicable environmental
standards have been complied with, and the resulting report is presented together with other specified documents to the relevant
construction administration authorities for their approval and record. Approval from the environmental authorities of such report
is required before we can deliver our completed work to our customers. In the past, we have not experienced any difficulties in
obtaining those approvals for commencement of construction and delivery of completed projects. However, we cannot assure you that
we will not experience any difficulties in the future. See “Item 4. Information on the Company — B. Business Overview
— Regulation — China — Regulations on Environmental Protection in Construction Projects.”
In connection with
our current and any future properties in the United States, our relevant property subsidiaries are or will be subject to a variety
of local, state and federal statutes, ordinances, rules and regulations concerning the protection of health and the environment.
The particular environmental laws which apply to any given community, will vary according to the site, its location, the site’s
environmental conditions and the present and former use of the site. Likewise, the particular procedures and approval or other
requirements will vary from project to project.
Regulation
China
The PRC government
regulates the real estate industry. This section summarizes the principal PRC regulations relating to our business.
We operate our business
in China under a legal regime consisting of the National People’s Congress, the PRC State Council, which is the highest authority
of the executive branch of the PRC central government, and several ministries and agencies under its authority, including the MOHURD,
MLR, the MOFCOM, the NDRC, the SAIC, the SAFE, and their respective authorized local counterparts.
Regulations
on Land
The Law of the
PRC on Land Administration, implemented on June 25, 1986 and amended on December 29, 1988, August 28, 2004 and August 26, 2019
by the Standing Committee of National People’s Congress, distinguishes between the ownership of land and the right to use
land. All land in the PRC is either state-owned or collectively-owned, depending on location. Generally, land in urban areas within
a city or town is state-owned, and all land in the rural areas of a city or town and all rural land, unless otherwise specified
by law, are collectively-owned.
Although all land
in the PRC is owned by the governments or by the collectives, private individuals and businesses are permitted to hold, lease and
develop land for a specified term without ever owning the land, the duration of which depends on the use purpose of the land. These
rights to use land are termed land use rights.
Under the Interim
Regulations of the PRC on Grant and Transfer of the Right to Use State-owned Land in Urban Areas, implemented on and effective
as of May 19, 1990 by the PRC State Council, enterprises, companies and other organizations who intend to hold, lease and develop
the land (each, a “Land User”), pay a premium to the government as consideration for the grant of the land use rights
on terms of use prescribed by the government, and a Land User may transfer, lease and mortgage or otherwise commercially exploit
the land use rights within such terms of use. The land administration authority enters into a contract with the Land User for grant
of the land use rights. The Land User pays the grant premium as stipulated in the grant contract. After paying the grant premium
in full, the Land User registers with the land administration authority and obtains a land use rights certificate. The certificate
evidences the acquisition of the land use rights.
The Regulations
on the Grant of State-Owned Construction Land Use Rights through Competitive Bidding, Auction and Listing-for-Sale (formerly
known as the Regulation on the Grant of State-Owned Land Use Rights through Competitive Bidding, Auction and Listing-for-Sale),
implemented by the MLR on May 9, 2002 and amended on September 28, 2007, provides that the land for industrial use (except for
mining), commercial use, tourism, entertainment and commodity housing development is granted by way of competitive bidding, public
auction or listing-for-sale. The land use rights are granted to the bidder with the highest bid/tender in accordance with the terms
and conditions of the bid/tender, or to the bidder who can best fulfill the comprehensive evaluation standards of the bid. The
successful bidder/tender will then enter into a grant contract with the local land administration authority. Only after the successful
bidder/tender has paid the land premium in full under the land grant contract, can the successful bidder/tender apply for the land
registration and obtain the land use right certificate.
The Property
Law of the PRC, or the Property Law, implemented on March 16, 2007 and effective as of October 1, 2007, further clarified
land use rights in the PRC with the following rules:
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the land use rights for residences will be automatically renewed upon expiry;
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the car parks and garages within the building area planned for vehicle parks must be used to meet
the needs of the owners who live in the building first;
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the construction of buildings must abide by relevant laws and regulations with regard to the construction
planning and may not affect the ventilation of or lighting to the neighboring buildings; and
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where the land use rights for construction use are transferred, exchanged, used as a capital contribution,
donated to others or mortgaged, an application for modification registration must be filed with the registration department.
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In accordance with
the Notice on Further Strengthening the Administration of the Costs and Revenues Associated with Land Grant, jointly issued
by the MOF, the MLR, the PBOC, the Ministry of Supervision and the National Audit Office on November 18, 2009, all payments for
land use rights paid for through installments must be made in full within one year in principle. In certain circumstances the payment
term may be extended to two years upon the approval of the competent authorities. In addition, the initial installment payment
may not be less than 50% of the overall amount owed for the land use rights. The notice also provides that the local-level governments
should strictly enforce relevant regulations to impose penalties on real estate developers that have delayed the payment of land
premiums or construction for reasons other than force majeure or restrict such developers from acquiring new land during the period
such payments are delayed.
The
Circular of the MLR and the MOHURD on Further Strengthening Administration over Land-use and Constructions of Real Estate,
implemented on September 21, 2010, specifies that when any bidder participates in a competitive bidding, public auction or listing-for-sale,
in addition to the provision of a valid identification certificate and payment of bidding deposit, the bidder shall be also required
to submit (i) a letter of commitment specifying that the bidding deposit is not from a bank loan, shareholder loan, etc., and (ii)
a credit certificate issued by a commercial financial institution. If the land is left idle for more than one year by a real estate
developer, the developer and its controlling shareholder shall be prohibited from taking part in any competitive bidding, public
auction or listing-for-sale for the grant of land use rights. Furthermore, real estate developers must commence the construction
of a housing project within one year from the date of delivery of the land as stipulated in the land grant contract, and complete
the construction within three years from the date of commencement of construction.
The Emergency
Notice on Further Tightening the Administration on Real Estate Land Use and Reinforcing the Control Results of Real Estate Market
implemented on July 19, 2012, further emphasized the strict enforcement of current regulations on land grants:
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the plot area ratio for residential land shall not be less than 1.0;
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for all types of housing construction projects, construction work shall be commenced within one
year of the date when the land is delivered as set forth in the land grant contract and shall be completed within three years after
its commencement date;
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the bidding deposit for a land grant shall not be less than 20% of the base price; and
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the land grant contract shall be signed within 10 working days after a land grant deal is concluded,
a down payment of 50% of the land premium shall be made within one month after signing the contract, and the remaining payment
shall be made in a timely manner in accordance with the contract; in no event should it be more than one year.
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On May 22, 2014,
the MLR issued the Provisions on the Economical and Intensive Use of Land, which took effect on September 1, 2014 and amended
on July 24, 2019. It provides that commercial land shall be granted via tender, auction and listing process to determine the user
and the price. Compensation for all types of land supply shall not be lower than the minimum standard stipulated by the government.
It is prohibited to reduce or relieve the land grant price in a disguised form by way of exchanging projects with land, returning
fees after collecting them or granting subsidies or awards.
On November 24,
2014, the PRC State Council issued Interim Regulations on Real Estate Registration, which took effect on March 1, 2015 and
amended on March 24, 2019. It stipulates the registration authorities and the procedures for registration of rights of real estate
rights, including land use rights, which applies to first registration, change of registration, transfer of registration, cancellation
of registration, correction of registration, dissidence registration, advance notice registration, close-down registration and
other affairs concerning registration of real estate. Further, on January 1, 2016, MLR issued Implementing Rules of the Interim
Regulations on Real Estate Registration, which is amended on July 24, 2019, which details the rules of the registration procedures
for registration of different kind of rights of real estate.
The Administrative
Measures for the Preliminary Review of Land Use for Construction Projects, implemented by the MLR on July 25, 2001, revised
on October 29, 2004, amended on November 12, 2008 and November 29, 2016 and took effect on January 1, 2017, simplify the content
of preliminary review of land for construction, reduce the documents necessary for examination and approval, and improve the efficiency
of examination and approval. Furthermore, under the Circular of the Ministry of Land and Resources on Improving and Optimizing
the Preliminary Review and Examination of Land Use for Construction Projects, implemented on November 30, 2016 and effective
as of January 1, 2017, the procedure of preliminary review and examination and approval of land for construction is requested to
be improved and optimized. Where a project does not involve any new land for construction, and is constructed by use of the approved
land for construction within the scope of land for urban construction as determined by the overall planning on land utilization,
the preliminary review may not be carried out for the land used for the project.
Regulations
on Establishment of a Real Estate Development Enterprise
In accordance with
the Law of the PRC on Administration of Urban Real Estate, or Urban Real Estate Law, implemented by the Standing Committee
of the National People’s Congress on July 5, 1994 and amended on August, 30, 2007, August 27, 2009, and August 26, 2019,
a developer is defined as “an enterprise which engages in the development and sale of real estate for the purposes of making
profits.”
Under the Regulations
on Administration of Development and Operation of Urban Real Estate, or Development Regulations, implemented by the PRC State
Council on and effective as of July 20, 1998 and amended on January 8, 2011, March 19, 2018 and March 24, 2019, a real estate development
enterprise must satisfy the following requirements:
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has a registered capital of not less than RMB1 million; and
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has four or more full time professional real estate/construction technicians and two or more full
time accounting officers, each of whom must hold the relevant qualifications.
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The Development
Regulations also allow people’s governments of the provinces, autonomous regions and/or municipalities directly under the
central government to impose more stringent requirements regarding the registered capital and qualifications of professional personnel
of a real estate development enterprise according to the local circumstances.
To establish a real
estate development enterprise, the developer is required to apply for registration with the department of administration of industry
and commerce. The developer must also report its establishment to the real estate administration authority in the location of the
registration authority within 30 days upon receipt of its business license.
Regulations
on Foreign-Invested Real Estate Enterprise
Industrial Restriction
Pursuant to the Special Administrative
Measures on the Access of Foreign Investment (Negative List) (2019 Edition) (the “2019 Negative List”) jointly issued
by the NDRC and the MOFCOM on June 30, 2019 and enforced on July 30, 2019, the foreign investment related to real estate development
does not fall within the category of industries in which foreign investment is restricted or prohibited. The 2019 Negative List
enumerates the restricted industries and the prohibited industries in relation to foreign investment, and the industries such as
real estate development industry which do not fall within the 2019 Negative List, shall be administered under the principle of
equal treatment to domestic and foreign investment. On March 15, 2019, the Foreign Investment Law of the People’s Republic
of China, or the “FIL”, was issued by SCNPC and took effect on January 1, 2020, which also provides that the industries
in which foreign investment is not restricted and prohibited shall be administered under the principle of equal treatment to domestic
investment, however, where verification and record-filing of a foreign investment are required, relevant provisions of the State
shall still be followed.Circular No. 171
Considering the
increasing foreign investment in the real estate industry in recent years, the MOHURD, the MOFCOM, the NDRC, the PBOC, the SAIC,
and the SAFE jointly implemented the Opinions on Regulating the Entry and Administration of Foreign Investment in the Real Estate
Market, or Circular No. 171, on July 11, 2006 and amended on August 19, 2015, which may impact foreign investment in the real
estate industry in the following areas:
Circular No. 171
requires a FIREE, with total investments equating to or exceeding US$10 million to have a registered capital consisting of certain
percentage of its total amount of investment. FIREEs with total investments below US$10 million must have a registered capital
in amounts pursuant to and consistent with existing regulations.
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Upon payment of the land use rights grant premium, the FIREE can apply to the land administration
authority for a land use rights certificate. Upon obtaining the land use rights certificate, an FIREE may then obtain a recertification
of its existing Foreign-Invested Enterprises Approval Certificate, or FIEAC, and the Business License, with the same validity period
as that of such land use rights certificate; following which, the FIREE may apply to the tax administration for tax registration
purposes.
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When a foreign investor merges with a domestic real estate enterprise, or acquires a FIREE’s
equity or project, the investor is required to submit a guarantee which ensures the compliance with the provisions of the land
use rights grant contract, construction site planning permit and construction work planning permit, and the land use rights certificate,
and the modification certification issued by the construction authorities, and the tax payments certification issued by the relevant
tax authorities.
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Foreign investors which merge with domestic real estate development enterprises by share transfers
or other methods, or which acquire the equity of a PRC party in joint venture enterprises, must allocate their employees appropriately,
deal with bank debts and settle the lump sum payment of the transfer price through self-owned funds. However, a foreign investor
with an unfavorable record may not be allowed to conduct any of the aforesaid activities.
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FIREEs which have failed to obtain a land use rights certificate, or which have under 35% of the
total capital required for the project, will not be allowed to obtain a loan in or outside China, and foreign exchange administration
departments will not approve any settlement of foreign loans by such enterprises.
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Any Chinese or foreign investors in an FIREE may not guarantee fixed profit returns or provide
other arrangements to the same effect for any party in any form.
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Circular No. 50
On May 23, 2007,
the MOFCOM and the SAFE issued the Notice on Further Strengthening and Standardizing the Approval and Administration of Foreign
Direct Investments in Real Estate Enterprise, or Circular No. 50, and amended on October 28, 2015. Some of the key developments
in this area are as follows:
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the local governments/authorities that approve FIREE establishments are now required to file such
approvals with the MOFCOM;
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prior to establishing a FIREE, foreign investors are required to obtain land use rights or the
ownership of a real estate project, or the investor should have entered into an indicative land grant contract or indicative project
purchase agreement with the land administrative department, developer of the land or owner of the property;
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the practice of allowing foreign investors taking over local project companies by way of roundtrip
investment is strictly controlled; and
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foreign-invested enterprise that intends to engage in real estate development, or an existing FIREE
which intends to undertake a new real estate development project, must first apply to the relevant authorities for such business
scope and scale expansion in accordance with laws and regulations on foreign investments.
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Circular No. 23
Under the Circular
on Properly Conducting Filing for the Record for Foreign Investment in the Real Property Sector, or Circular No. 23, implemented
by the MOFCOM on June 18, 2008 and effective as of July 1, 2008, the MOFCOM delegated to its provincial branches the review of
filing records in relation to FIREE’s establishment, capital increase, equity transfer, merger and acquisition, etc. Under
Circular No. 23, the local branches of the MOFCOM submit all the application documents that were previously required to be filed
with the MOFCOM to the aforesaid provincial branches of the MOFCOM for review. Within five days of receipt of the MOFCOM’s
request, the provincial branches of the MOFCOM that have reviewed such filings must submit all of the aforementioned materials
to the MOFCOM.
Notwithstanding
the above, Circular No. 23 does not de-regulate the Chinese real estate market. The previous material requirements for granting
approval under Circular No. 171 and Circular No. 50 still apply.
Circular 122
On August 19, 2015,
six PRC regulatory agencies, including the MOHURD and the SAFE, implemented the Notice on Adjusting Policies on Entry and Administration
of Foreign Investment in the Real Estate Market, or Circular 122, among other things, according to which, the requirement
of fully payment of its capital contributions of FIREE, no longer exists when the FIREE applies to domestic loans, overseas loans,
and settlement of foreign exchange loans, and the FIREE may directly apply to bank the registration of foreign exchange regarding
foreign direct investment in accordance with the relevant rules on foreign exchange administration. Similarly, Circular 122 does
not de-regulate the Chinese real estate market. The previous material requirements for granting approval under Circular No. 171
and Circular No. 50 still apply.
On November 6, 2015,
the MOFCOM and the SAFE jointly promulgated the Circular on Further Improving the Registration of Foreign Investments in Real Estate
which has simplified the administrative procedures for foreign invested real estate companies. According to the circular, the local
departments of the MOFCOM shall approve the establishment and changes of foreign-invested real estate enterprises in accordance
with the laws and statutes concerning foreign investment and provide information on real estate projects in the foreign investment
information system of MOFCOM. In addition, the public registration on the website of MOFCOM is canceled. Furthermore, the MOFCOM
will randomly select foreign-invested real estate enterprises for examinations on a quarterly basis.
Regulations on Qualifications of Developer
Under the Rules
on the Administration of Qualifications of Real Estate Developers implemented on March 29, 2000 by the MOHURD and effective
on the same day (amended on May 4, 2015) a developer must apply for registration of its qualifications. An enterprise may not engage
in the development and sale of real estate without a qualification classification certificate for real estate development.
In accordance with
the above rules, developers are classified into four classes: class I, class II, class III and class IV. A developer that
passes the qualification examination will be issued a qualification certificate of the relevant class by the relevant construction
authority.
A developer of any
qualification classification may only engage in the development and sale of real estate within its approved scope of business and
may not engage in business of another classification. A class I developer is not restricted as to the scale of the real estate
projects to be developed and may undertake real estate development projects anywhere in the country. A developer of class II or
lower may only undertake projects with a gross area of less than 250,000 square meters and the specific scope of business must
be as confirmed by the local construction authority.
Under the Development
Regulations, real estate administration authorities examine all applications for the registration of the qualifications of a developer
when it reports its establishment, by considering its assets, professional personnel and business results. A developer may only
undertake real estate development projects in compliance with the approved qualification registration.
After a newly established
developer reports its establishment to the real estate administration authority, the latter will issue a temporary Qualification
Certificate to the eligible developer within 30 days of its receipt of the above report. The developer must apply for the qualification
classification by the real estate administration authority within one month before expiry of the temporary Qualification Certificate.
Regulations
on Development of a Real Estate Project
Commencement
of a Real Estate Project and the Idle Land
According to the
Circular on the Implementation of the Catalog for Restricted Land Use Projects (2012 Edition) and the Catalogue for Prohibited
Land Use Projects (2012 Edition) implemented by the MLR and the NDRC in May 23, 2012, the area of a plot of land to be
granted for residential use may not exceed (i) seven hectares for small cities and towns, (ii) 14 hectares for medium-sized cities
or (iii) 20 hectares for large cities. The plot area ratio for residential land should not be lower than 1.0. No land may be granted
for “villa” real estate projects.
Under the Urban
Real Estate Law, those who have obtained the land use rights through grant must develop the land in accordance with the terms of
use and within the period of commencement prescribed in the contract for the land use rights grant.
According to the
Measures on Disposing Idle Land implemented by the MLR and effective as of April 28, 1999, as amended on May 22, 2012 and
effective as of July 1, 2012, with regards to the land for a real estate project which is obtained by grant and is within the scope
of city planning, if the construction work has not been commenced within one year upon the commencement date as set forth in the
land use rights grant contract, or the construction and development has been started but the area of land that is under construction
and development is less than one third of the total area of land that should have been under construction and development, or the
invested amount is less than 25% of the total investment, and the construction and development of which has been suspended for
more than one year, a surcharge on idle land equivalent to 20% of the grant premium may be levied; if the construction work has
not been commenced within two years, the land can be confiscated without any compensation, unless the delay is caused by force
majeure, or the acts of government or acts of other relevant departments under the government, or by indispensable preliminary
work.
The Emergency
Notice on Further Tightening the Administration on Real Estate Land Use and Reinforcing the Control Results of Real Estate Market
implemented on July 19, 2012, requires that the Measures on Disposing Idle Land be strictly implemented, and the land authority
dispose of, case by case, idle land and publish related information on the website designated by the MLR. With regard to land users
who have committed acts such as failing to make payments for land grants, leaving land idle, hoarding land, land speculation, developing
land in excess of its actual development capacity, or failing to fulfill the land use contract, they may be prohibited by the land
authority from participating in land auctions for a certain period of time.
Planning of a
Real Estate Project
The Law of the
PRC on Urban and Rural Planning, implemented by the National People’s Congress on October 28, 2007 and effective
as of January 1, 2008 and amended on April 24, 2015 and April 23, 2019 replacing the previous City Planning Law of the PRC,
provides that a developer who has obtained land use rights by grant must, after obtaining approval for a construction project and
signing a land use rights grant contract, apply to the city planning authority for the Permit for Construction Site Planning It
further provides that a developer who has a proposed construction project within the planning area of a city or town must, after
obtaining a Permit for Construction Site Planning, prepare the necessary planning and design work, and submit the detailed planning
and design report, together with the land use rights certificate, to the city planning authority or the town government designated
by the provincial government, and apply for the Permit for Construction Work Planning.
Construction
of a Real Estate Project
On June 25, 2014,
the MOHURD implemented the Measures for the Administration of Construction Permits for Construction Projects, which was
amended on September 28, 2018. Under the measures, after having obtained a Permit for Construction Work Planning, a developer needs
to file an application for a Construction Permit with the local construction authority above the county level.
Completion of
a Real Estate Project
Construction projects
shall be delivered for use only after passing the inspection and acceptance examinations under the Construction Law of the PRC
which was implemented on November 1, 1997 and amended on April 22, 2011.
According to the
Development Regulations, the Regulations on the Acceptance Examination Upon the Completion of Construction Work and Municipal
Infrastructure implemented on December 2, 2013 by the MOHURD, the Regulations on the Administration of Quality of Construction
Works implemented and implemented by the PRC State Council on January 30, 2000, and the Measures on the Administration of
Reporting Details regarding Acceptance Examination Upon Completion of Construction Work and Municipal Infrastructure implemented
and implemented on April 4, 2000 by the MOHURD and amended on October 19, 2009, a real estate project must comply with the relevant
laws and regulations, requirements on construction quality, safety standards and technical guidance on survey, design and construction
work, as well as provisions of the relevant construction contract. After the completion of works for a project, the developer must
apply for an acceptance examination to the construction authority and must also report details of the acceptance examination to
the construction authority. A real estate development project may only be delivered after passing the inspection and acceptance
examinations. For a housing estate or building complex, an acceptance examination shall be conducted upon completion of the entire
project. In the case of a cluster of real estate development projects, such as a residential area developed in phases, separate
acceptance examinations may be carried out for each completed phase.
Regulations
on Sale of Commodity Properties
Under the Measures
for Administration of Sale of Commodity Properties implemented by the MOHURD on April 4, 2001 and effective June 1, 2001,
the sale of commodity properties can include both pre-completion and post-completion sales.
Pre-completion
Sales
In
accordance with the Measures for the Administration of Pre-completion Sale of Urban Commodity Properties, or Urban Pre-completion
Sale Measure, implemented in November 15, 1994 by the MOHURD and amended on August 30, 2007 and on August 27, 2008, a developer
intending to sell a commodity building before its construction work’s completion must attend to the necessary pre-completion
sale registration with the real estate administration authority of the relevant city or county to obtain a Permit for Pre-completion
Sale of Commodity Properties.
Commodity properties
may only be sold before completion if:
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the grant land premium has been paid in full for the grant of the land use rights involved and
a land use rights certificate has been obtained;
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a permit for construction work planning and a construction permit have been obtained;
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the funds invested in the development of the commodity properties put up for pre-completion sale
represent 25% or more of the total investment in the project and the progress of works and the completion and delivery dates have
been ascertained; and
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the pre-completion sale has been registered and a permit for pre-completion sale of commodity properties
has been obtained.
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The Circular
on Issues Relevant to Further Strengthening the Regulation of the Real Property Market and Improving the System for Pre-sale of
Residential Premises, implemented by the MOHURD on April 13, 2010, provides that:
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for residential projects for which a pre-sale permit has not yet been obtained, real estate developers
may not pre-sell such premises, collect or collect in a disguised manner, deposits, reservation fees or other such fees from purchasers
in the form of subscriptions, reservations lot drawings or the issuance of VIP cards, or participate in any exhibition;
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where a real estate developer has obtained a pre-sale permit for its residential project, it must
publicize all premises available for sale and the prices of each unit at one time within 10 days, and must sell the premises to
the public with clearly marked prices as filed. Real estate developers may not sell the premises reserved for self-use to the public
before the initial registration of the housing ownership, pre-sell premises through a refund of the sales amount to the purchaser
or the guarantee of a lease of the property after sales, or conduct sham transactions;
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pre-sale permits can only be issued for an entire building but not for individual floors or units;
and
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all proceeds from the pre-sale of commodity residential premises must be deposited into accounts
monitored by the regulatory authorities to ensure that such proceeds are used for construction of the commodity residential premises.
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Management of
Proceeds from Pre-sales of Properties
The Pre-completion
Sale Measures also provide that the proceeds obtained by a real estate developer from the advance sale of commodity properties
must be used for the construction of the relevant projects. The specific measures for the supervision of proceeds from the pre-sale
of commodity properties are formulated by the real estate administration authorities.
Under the Implementing
Regulations on Supervision of Proceeds from Pre-sales of Commodity Properties of Jinan City, implemented by Jinan Committee
of Construction on September 26, 2005 and effective as of October 26, 2005, the proceeds from pre-sales of properties must be used
in the construction of pre-sale projects, including the purchase of construction materials and equipment, remittance of construction
fees and taxes payable, and should not be used for other purposes.
In accordance with
the Implementing Opinions on Strengthening the Management for sale of Urban Commodity Properties, implemented by the People’s
Government of Sichuan Province on March 23, 2000, the proceeds from pre-sales of properties must be deposited in a special bank
account opened by the developers, may only be used for the relevant construction work and may not be used for other purposes. The
relevant banks monitor the use of the proceeds of pre-sales and ensure that the proceeds are used in the designated way.
In accordance with
the Regulations on Supervision of Proceeds from the Pre-sales of Commodity Properties in Zhengzhou, implemented by the Zhengzhou
People’s Government on November 19, 2009 and effective as of December 20, 2009, the proceeds from the pre-sales of properties
must be used for the construction of the same, which includes the purchase of construction materials and equipment, remittance
of fees for construction and taxes payable.
The Notice on
Enhancing the Management on Use of Fund of Pre-sales of Commodity Properties of Beijing City, implemented and effective as
of December 16, 2015 provides that the real estate development enterprise may withdraw funds for construction purpose from accounts
monitored by the regulatory authorities if the sale scale confirmed by pre-sale contracts signed online is less than half of the
authorized scale of pre-sale.
Post-completion
Sales
In accordance with
the Measures for Administration of Sale of Commodity Properties implemented by the MOHURD on April 4, 2001, commodity properties
may be put up for post-completion sale only when the following preconditions for such sale have been satisfied:
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the developer offering to sell the post-completion properties has a valid business license and
a qualification classification certificate;
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the developer has obtained a land use rights certificate or other approval documents of land use;
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the developer has the relevant permit for construction project planning and the permit for construction;
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the commodity properties have been completed, inspected and accepted as qualified;
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the relocation of the original residents has been settled;
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the supplementary and essential facilities for supplying water, electricity, heating, gas, communication,
etc. have been made ready for use, and other supplementary facilities and public facilities have been made ready for use, or the
schedule of construction and delivery date of such facilities have been specified; and
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the property management plan has been completed.
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Prior to a post-completion
sale of a commodity property, a real estate developer is required to submit the Real Estate Development Project Manual and other
documents showing that the preconditions for a post-completion sale have been fulfilled to the real estate development authority.
Regulations
on Property Ownership Certificates
Under the Measures
for Administration of Sale of Commodity Properties, the developers must submit the documents relating to the application for
property ownership certificates to the local real estate administration authorities within 60 days after the delivery of the property
to customers. The developers are required to assist customers in applying for amendments in the procedures for land use rights
and registration procedures for property ownership.
In accordance with
the Pre-completion Sale Measures, the purchasers must apply for property ownership certificates to the local real estate administration
authorities within 90 days after the delivery of pre-sale property to purchasers. The developers are required to assist and provide
the purchasers with necessary verifying documents. Where the purchasers fail to obtain the property ownership certificates within
90 days thereafter due to the developer’s fault, unless otherwise provided between the developers and the purchasers, the
developers will be liable for the breach of contract.
Regulations on Transfer, Mortgage
and Lease
Transfer
According to the
Urban Real Estate Law and the Provisions on Administration of Transfer of Urban Real Estate implemented on August 7, 1995
by the MOHURD and amended on August 15, 2001, a real estate owner may sell, bequeath or otherwise legally transfer real estate
to another person or legal entity. When transferring a building, the ownership of the building and the land use rights to the site
on which the building is situated are transferred as well.
The parties to a
transfer must enter into a real estate transfer contract in writing and register the transfer with the real estate administration
authority having jurisdiction over the location of the real estate within 90 days of the execution of the transfer contract.
Where the land use
rights were originally obtained by grant, the real property may only be transferred if:
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the grant premium has been paid in full for the grant of the land use rights as provided by the
grant contract and a land use rights certificate has been obtained; and
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the development has been carried out according to the grant contract: in the case of a project
for which buildings are developed, development representing more than 25% of the total investment has been completed; in the case
of a whole land lot development project, construction works have been carried out as planned, water supply, sewerage, electricity
supply, heat supply, access roads, telecommunications and other infrastructure or utilities have been made available, and the site
has been leveled and made ready for industrial or other construction purposes.
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Mortgages of
Real Estate
Under the Urban
Real Estate Law, the Property Law, and the Measures on the Administration of Mortgage of Buildings in Urban Areas implemented
by the MOHURD in May 9, 1997 and amended on August 15, 2001, when a mortgage is created on the ownership of a building on state-owned
land legally obtained, a mortgage will be simultaneously created on the land use rights of the land on which the building is erected.
Land use rights occupied by the properties will also be mortgaged at the same time. The mortgager and the mortgagee sign a mortgage
contract in writing. Within 30 days after a real estate mortgage contract has been signed, the parties to the mortgage must register
the mortgage with the real estate administration authority in the city where the real estate is situated. A real estate mortgage
contract will become effective on the date of registration of the mortgage. If a mortgage is created on the property placed on
pre-sale or which is still undergoing construction, the registration authority will, when registering the mortgage, record such
details on the mortgage contract. If the construction of the property is completed during the term of a mortgage, the parties involved
will have to re-register the mortgage after the issuance of the relevant certificates evidencing the rights and ownership to the
real estate.
Lease
Under the Urban
Real Estate Law and the Measures for Administration of Leases of Commodity Properties implemented by the MOHURD on December
1, 2010 and effective as of February 1, 2011, the parties to a lease of a building are required to enter into a lease contract
in writing. When a lease contract is signed, amended or terminated, the parties must register the details with the real estate
administration authority in which the building is situated.
On May 17, 2016,
the PRC State Council implemented the Opinions on Accelerating to Cultivate and Develop the Housing Leasing Market, according
to which real estate developers are encouraged to engage in housing leasing business. Among others, the government intends to (i)
support real estate developers to expand their business scopes, develop housing leasing business by taking advantage of their completed
real properties; (ii) encourage real estate developers to rent the commercial housing in stock and (iii) guide real estate developers
to cooperate with the housing leasing enterprises for developing housing leasing business.
Regulations on Real Estate Financing
The Opinions
of the MOHURD and Other Departments on Adjusting the Housing Supply Structure and Stabilizing the Property Prices, issued on
May 24, 2006 by the General Office of the PRC State Council, provides that, to tighten the control of advancing loan facilities,
commercial banks are not allowed to advance their loan facilities to developers who do not have the required 35% or more of the
total capital for the construction projects. The commercial banks should be prudent in granting loan facilities and/or revolving
credit facilities in any form to the developers who have a large number of idle land parcels and unsold commodity properties. Banks
may not accept mortgages of commodity properties remaining unsold for more than three years. In terms of minimum down payment,
this Opinion provides that:
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the minimum down payment for any purchase of first self-use residential property with a unit GFA
of less than 90 square meters is 20% of the purchase price of the property; and
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the minimum down payment for any purchase of first self-use residential property with a unit GFA
of 90 square meters or more is 30% of the purchase price of the property.
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The Circular
on Strengthening the Management of Commercial Real Estate Credit Facilities, issued on September 27, 2007 by the PBOC and the
CBRC, as supplemented on December 5, 2007 reinstates the minimum down payment requirements contained in the Opinion of the MOHURD
and Other Departments on Adjusting the Housing Supply Structure and Stabilizing the Property Prices issued on May 24, 2006,
and further provides that if a family member (including the purchaser and his / her spouse and their children under 18) has financed
the purchase of a residential property with loans from banks, any member of the family that purchases another residential property
will be regarded as a second-time property purchaser.
The Circular
of the State Council on Firmly Curbing Precipitous Rise of Some Urban Housing Prices implemented on April 17, 2010 by the PRC
State Council, provides for the implementation of a stricter differentiated housing loan policy, including:
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purchasers of a first residential property for a household with a GFA of greater than 90 square
meters must make down payments of no less than 30% of the purchase price;
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purchasers of a second residential property for a household must make down payments of no less
than 50% of the purchase price and the interest rate of any mortgage for such property must equal at least the benchmark interest
rate plus 10%; and
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the minimum down payment amount and applied interest rate must be increased significantly for purchasers
of a third residential property.
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On May 26, 2010,
the MOHURD, the PBOC and the CBRC jointly issued a notice clarifying the criteria for determining a “second residential household
property.” Among other matters, the requirements on down payments and interest rates for mortgages on a second residential
property will also apply to non-local resident purchasers (i.e., purchasers who cannot provide proof that they have been making
individual income tax payments or social security payments in the relevant local area for more than one year) applying for housing-related
mortgage financing, regardless of whether there is any residential property under the name of a member of their households at the
time of application.
On
March 30, 2015, the MOF and the SAT jointly issued the Notice on Adjustment of Business Tax Policies on Individual Transfer
of House, or Circular 39, which became effective on March 31, 2015. According to Circular No. 39, individual property
owners are exempt from paying business tax on the sale of an ordinary housing if he has owned and held it for at least two years.
The Circular
on Issues Relevant to Improving the Regulation and Control of the Real Property Market implemented by the General Office of
the PRC State Council on January 26, 2011, provides that all local governments and the ministries and commissions under the PRC
State Council must comply with the following requirements:
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if an individual transfers a house within five years after purchasing it, all his or her income
from such sale will be subject to business tax;
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a household purchasing a second residential household property by mortgage financing, the down
payment must not be less than 60% of the purchase price, and the interest rate for a mortgage on such property must not be less
than 1.1 times of the benchmark interest rate;
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local governments are required to strengthen the administration of housing land supply and the
land supply for housing for low-income people and shantytown renovation. Small and medium-sized common commodity property must
not be less than 70% of the total housing land supply;
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a local resident household having one residential household property, or a non-local resident household
that is able to provide the individual income tax payment certificate or social insurance contribution certificate for a certain
number of years, may only be allowed to purchase one more residential property;
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a local resident household having two or more residential property, or a non-local resident household
having one or more residential property or is unable to provide the individual income tax payment certificate or social insurance
contribution certificate for a certain number of years, may not be allowed to purchase any residential property in the local area.
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In accordance with
the Circular of the MOHURD and the SAFE on Further Regulating the Administration of Houses Purchase by Overseas Entities and
Individuals implemented on November 4, 2010, except as otherwise provided in the law, an overseas individual may only purchase
one house unit for personal residence, and an overseas entity establishing domestic branches or representative offices may only
purchase non-residential houses in the city of registration for business purposes.
On February 20,
2013, the PRC State Council, in an executive meeting, stated that it is still a national policy to take action to curb investment
and speculation in the housing market. The PRC State Council required the local governments continue to stabilize the housing price
and restrict the speculation in the housing market. The meeting also determined that the trial regions for real property tax will
be enlarged.
On February 26,
2013, the General Office of the PRC State Council announced the Circular on Continuing to Improve the Regulation and Control
of the Real Estate Market, which among others, provides the following requirements:
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all municipalities directly under the central government, municipalities with independent planning
status, and provincial capital cities (excluding Lhasa) must promulgate their own plans and targets for price controls on newly
constructed commodity properties (excluding low-cost housing projects) in 2013 based on the principle of stabilizing the current
market price. Such plans and targets must be published within the first quarter of 2013;
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limitations on the purchase of commodity properties must be strictly implemented, and the scope
of such limitations must cover all newly constructed commodity properties and second-hand properties located within the entire
administrative area of the city in question;
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non-local resident families that already hold a property and non-local resident families that cannot
prove their local payment of tax and/or social insurance for a required period of time shall be suspended from purchasing any property
within the local administrative area;
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for those cities with excessive growth in housing prices, the local counterparts of the PBOC may
further increase down payment ratios and interest rates for loans to purchase second properties in accordance with the price control
policies and targets of the corresponding local governments;
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the gains generated from the sale of a self-owned property shall be subject to individual income
tax at a rate of 20%, if the original value of such property can be verified through historical information such as tax filings
and property registration.
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On September 29,
2014, PBOC and CBRC issued the Circular of PBOC and CBRC on Further Improving Financial Services for Housing, among other
incentive policies, which specifies that the minimum down payment is 30% of the purchase price for purchasers of a first residential
property for their households, and the minimum loan interest rate is 70% of the benchmark rate, to be decided by banking financial
institutions in light of risk conditions. For purchasers of a second residential property for their households who have paid off
the loan that financed their first house and reapply for a loan to finance an ordinary commodity house for the purpose of improving
their living conditions, the loan policies for a first house will apply.
On October 9, 2014,
the MOHURD, the MOF, and the PBOC jointly issued the Circular of MOHURD, MOF and PBOC on Developing the Business of Individual
Housing Loan through Housing Fund, which specifies that employees who make their payment of housing fund for consecutive 6
months may apply for individual housing loans through the housing fund and local authorities may raise the amount that a person
can apply for under certain conditions.
In light of the
weakening in the property market in China, on March 30, 2015, the PBOC, the MOHURD and the CBRC jointly issued the Circular
on Issues concerning Individual Residential Mortgage Policies in an effort to stimulate the market. The circular reduces the
minimum down payment ratios from 30% to 20% for first home buyers who use the housing provident fund for their purchase and from
60% to 40% for second home buyers with outstanding mortgages who apply for another mortgage. In addition, the circular provides
that home buyers who use the housing provident fund for their home purchase are only required to pay a minimum down payment of
30% for their purchase of a second house if all loans are settled on their first home.
On August 27, 2015,
the MOHURD, the MOF and the PBOC jointly issued the Circular on Adjusting the Minimum Down Payment for the Purchase of Houses
by Individuals on the Housing Provident Fund Loans. The circular provides that home buyers who use the housing provident fund
for their home purchase are only required to pay a minimum down payment of 20% for their purchase of a second house if all loans
are settled on their first home.
On September 24,
2015, the PBOC and the CBRC jointly issued the Circular on Issues Concerning Further Improving Differentiated Housing Loan Policies,
which provided that in the cities without restrictive measures for house purchase, the minimum down payment ratio shall be 25%
or higher for the first home buyers who use the commercial individual housing loans.
On September 29,
2015, the MOHURD, the MOF and the PBOC jointly issued the Notice on further improving the Usage Efficiency of Housing Provident
Fund, according to which, in the case of any cities with sub-districts avail the housing provident fund with an efficiency
index less than 85%, the cities shall increase the housing provident fund loans based on the housing price, loan needs and repayment
capacities. The term of the indebtedness can be extended to 5 years after one’s retirement but is limited to 30 years.
On
February 1, 2016, the PBOC and the CBRC jointly issued Circular of the People’s Bank of China and the China Banking Regulatory
Commission on Issues Concerning Adjusting the Individual Housing Loan Policies. It provides that in the cities without restrictive
measures for house purchase, the minimum down payment ratio, in principal, shall be 25% for the first home buyers who use the commercial
individual housing loans common, and the said percentage may be lowered by 5% in different regions; with respect to second home
buyers with unsettled house purchase loans who purchase for improving living conditions and use commercial individual housing loans,
the minimum down payment ratio shall be at least 30%.
On February 17,
2016, the MOF, the SAT and the MOHURD jointly issued Circular on Adjusting Deed Tax and Business Tax Policies for Real Estate
Transactions. Regarding deed tax, it provides that for first home buyers purchasing the only residence for their families (family
members include the buyer, the buyer’s spouse and under-age children, as applicable hereinafter) with an area of 90 square
meters or less, the deed tax is reduced to 1%; for a residence with an area of more than 90 square meters, the deed tax is reduced
to 1.5%. For second home buyers purchasing a second residence with an area of 90 square meters or less, the deed tax is reduced
to 1%; for residences with an area of more than 90 square meters, the deed tax is reduced to 2%. Regarding business tax, it provides
that for any individual who sells his/her ordinary housing that is purchased and owned less than two years, full business tax is
levied; for an individual who sells his/her ordinary housing purchased and owned not less than two years ago, the business tax
is exempted. However, the circular specifies that the policies regarding deed tax and business tax shall not apply to Beijing,
Shanghai, Guangzhou and Shenzhen, where the business tax for transfer of residences by individuals as stipulated in the Circular
of the Ministry of Finance, and the State Administration of Taxation on Adjusting Business Tax Policies for Transfer of Residences
by Individuals still apply. Furthermore, the MOF and the SAT jointly implemented the Circular on Issues concerning the Taxation
Basis for Deed Tax, House Property Tax, Land Value-added Tax and Individual Income Tax after the Pilot Collection of Value-Added
Tax in Lieu of Business Tax on April 25, 2016 which deducts VAT from the taxation basis of Deed Tax, House Property Tax, Land
Value-added Tax and Individual Income Tax.
Regulations on Housing Prices and
Real Estate Tax
On January 7, 2010,
the general office of the PRC State Council issued the Circular of the General Office of the State Council on Accelerating the
Stable and Smooth Development of Real Estate Market to all ministries and provincial-level local governments to control the
rapid increase in housing prices and cool down the real estate market in China. The circular reiterated that the purchasers of
a second residential property for their households must make down payments of not less than 40% of the purchase price and the real
estate developers must commence the sale within the mandated period as set forth in the pre-sale approvals and at the publicly
announced prices. Further, in order to implement the requirements set out in the PRC State Council’s circular, the MLR, issued
a notice on March 8, 2010 in relation to increasing the supply of, and strengthening the supervision over, land for real estate
development purposes. The MLR’s notice stipulated that the floor price of a parcel of land must not be lower than 70% of
the benchmark land price set for the area in which the parcel is located, and that real estate developers participating in land
auctions must pay a deposit equivalent to 20% of the land parcel’s floor price.
On March 16, 2011,
the NDRC, issued the Provisions on Selling Real Estate at Expressly Marked Prices, which was implemented on May 1, 2011
to regulate price manipulation and arbitrary price increases by, among other things, requiring developers to re-register with the
appropriate government department before increasing real estate prices. PRC government agencies have also implemented several other
regulations in a continuous bid to promote the construction of public housing, especially rental housing projects. The urban public
rental housing policy is targeted at low to middle income families, new employees without housing and migrants with stable employment
in urban areas. Several policies, such as increasing financial aid from central finance agencies and local governments, improving
project planning and establishing a sound regulatory mechanism, have been implemented to ensure the successful promotion of affordable
housing projects.
In addition to the
notice above, local government authorities of several municipalities and cities such as Beijing, Zhengzhou, Jinan, Chengdu and
Hefei have successively implemented more detailed regulations to restrict residents who have not resided in the local area for
a certain period of time (ranging from 1 year to 5 years, evidenced by their individual income tax payment track records) from
purchasing residential property in that area.
On
February 15, 2012, the MLR issued the Circular on Issues Relevant to the Regulation and Control of the Real Property Market
in 2012, which provides that governments must strictly maintain the current range of restrictions on the real estate market.
On April 17, 2014,
the General office of the PRC State Council issued a notice that, among other things, specifically emphasizes the importance of
adopting real estate tax. On November 24, 2014, the Provisional Regulations on Registration of Real Estate was implemented
by PRC State Council and became effective on March 1, 2015. It provides that PRC has established a nationwide property registration
system to provide a uniform platform through which ownership information of every registered property can be shared in real-time
among different regions in China. If the PRC government promulgates regulations of real estate tax in the future, it may adversely
affect the real estate market in China.
On March 7, 2016,
during the National People’s Congress and the Chinese Political Consultative Conference, the All-China Federation of Industry
and Commerce made a proposal concerning propelling relief of real estate inventory. The proposal includes suggestions such as introducing
real estate trusts, using individual income tax to charge against interest of housing loans.
Regulations on Housing Supply and
Improving the Healthy Development of the Real Estate Market
The Opinion of
the MOHURD and Other Departments on Adjusting the Housing Supply Structure and Stabilizing Property Prices, implemented on
March 25, 2015, provides the following:
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commercial banks may not grant loans to any developer whose total investment capital contributed
is less than 35% and may not accept any premises that have been left vacant for more than three years as security;
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land that has been left idle for two years or more will be repossessed by the government without
any compensation payment to the developer. Also, land will be treated as being left idle if construction has been halted for more
than one year and the total area developed is less than one-third of the whole project area or the capital invested is less than
a quarter of the total investment;
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there will be no supply of land for villas and other equivalent real estate development projects,
while land allocation for low-density, large housing developments will remain tight; and
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no planning permit, construction permit or premises pre-sale permit is to be issued for projects
that do not comply with the abovementioned requirements, in particular composite structure projects that exceed planning requirements.
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The Circular
on Increasing the Supply of, and Strengthening the Supervision over, Land for Real Estate Development Purposes issued on March
8, 2010 by the MLR, provides that:
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the floor price of a parcel of land must not be lower than 70% of the benchmark land price set
for the area in which the parcel is located;
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real estate developers participating in land auctions must pay a deposit equivalent to 20% of the
land parcel’s floor price; and
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real estate developers must report to the competent land authorities when they commence and complete
the construction of each project, and the land authorities will conduct inspections according to the corresponding land grant contract.
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This circular also
reiterated the policy that the initial installment payment made by real estate developers for a parcel of land must not be less
than 50% of the overall amount owed for the land use rights.
Regulations on Environmental Protection
in Construction Projects
Under the Regulations
on the Administration of Environmental Protection in Construction Project, or Environmental Regulations, implemented by the
PRC State Council on November 29, 1998 and amended on July 16, 2017 and effective as of October 1, 2017, each construction project
is subject to an environmental impact assessment by the relevant authorities.
According to the
Environmental Regulations, a developer is required to submit an environmental impact report, or an environmental impact report
form, or an environmental impact registration form (as the case may be) to the relevant environmental protection administration
for approval during the project’s feasibility analysis stage. In the meantime, if any ancillary environmental protection
facilities are necessary in the construction project, such facilities are required to be designed, constructed and used in conjunction
with the main project. After completion of the project, the developers are required to apply to the relevant environmental protection
administrations for final acceptance examination in respect of any ancillary environmental protection facilities. Construction
projects are approved for use after passing the said acceptance examination.
The Environmental
Impact Assessment Law, implemented by the National People’s Congress on October 28, 2002 and effective as of September
1, 2003 and amended on July 2, 2016, provides that if the environmental impact assessment documents of a construction project have
not been examined by the relevant environmental protection administrations or are not approved after examination, the authority
in charge of examination and approval of the project may not approve construction on the project, and the construction work unit
may not commence work.
According to the
Fire Prevention Law of the People’s Republic of China
promulgated by the SCNPC on April 29, 1998 and implemented on September 1, 1998, later amended on October 28, 2008 and implemented
on May 1, 2009, and latest amended and implemented on April 23, 2019, fire prevention facilities design and works for construction
projects shall conform to state’s fire prevention technical standards for engineering construction. Provisions on Supervision
and Administration of Fire Prevention of Construction Projects promulgated by the Ministry of Public Security of the People’s
Republic of China on April 30, 2009, implemented on May 1, 2009 and later amended on July 17, 2012 and implemented on November
1, 2012 shall apply to the fire prevention supervision and administration of new construction, expansion, reconstruction (including
indoor and outdoor improvement, thermal insulation in buildings and modification of uses) and other construction projects. This
provision also specify the procedure and standard for review of fire facilities design and acceptance of fire prevention facilities.
Regulations on Civil Air Defense Property
Pursuant to the National Defense Law
of the PRC promulgated by the NPC on March 14, 1997 and amended by SCNPC on August 27,2009, national defense assets are owned
by the State. Pursuant to the Civil Air Defense Law of the PRC promulgated by the SCNPC on October 29, 1996 and amended
on August 27, 2009, State supports and encourages the enterprises in kinds of way to invest in the construction of civil air defense
property. The civil air defense property is used and managed at ordinary time by its investor who derives profits therefrom. The
design, construction and quality of the civil air defense property must conform to the protection and quality standards established
by the State. The use of civil air defense property at ordinary time shall not impair its function of air defense. Pursuant to
the Interim Measures for Quality Supervision and Management of Civil Air Defense Property promulgated by the National Civil
Air Defense Office on February 13, 2001, the construction of the civil air defense property shall be subject to the supervision
of the relevant quality supervision department of civil air defense.
Regulations on Property Management
The Property
Management Rules, amended by the PRC State Council on August 26, 2007 and effective as of October 1, 2007 and amended on February
6, 2016, provide that property owners have the right to appoint and dismiss property service enterprises (formerly known as property
management enterprises). The rules also establish a regulatory system for property service enterprises, which encompasses the following
regulations:
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the Measures for the Administration of Qualifications of Property Service Enterprises (formerly
known as the Measures for the Administration of Qualifications of Property Management Enterprises) amended by the MOHURD and effective
as of November 26, 2007, amended on May 4, 2015 and January 21, 2017, provide that property service enterprises must apply to the
local branch of the MOHURD and undertake a qualification examination to obtain a Property Service Qualification Certificate. A
property service enterprise must pass the Property Service Qualification (formerly known as the Property Management Qualification),
or PSQ examination, in order to engage in property management. Property service enterprises are classified as class I, II or III.
Different classes of service enterprises have different establishment requirements and may manage different types of premises.
However, the Measures for the Administration of Qualifications of Property Service Enterprises expired on March 8, 2018, the qualifications
of property service enterprises are cancelled and no administrative approval is required for operating property service.
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the Measures on the Administration of Bid Soliciting and Bidding Concerning Preliminary Property
Management, implemented on June 26, 2003 by the MOHURD, provide that prior to the selection of the Property Owners’ Committee,
or the POC, the property developer will select a property management enterprise to provide property management services.
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the NDRC and the MOHURD jointly implemented the Measures on the Administration of Property Management
Service Fees on November 13, 2003, which provide that property management fees will be determined by mutual consent between the
POC and the property management enterprise, and set forth in writing in the property management service contract.
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Xinyuan Science
and Technology Service Co., Ltd. is a class I property management company.
Regulations on Urban Landscaping Services
The Regulations
Regarding Urban Landscape implemented on June 22, 1992, amended on January 8, 2011 and March 1, 2017 by the PRC State Council
and the Measures on the Administration of Qualifications of Urban Landscaping Enterprises (“Urban Landscaping Measures”)
implemented on July 4, 1995, as amended on October 9, 2009, provide the following:
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any enterprise that wishes to provide landscaping services must apply to the MOHURD’s local
branch for an urban landscaping qualification, or ULQ certificate; and
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if a landscaping enterprise wishes to provide landscaping service outside the province where it
is registered, it must establish branches in such locales and submit its original ULQ certificate for filing with the MOHURD’s
respective local branch.
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While
the Urban Landscaping Measures were abolished on February 18, 2016, the requirements are still being implemented by the MOHURD
and its local branches in practice.
United States
Our operations in
the United States will be subject to extensive regulations imposed and enforced by various federal, state, and local governing
authorities. These regulations are complex and include building codes, land zoning and other entitlement restrictions, health and
safety regulations, labor practices, marketing and sales practices, environmental regulations, and various other laws, rules, and
regulations. Collectively, these regulations have a significant impact on the site selection and development of our properties,
our design and construction techniques, our relationships with customers, employees, and suppliers, subcontractors, and many other
aspects of our business.
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Organizational Structure
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Xinyuan is a holding
company established in the Cayman Islands that operates its business and operations through its subsidiaries. For its operations
in each of the PRC and the United States, the Group has a local holding company which owns the operating entities. The Group establishes
a separate entity for each development project. In addition, the Group has various subsidiaries which have been created for use
in various future ventures, and subsidiaries which provide real estate and property management related technology services. Please
refer to Exhibit 8.1 to this Annual Report on Form 20-F for a listing of the Company’s subsidiaries, including country
of incorporation. Please refer to Note 1 of our audited consolidated financial statements for the ownership percentages of the
Group’s principal subsidiaries.
Effective
October 11, 2019, Xinyuan's property management service ("Xinyuan Service"), entity was listed on the Hong Kong Stock
Exchange under code ‘01895’, with 25% of the outstanding shares issued to new investors, following an internal reorganizaton
pursuant to which Xinyuan Service became a subsidiary of Xinyuan Real Estate, Ltd. The initial public offering price for each
share was HK$2.08, resulting in an initial market valuation of HK$1.04 billion. Xinyuan Real Estate, Ltd. will remain the largest
shareholder with 60% of total shares held, and Xinyuan Service will still be consolidated on Xinyuan’sfinancial statements.
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Property, plant and equipment
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Our headquarters
and some of our subsidiaries are located in Beijing, China, where we lease approximately 8,338 square meters of office space. We
also lease a total of approximately 14,063 square meters of office space in other cities where our subsidiaries are located, which
includes approximately 1,383 square meters in Jinan, Shandong Province, 1,966 square meters in Suzhou, Jiangsu Province, 1,136
square meters in Kunshan, Jiangsu Province, 276 square meters in Xuzhou, Jiangsu Province, 4,611 square meters in Zhengzhou, Henan
Province, Shaanxi Province, 2,751 square meters in Changsha and 943 square meters in Wuhan, Hunan Province, 517 square meters in
Chengdu, Sichuan Province, 367 square meters in New York and 115 square meters in Malaysia.
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ITEM 4A.
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UNRESOLVED STAFF COMMENTS
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None.
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ITEM 5.
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OPERATING AND FINANCIAL REVIEW AND PROSPECTS
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You should read
the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated
financial statements and the related notes included elsewhere in this annual report on Form 20-F. This discussion may contain forward-looking
statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from
those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Item
3. Key Information — D. Risk Factors” or in other parts of this annual report on Form 20-F.
In accordance with
Instruction 6 to Item 5, information with respect to the fiscal year 2017 has been omitted from this Item 5. Such information has
previously been reported and is available in Item 5 of the Company's Annual Report on Form 20-F for the fiscal year ended December
31, 2018.
Overview
Since our inception in 1997, we have
completed 60 projects with total GFA of 9,068,623 square meters. As of December 31, 2019, we had 40 projects in 17 cities in China
and the United States with estimated total GFA of 7,242,225 square meters under construction and planning, of which 28 projects
with estimated total GFA of 4,041,106 square meters were under construction. As of December 31, 2018, we had 42 projects in 14
cities in China and the United States with estimated total GFA of 7,541,823 square meters under construction and planning, of which
29 projects with estimated total GFA of 4,480,111 square meters were under construction . In addition, we had 1 project
in London, United Kingdom with estimated total GFA of 29,767 square meters under construction.
Our total revenue,
derived primarily from sales of residential real estate, was US$2,217.6 million in 2018 and US$2,482.6 million in 2019. Our net
income was US$106.0 million and US$83.0 million, respectively, for the same periods. We acquire land in China primarily through
auctions of government land and acquisition of landowning entities. These acquisition methods allow us to obtain unoccupied land
with unencumbered land use rights, which in turn enables us to save the time and expenses associated with protracted legal processes
to obtain title, demolition and re-settlement and to commence construction quickly.
The most significant
factors that directly or indirectly affect our financial performance and results of operations are:
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Economic growth and demand for residential property in China and, since 2012, in the United States;
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PRC government policies and regulations, including tax guidelines and lending policies for the
real estate sector;
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Location, number and type of our property developments;
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Availability and cost of financing;
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Acquisition of quality land use rights or title to quality properties in our target markets;
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Changes in the price of raw materials and labor costs; and
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Our execution capability to support business expansion.
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Principal Factors Affecting Our
Results of Operations
Economic growth and demand for residential
property in China and since 2012, in the United States
Our business and
results of operations are significantly affected by trends and developments in the PRC economy, including disposable income levels,
urbanization rate, population growth, and availability of project and consumer financing, which affect demand for residential properties
in China. During the past decade, China has experienced significant economic growth, which has created a favorable operating environment
for us in the cities where we operate. As of December 31, 2019, 97.2% of the units in our completed projects have been sold. We
have periodically experienced some volatilities in demand due to the strict mortgage policy and other measures taken by the PRC
government to slow down the rapid increase in housing prices, such as the Circular on Continuing to Improve the Regulation and
Control of the Real Estate Market announced by the General Office of the PRC State Council in February 2013 which, among others,
requires an individual income tax at a rate of 20% on gains generated from the sale of a self-owned property (See “Item 4.
Information on the Company — B. Business Overview — Regulation — China — Regulations on Real Estate Financing”).
However, we expect continuing economic growth in China, rising disposable income levels and population growth in our target cities
to support demand for residential properties over the next several years. If we continue to expand our business operations in the
United States, trends and development in the U.S. economy, including developments in the United States housing markets, will become
increasing important to our business and results of operations.
PRC government
policies and regulations
Our
business and results of operations are significantly affected by PRC government policies and regulations, particularly those that
relate to land sales and development, project and consumer financing, property sales and transfers, property taxation and residential
property prices.
We believe that
it is in the PRC government’s interest to stabilize the market and to encourage the urbanization process and that increases
of disposable income will continue to support the long-term growth of China’s real estate market. Accordingly, we expect
that the government will maintain policies that will foster long-term healthy growth and curb potential bubbles in the market.
However, we cannot assure that the PRC government will not adopt further measures in the future that may adversely affect our business
and financial performance or that a real estate bubble will not develop despite government efforts to discourage such development.
Moreover, a substantial
portion of our customers depend on mortgage financing to purchase our properties. Although government policies have generally fostered
the growth of private home ownership, regulations have been adopted in recent years to tighten and then loosen mortgage lending
rules.
Such policies relate
to, among other matters, down payment requirements and ratios, minimum loan interest rates ad amount or percentage or mortgage
financing.
The down payment
ratio, the loan interest rate and the size of mortgage financing are important factors that affect our results of operations, and
we cannot guarantee that our operations will not be adversely affected by future government policies.
The PRC government
will also from time to time introduce sales tax incentives or disincentives to either stimulate or dampen demand. For example,
the required holding period for avoidance of business tax on capital gains on sale of real estate was recently reduced from five
years to two years with the promulgation of Circular 39 on March 30, 2015 in an effort to stimulate the weakening property market
in China.
Location, number and type of our property
developments
The
amount of revenue we record in any given period is affected by a number of factors, including the number, type and location of
properties we have under construction and their stage of completion, whether the completed units have been sold and the realized
selling prices for such units. The average selling prices of our projects vary depending on the types and sizes of the units sold
and on the location of the projects. As the overall development moves closer to completion, the sales prices tend to increase
because a more established residential community is offered to purchasers. The type of property development affects the estimated
construction period of the project, which largely determines the revenue recognition method we apply. Revenue recognized in any
period at a point in time depends on the number, aggregate GFA and average selling prices of units completed and sold during the
period. Revenue recognized in any period on an over time basis depends on contracted sales of units in the relevant project and
the completion progress of a project (measured by the ratio of cost incurred to total estimated cost). As the completion and sales
of our projects are not spread evenly over time, our results of operations may differ significantly from period to period.
Availability and cost of financing
Like other property
developers, we require substantial capital investment for the acquisition of land use rights and the construction of our projects.
Our ability to secure financing for such purposes affects the number of projects we are able to develop at any time. Over the past
ten years, the PBCO has alternatively tightened or loosened the credit supply by increasing or decreasing the reserve requirement
ratios of commercial banks and financial institutions. Any future increases in the reserve requirement ratio will reduce the amount
of commercial bank credit available to businesses in China and may affect our ability to obtain sufficient funding from banks to
finance our business expansion. The cost of our financing also affects our operating results. We typically obtain bank borrowings
for up to 65% of the cost of our land use rights to fund PRC project developments after we receive the required permits. Interest
rates on our commercial bank borrowings vary and are linked to benchmark lending rates published by the PBOC, which fluctuate from
time to time.
In
addition to bank debt, we obtain financing through the issuance of debt securities and through onshore corporate bonds issued
by our subsidiary, Xinyuan China. As of December 31, 2019, we had outstanding US$978.1 million aggregate principal amount of Senior
Secured Notes with interest rates ranging from 7.75% to 14.2%. Also as of December 31, 2019, Xinyuan China had outstanding US$98.9
million in corporate bonds. For more detailed discussion of the bank borrowing and debt securities, see Item 5. Operating and
Financial Review and Prospects - B. Liquidity and Capital Resources.
Acquisition
of land use rights or title to properties in target markets
Our business model
depends to a large extent on our ability to acquire land use rights for development sites and proceed quickly with construction
to shorten our development cycle. As a consequence, we are frequently surveying the market for attractive development opportunities
in our target cities. Under current regulations and market practice, land use rights for residential development purposes in China
may be acquired from local governments through a competitive auction or other bidding process, in which the minimum reserve price
is determined based on the appraised value. Land use rights may also be acquired in the secondary markets. We also utilize a negotiated
land acquisition model, which involves deposits on certain lands that we are most interested in acquiring, which we believe will
improve our chances of successfully acquiring desired land.
Government land
auctions are a transparent and competitive process for bringing development land to market, allowing the developer to acquire clean
title and the ability to proceed immediately with development. However, as competition for development sites increases, the auction
mechanism tends to lead to higher prices. In 2018 and 2019, land use rights costs, including auction price and taxes, constituted
42.2% and 45.7% respectively, of our costs of revenue. During 2019, we incurred an aggregate of US$177.5 million for land acquisitions
in China, including deposits for potential acquisitions under the negotiated land acquisition model.
We acquire our developments
sites or land held for sale in the United States generally through off-market transactions, including resales and distressed sales.
During 2019, we did not purchase any new property in the United States.
On March 21, 2018,
we acquired from ED Group, a 50% equity stake in MDL, the developer of the Madison Project, via our wholly-owned subsidiary Xinyuan
International (HK) Property Investment Co., Limited for a total consideration of US$19.1 million.
Increases in the price of raw materials
and labor costs
We outsource the
design and construction of our property developments to third-party service providers. Our third-party contractors are responsible
for providing labor and procuring a majority of the raw materials used in our project developments. Our construction contracts
typically provide for flexible payments, subject to changes in certain cases, such as design changes during construction, changes
in government-suggested steel prices, cement prices, as well as labor costs. Any increase in labor costs or other costs which may
result in adjustments in payments under our construction contracts could result in an increase in our construction costs. In addition,
the increase in the price of raw materials, such as cement, concrete blocks and bricks, in the long run could be passed on to us
by our contractors, which could increase our construction costs. Any input cost increase could reduce our earnings to the extent
we are unable to pass these increased costs to our customers.
Our execution capability to support
business expansion
Since 2006, we have
been expanding our residential property development operations from Zhengzhou in Henan Province into other high growth cities,
we plan to expand into additional high growth cities as suitable opportunities arise. The development of real estate projects across
additional high growth cities will impose significant demand on our management and other operational resources. Moreover, we will
face increased competition and will need to establish brand recognition and market acceptance for our developments in these new
markets. Each of our targeted high growth cities has its own market conditions, customer requirements and local regulations related
to the real estate industry. In addition, while our primary focus continues to be residential real estate markets in the high growth
cities in China, we have expanded into the U.S. market. Our expansion in the U.S. market, which is significantly different from
China in terms of market conditions, regulatory compliance requirement and customers, imposes significant demands on our management
and other operational resources. In 2014, we acquired 100% of the shares of a Malaysian company, which owns offshore land fill
development rights for a total area of 170 acres (approximately 687,966 square meters). On March 21, 2018, we acquired from ED
Group, a 50% equity stake in MDL, the developer of the Madison Project, via our wholly-owned subsidiary Xinyuan International (HK)
Property Investment Co., Limited for a total consideration of US$19.1 million. We have no development experience in Malaysia and
England, nor have we ever engaged in landfill reclamation projects. Such expansion also imposes significant demands on our capital
and management resources to develop and generate future revenues from projects. The success of our business expansion depends on
our ability to develop, market and deliver quality development projects on time. In addition, the progress and costs of a development
project can be adversely affected by many factors, such as delays in obtaining necessary licenses, permits or approvals from relevant
government authorities, failure by local contractors to comply with our designs, specifications or standards, and disputes with
our third-party contractors. As we are not permitted to commence pre-sales in China until we have reached certain milestones in
the construction progress for a project, any significant delay in construction could restrict our ability to pre-sell our properties,
which could extend the recovery period for our investments. This, in turn, could have an adverse effect on our cash flow, investment
returns, results of operations and financial position.
Operating Results
Revenues
We derive our revenues
mainly from the development and sale of real estate. In addition, we generate a small percentage of revenue from leasing ancillary
facilities and residential units in certain of our residential developments, as well as from the provision of related services,
including property management and real estate related services that we provide to residents and purchasers of our residential units.
|
|
2018
|
|
|
2019
|
|
|
|
US$
|
|
|
%
|
|
|
US$
|
|
|
%
|
|
|
|
(in thousands, except for percentages)
|
|
Real estate sales
|
|
|
2,139,371
|
|
|
|
96.5
|
|
|
|
2,387,032
|
|
|
|
96.1
|
|
Real estate leasing
|
|
|
9,585
|
|
|
|
0.4
|
|
|
|
16,129
|
|
|
|
0.7
|
|
Real estate management services income
|
|
|
63,447
|
|
|
|
2.9
|
|
|
|
67,488
|
|
|
|
2.7
|
|
Other revenue
|
|
|
5,148
|
|
|
|
0.2
|
|
|
|
11,984
|
|
|
|
0.5
|
|
Total revenue
|
|
|
2,217,551
|
|
|
|
100.0
|
|
|
|
2,482,633
|
|
|
|
100.0
|
|
The impact of foreign
exchange rate variances on reported revenues in U.S. dollars was an adverse 4.3 % for the year ended December 31, 2019, compared
to a favorable 2.1% for the year ended December 31, 2018. These variances were due to the fact that the appreciation of the RMB
versus the U.S. dollar during 2019 was heightened as compared to 2018.
Real estate sales
Real
estate sales represent revenues from the sales of residential properties we develop and acquire. Throughout this annual report,
real estate sales are stated net of sales tax levied on the relevant contracted sales value. Sales tax is a one-time tariff which
consists of a business tax at the rate of 5%, an urban construction tax at the rate of 0.35% and an education surcharge at the
rate of 0.15%. Total sales tax amounted to US$21.4 million, and US$2.8 million for 2018 and 2019, respectively. Beginning May
1, 2016, a value added tax instead of the business tax was levied on the relevant contracted sales value at the rate of 5 % or
11%. Beginning May 1, 2018, the rates of value added tax was levied on the relevant contracted sales value at the rate of 5% or
10%. Beginning May 1, 2019, the rates of value added tax was levied on the relevant contracted sales value at the rate of 5% or
9%.
On January 1, 2018,
the Company adopted ASC 606: Revenue from Contracts with Customers (“ASC 606”) issued by the Financial Accounting Standards
Board. The Company adopted the guidance using the modified retrospective approach for the year ended December 31, 2019. Under the
new revenue recognition standards, revenue from domestic real estate sales under the previous contract terms, which used to be
recognized over time under the percentage of completion method (“POC”), was not recognized until title is transferred
when the Company does not have the enforceable right to payment, therefore, the revenue, cost and retained earnings decreased;
on the other hand, the balance of real estate properties under development and customer deposits increased. For the year ended
December 31, 2018 and 2019, all the revenues related to projects in the U.S. were recognized until title is transferred.
Real estate leasing
Real estate leasing
revenues represent the income from the rental of ancillary facilities, including a retail property, parking facilities, kindergartens,
elementary schools, and clubhouses in a number of our developments.
Real estate management
service
Real estate management
services income is recognized ratably as services are provided over the term of the property management agreements.
Other revenue
Other revenue consists
primarily of fees received for our property management services, landscaping and computer network engineering and other real estate-related
services that we provide to residents and purchasers of our residential units.
Costs of revenues
The following table
sets forth a breakdown of our costs of revenues for the period indicated:
|
|
2018
|
|
|
2019
|
|
|
|
US$
|
|
|
%
|
|
|
US$
|
|
|
%
|
|
|
|
(in thousands, except for percentages)
|
|
Cost of real estate sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land use rights costs
|
|
|
676,284
|
|
|
|
42.2
|
|
|
|
877,582
|
|
|
|
45.7
|
|
Construction costs
|
|
|
860,689
|
|
|
|
54.1
|
|
|
|
974,237
|
|
|
|
50.7
|
|
Total cost of real estate sales
|
|
|
1,543,973
|
|
|
|
96.3
|
|
|
|
1,851,819
|
|
|
|
96.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of real estate leasing
|
|
|
9,349
|
|
|
|
0.6
|
|
|
|
12,757
|
|
|
|
0.7
|
|
Cost of real estate management services
|
|
|
44,620
|
|
|
|
2.8
|
|
|
|
40,889
|
|
|
|
2.1
|
|
Other costs
|
|
|
4,131
|
|
|
|
0.3
|
|
|
|
16,858
|
|
|
|
0.8
|
|
Total Costs of revenues
|
|
|
1,602,073
|
|
|
|
100.0
|
|
|
|
1,922,323
|
|
|
|
100.0
|
|
Cost of real
estate sales
Cost of real estate
sales consist primarily of land use rights costs and construction costs. Impairment charges, if any, are also recorded under cost
of real estate sales. Cost of real estate sales are capitalized and allocated to development projects using the specific identification
method. When the full accrual method of revenue recognition is applied, cost of sales is recognized by determining the ratio of
the area of the relevant units completed and sold to the estimated total project area, and applying that ratio to the estimated
total project costs. When the over time basis of revenue recognition is applied, capitalized costs are released to our statement
of comprehensive income based on the completion progress of a project.
Land use rights
cost. Land use rights costs include the amount we pay to acquire land use rights for our property development sites in China,
plus taxes, and the amount we pay to acquire land for our property development in the United States, plus taxes. We acquire our
development sites in the PRC mainly by auctions of government land, direct negotiation and acquisition of land-owning entities.
We acquired our development sites or land held for sale in the United States generally through off-market transactions, including
resale and distressed sales. Our land use rights costs for different projects vary according to the size and location of the site
and the minimum reserve price for the site, all of which are influenced by government policies, as well as prevailing market conditions.
Our land use rights costs have increased in the past few years due to several factors including geographic expansion into certain
higher priced markets, generally rising prices in each of our served markets, and increased competition from a growing number of
bidders at government land auctions.
Construction
costs. We outsource the construction of all of our projects to third party contractors, whom we select through a competitive
tender process. Our construction contracts provide for flexible payments which cover substantially most of all labor, materials,
fittings and equipment costs, subject to adjustments for certain prescribed contingencies, such as design changes during the construction
process or changes in government-suggested steel prices or cement prices. Our construction costs consist primarily of the payments
to our third-party contractors, which are paid over the construction period based on specified milestones. In addition, we directly
purchase and supply a limited range of fittings and equipment, including elevators, window frames and door frames. Our construction
costs also include capitalized interest costs in the amount of US$135.3 million, and US$125.3 million for 2018 and 2019, respectively.
Future losses
and impairment charges. When the profitability of a current project deteriorates due to a slowdown in the sales pace, reduction
of pricing or some other factor, this indicates that there may be a possible future loss on delivery and possible impairment in
the recoverability of the assets. Accordingly, the assets of such project are subsequently reviewed for future losses and impairment
by comparing the estimated future undiscounted cash flows for the project to the carrying value of such project. If the estimated
future undiscounted cash flows are less than the asset’s carrying value, such deficit will be charged as a future loss and
the asset will then be written down to its estimated fair value.
We determine estimated
fair value primarily by discounting the estimated future cash flows relating to the asset. In estimating the cash flows for a project,
we use various factors including (a) the expected pace at which the planned number of units will be sold, based on competitive
market conditions, historical trends in sales pace and actual average selling prices of similar product offerings and any other
long or short-term economic conditions which may impact the market in which the project is located; (b) the estimated net sales
prices expected to be attained based on the current market conditions and historical price trends, as well as any estimated increases
in future sales prices based upon the projected rate of unit sales, the estimated time gap between presale and expected delivery,
the impact of government policies, the local and regional competitive environment, and certain external factors such as the opening
of a subway line, school or factory; and (c) the expected costs to be incurred in the future by us, including, but not limited
to, construction cost, construction overhead, sales and marketing, sales taxes and interest costs.
Our determination
of fair value requires discounting the estimated cash flows at a rate commensurate with the inherent risk associated with the assets
and related estimated cash flows. The discount rate used in determining each project’s fair value depends on the stage of
development, location and other specific factors that increase or decrease the risk associated with the estimated cash flows. In
accordance with our accounting policies, we consider on a quarterly basis whether indicators of impairment of long-lived assets
are present. See also “Item 5. Operating and Financial Review and Prospects — A. Operating Results — Critical
Accounting Policies — Real estate properties development completed and under development” for our policy on impairment
of long-lived assets.
For the years ended
December 31, 2018 and 2019 we did not recognize any impairment for our active projects, consisting of projects under construction
or planning or completed or held for lease.
Cost of real
estate leasing
Our cost of real
estate leasing consists primarily of depreciation expenses and maintenance expenses associated with the leased properties. Depreciation
is computed using the straight-line method over the estimated useful lives of the assets. Estimated useful lives of our properties
held for lease are 20-60 years.
Cost of real
estate management services
Our cost of real
estate management services consists of employee salaries, maintenance water and electricity charges.
Other
costs
Other costs represent
costs incurred in connection with the property management and real estate services that we provide to residents and purchasers
of our residential units.
Selling and Distribution
Expenses
Our selling and
distribution expenses include:
|
•
|
advertising and promotion expenses, such as print advertisement costs, billboard and other display
advertising costs, and costs associated with our showrooms and illustrative units;
|
|
•
|
sales and marketing staff costs, which consist primarily of salaries, welfares and sales commissions;
|
|
•
|
agency commissions of approximately 1% of contracted sales on outsourced project sales; and
|
|
•
|
other related expenses.
|
As of December 31,
2019, we employed 108 full-time sales and marketing personnel. We expect our selling and marketing expenses to increase in the
near future as we increase our sales efforts, launch more projects and target new markets to expand our operations.
General and Administrative
Expenses
General and administrative
expenses principally include:
|
•
|
staff salaries and benefits, quarterly and annual bonuses, and stock-based compensation;
|
|
•
|
traveling and office expenses;
|
|
•
|
professional fees, such as audit and legal fees; and
|
Interest Income
Interest income
represents interest earned on mainly on our bank balances.
Interest Expenses
Interest
expense includes (i) interest on US$300 million principal amount of our 14.20% notes due 2021 (the “October 2021 Senior
Secured Notes” which were partially redeemed early in 2019), US$300 million principal amount of our 7.75% notes due 2021
(the “February 2021 Senior Secured Notes" which were partially redeemed early in 2019), US$300 million principal amount
of our 8.875% notes due 2020 (the “November 2020 Senior Secured Notes” which were partially redeemed early in 2019),
US$200 million principal amount of our 9.875% notes due 2020 (the “March 2020 Senior Secured Notes" which were partially
redeemed early in 2019), US$628 million principal amount of our public onshore bonds (which was partially redeemed early in 2019),
US$377 million principal amount of our non-public onshore bonds (which was partially redeemed early in 2019), (ii) amortization
of debt issuance cost, and (iii) interest expense on capital leases.
Except
for U.S. dollar-denominated borrowings from the following: US$123.5 million from The Bank of East Asia, US$59.5 million from Kent
EB-5. LLC, and US$50.2 million from The Bank of Ozarks and US$0.8 million from The Bank Direct Capital Finance, all of our borrowings
are granted by PRC commercial banks or financing institutions and denominated in RMB. Our senior secured notes (see below) are
also denominated in U.S. dollars. Interest rates on our long-term PRC bank borrowings are typically variable and linked to benchmark
rates published by the PBOC. Our weighted average interest rate on short-term bank loans and other debt as of December 31, 2019
was 8.33%. As of December 31, 2019, the PBOC benchmark rate for a one-year loan was 4.35% per annum and those for loans of more
than one year ranged from 4.75% to 4.9% per annum. The above-mentioned borrowings from oversea branches of PRC banks are secured
by RMB deposits in PRC banks’ local branches and bear interest rates LIBOR plus 1.1%.
The
October 2021 Senior Secured Notes in the principal amount of US$300 million bear interest at the fixed rate of 14.20% per annum.
The February 2021 Senior Secured Notes in the principal amount of US$300 million bear interest at a fixed rate of 7.75% per annum.
The November 2020 Senior Secured Notes in the principal amount of US$300 million bear interest at a fixed rate of 8.875% per annum.
The March 2020 Senior Secured Notes in the principal amount of US$200 million bear interest at a fixed rate of 9.875% per annum.
For
the year ended December 31, 2019, out of total interest costs incurred, US$113.8 million did not qualify for interest capitalization
treatment under U.S. GAAP and was charged to the 2019 Statement of Comprehensive Income. Total gross interest costs incurred amounted
to US$317.9 million for the year of 2019, including US$308.7 million of interest on loans and notes, US$8.1 million of amortization
of debt issuance costs and US$1.0 million of amortization of aircraft finance lease related interest.
For the year ended
December 31, 2018, out of total interest costs incurred, US$99.2 million did not qualify for interest capitalization treatment
under U.S. GAAP and was charged to the 2018 Statement of Comprehensive Income. Total gross interest costs incurred amounted to
US$281.8 million for the year of 2018, including US$271.8 million of interest on loans and notes, US$8.6 million of amortization
of debt issuance costs and US$1.4 million of amortization of aircraft finance lease related interest.
Share of Loss of Equity Investee
As of December 31,
2018 and 2019, the Group has a 1.85% investment in Zhengzhou Lianhe Real Estate Co., Ltd. The Group does not exercise significant
influence over Zhengzhou Lianhe Real Estate Co., Ltd. and therefore, the Group accounts for the investment as nonmarketable equity
security. Investment income is recognized by the Group when the investee declares a dividend and the Group believes it is collectible.
The Company adopted ASU 2016-01 and elected to record equity investments without readily determinable fair values at cost minus
impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or
a similar investment of the Company. There were no material adjustments for observable price change or impairment related to these
investments for the year ended December 31, 2019.
On January 11, 2016,
the Group together with two other entities established a joint venture called Shenzhen Zhong An Financial Lease Co., Ltd. (“Shenzhen
Zhong An”), in which the Group holds a 25% equity interest. The purpose of the joint venture is to undertake financial lease
businesses. For the year ended December 31, 2019, dividend received amounted to US$183,427 (2018: nil).
On November 3, 2016,
the Company together with two third parties established Zhengzhou Xinci Health Service Co., Ltd. (“Zhengzhou Xinci”)
to provide health services in Zhengzhou, in which the Company holds a 60% equity interest and injected capital amounted US$1,290,135
in 2017. Based on the articles of association, Company cannot exercise control over relevant activities of the investee, but it
has the ability to exercise significant influence over Zhengzhou Xinci’s operation and financial decisions and accounted
for it as an equity method investment.
On
January 9, 2017, the Company set up a limited partnership, Shenzhen Qianhai Jingjie City Renewal Investment Partnership (“Shenzhen
Qianhai”), with third parties and made a capital injection of US$8,118,800. Shenzhen Qianhai will focus on investment in
real estate renewal projects in Shenzhen city. The Company has significant influence over Shenzhen Qianhai operating and financial
decisions and accounted for it as an equity method investment.
On January 18, 2017,
the Group acquired 51% equity interest in Zhengzhou Hangmei. Zhengzhou Hangmei, a consolidated subsidiary, holds a 3.75% equity
interest of Zhengzhou Taike Real Estate Co., Ltd. amounting to US$738,073. The Group does not exercise significant influence over
Zhengzhou Taike Real Estate Co., Ltd. and therefore, the Group accounted for the investment as nonmarketable equity security. Investment
income is recognized by the Group when the investee declares a dividend and the Group believes it is collectible. The Company adopted
ASU 2016-01 and elected to record equity investments without readily determinable fair values at cost minus impairment, if any,
plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment
of the Company. There were no material adjustments for observable price change or impairment related to these investments for the
year ended December 31, 2019.
On April 19, 2017, the Company signed an agreement to acquire
up to 70% equity interest of Qingdao Huiji Zhihui City Industrial Development Co., Ltd. (“Qingdao Huiju”), which is
developing a real estate project in Qingdao city from Beijing Huiju Technology Industry Development Co., Ltd., a non-affiliated
company for a consideration of US$505.2 million. As of December 31, 2019, US$505.2 million had been paid in exchange for 49% equity
interest that has been transferred to the Company. Based on the articles of association, the Company cannot exercise control of
Qingdao Huiju until it acquires the entire 70% equity interest, but has the ability to exercise significant influence over Qingdao
Huiju’s operating and financial decisions and accounted for it as an equity method investment.
The Group
initiated various legal actions against Beijing Huiju for, inter alia, (i) the transfer of the remaining 21% equity interest
in Qingdao Huiju to the Group and appointment of directors into the board of Qingdao Huiju, (ii) refund of unauthorized
transfer of cash of US$98.7 million from Qingdao Huiju to Beijing Huiju, and (iii) return of business license and official
seals of Qingdao Huiju to Qingdao Huiju. In March 2019, the PRC local court held that Beijing Huiju shall refund the
unauthorized cash transferred to Beijing Huiju to Qingdao Huiju and has frozen the cash of US$98.7 million in Beijing
Huiju’s bank account. In January 2020, local PRC court held that Beijing Huiju shall return the business license and
official seals of Qingdao Huiju to Qingdao Huiju. However, Beijing Huiju appealed to PRC Courts against the refund of cash
and return of business and official seals to Qingdao Huiju. Currently the above lawsuits are in progress. Based on
independent legal advice and after due and careful enquiry, the directors of the Company are of the view that Group is
entitled to the receipt of the 21% equity interest in Qingdao Huiju and the appointment of directors into the board of
Qingdao Huiju, and Qingdao Huiju is entitled to get back the cash, business license and seals from Beijing Huiju. Hence the
above events shall have not any material adverse effect on the Group’s investment in and receivable from Qingdao
Huiju.
On September 4,
2017, the Company with two non-affiliated companies, established a limited partnership, Wuhu Penghong Investment Center (Limited
Partnership) (“Wuhu Penghong”), in which the Company and the other two partners each invested US$30.6 million, US$91.8
million and US$3.1 million in cash, respectively. The other two partners hold substantive participating rights whereas the Company
only exercises significant influence, and therefore, accounted for its investment in Wuhu Penghong under the equity method. On
September 8, 2017, Wuhu Penghong acquired 90.57% equity interest of Guangzhou Huanglong Information Technology Co., Ltd. (“Guangzhou
Huanglong”) for a total cash consideration of US$19.7 million.
On December 27,
2017, the Company with a non-affiliated company, established a limited partnership, called Wuhu Penghua Tenth Investment Center
(Limited Partnership) (“Wuhu Penghua”), where the Company and the other partner invested US$367.3 million and US$153.0
million in cash, respectively. The other partner holds substantive participating rights whereas the Company only exercises significant
influence, and therefore, accounted for its investment in Wuhu Penghua under the equity method. In December 2017, Wuhu Penghua
and the Company made capital contributions amounting to US$6.9 million and US$0.8 million, representing a 90% and 10% equity interest
in Chengdu Xinyuan Renju Enterprise Management Co., Ltd. (“Chengdu Renju”), respectively. The Company exercises significant
influence and accounted for its investment in Chengdu Renju using equity method. On September 6, 2018, Wuhu Penghua returned
to the non-affiliated partner its related investment contribution resulting in the Company becoming the sole owner of the Wuhu
Penghua and Chengdu Renju. Therefore, management assessed that the acquisition constitutes an acquisition of business according
to ASC805, Business combinations.
On March 20, 2018,
the Company acquired 16.66% equity interest in Suzhou Hengwan Real Estate Co., Ltd (“Suzhou Hengwan”), which is developing
a real estate project in Suzhou city from Suzhou Hengwan Enterprise Management Consulting Co., Ltd., a non-affiliated company for
a consideration of US$18.6 million. As of December 31, 2019, Suzhou Hengwan returned US$5.4 million (2018: US$7.3 million) of capital
to the Company. Based on the articles of association, the Company cannot exercise control of Suzhou Hengwan, but has the ability
to exercise significant influence over Suzhou Hengwan’s operating and financial decisions and accounted for it as an equity
method investment.
On
March 21, 2018, the Company acquired 50% equity interest in Madison Developments Limited (“MDL”), which is developing
a real estate project in London, England from ED Jersey Limited, a non-affiliated company for a consideration of US$19.1 million.
Based on the articles of association, the Company cannot exercise control of MDL, but has the ability to exercise significant influence
over MDL’s operating and financial decisions and accounts for it as an equity method investment.
On April 26, 2018,
the Company acquired 51% equity interest in Henan Qingning Apartment Management Co., Ltd. (“Henan Qingning”), which
is operating rental apartments in Henan Province, from one natural person and Henan Yangjian Industry Co., Ltd., a non-affiliated
company, for a consideration of US$3.8 million. Based on the articles of association, the Company cannot exercise control of Henan
Qingning, but has the ability to exercise significant influence over Henan Qingning’s operating and financial decisions and
accounted for it as an equity method investment.
On May 31, 2018,
the Company acquired 19.99% equity interest in Suzhou Litai Real Estate Co., Ltd (“Suzhou Litai”), which is developing
a real estate project in Suzhou city from Yongwei Real Estate (Suzhou) Co., Ltd., a non-affiliated company, for a consideration
of US$9.3 million. As of December 31, 2019, Suzhou Litai returned US$5.7 million of capital to the Company. Based on the articles
of association, the Company cannot exercise control of Suzhou Litai, but has the ability to exercise significant influence over
Suzhou Litai’s operating and financial decisions and accounted for it as an equity method investment.
On June 22, 2018,
the Company together with a non-affiliated company, Huzhou Tianhong Real Estate Development Co., Ltd, established a joint venture,
Huzhou Xinhong Town Construction and Development Co., Ltd. ("Huzhou Xinhong"), in which the Company holds a 78.46% equity
interest. Based on the articles of association, the Company cannot exercise control of Huzhou Xinhong, but has the ability to exercise
significant influence over Huzhou Xinhong’s operating and financial decisions and accounted for it as an equity method investment.
On May 27, 2015,
the Company together with a non-affiliated company, Nanjing Starry Sky Studios Management Co., Ltd. established a joint venture
Beijing Starry Sky Cinema Co., Ltd. ("Starry Sky"), in which the Company holds a 51% equity interest. The purpose of
the joint venture is to operate movie theatres. On October 18, 2018, for the best interests of the Company, the Company and its
non-affiliated joint venture partner agreed that advances amounting to US$2.4 million for operational needs due from Nanjing Starry
Sky should be converted to an additional 19.77% equity interest. Therefore, as of October 18, 2018, the Company’s accumulated
equity interest in Starry Sky is 70.77%. Based on the latest articles of association, the Company still cannot exercise control
of Starry Sky, but has the ability to exercise significant influence over Starry Sky’s operating and financial decisions
and accounted for it as an equity method investment.
On September 25,
2019, the Company acquired 40% equity interest in Taizhou Yiju Real Estate Co., Ltd. ("Taizhou Yiju"), which is developing
a real estate project in Taizhou city from Zhejiang Zhongjian Real Estate Co., Ltd., a non-affiliated company, for a consideration
of US$8.5 million. Based on the articles of association, the Company cannot exercise control of Taizhou Yiju, but has the ability
to exercise significant influence over Taizhou Yiju's operating and financial decisions and accounted for it as an equity method
investment.
In July 2019, the
Company acquired 24% equity interest in Suzhou Rongjingchen Real Estate Co., Ltd. ("Suzhou Rongjingchen"), which is developing
a real estate project in Suzhou city from Suzhou Kaijingsheng Real Estate Co., Ltd., a non-affiliated company, for a consideration
of US$42.0 million. Based on the articles of association, the Company cannot exercise control of Suzhou Rongjingchen, but has the
ability to exercise significant influence over Suzhou Rongjingchen's operating and financial decisions and accounted for it as
an equity method investment.
As of December 31,
2019, the Group’s investment in the investees in the aggregate exceeded its proportionate share of the net assets of the
equity method investee by nil (December 31, 2018: nil). This difference, if any, represents equity method goodwill and therefore,
is not amortized. For the year ended December 31, 2019, the Group recognized investment loss amounting to US$5.4 million (2018:
US$9.4 million), mainly consisting of Wuhu Penghong amounting to US$2.9 million, Qingdao Huiju amounting to US$0.9 million and
Starry Sky amounting to US$0.8 million, respectively. As of December 31, 2018 and 2019, there was no material impairment related
to these investments.
Net Loss on Debt
Extinguishment
On July 10, 2017,
the Company redeemed the 13% senior notes due 2019 (the “June 2019 Senior Secured Notes”) for a total redemption amount
of US$215,456,000 consisting of the entire outstanding principal balance, interest to the redemption date and debt redemption price
amounting to US$200,000,000, US$2,456,000 and US$13,000,000 (equal to the 6.5% of the outstanding principal amount), respectively.
The Company recognized loss on extinguishment of debt amounting to US$15,879,702, consisting of both the debt redemption price
amounting to US$13,000,000 and unamortized deferred debt issuance costs amounting to US$2,879,702. The Company funded the redemption
using the proceeds from the issuance of the February 2021 Senior Secured Notes.
From
August 14, 2019 to November 12, 2019, the Company redeemed the 8.2% onshore corporate bonds due 2020 (the “First Tranche
Bonds”) for a total principal amount of RMB 0.4 billion (US$57 million). The Company recognized loss on extinguishment of
debt amounting to US$1,484, consisting of both the debt redemption price amounting to US$175 and unamortized deferred debt issuance
costs amounting to US$1,659.
From
June 21, 2019 to August 12, 2019, the Company redeemed the 8.2% onshore corporate bonds due 2021(the “Second Tranche Bonds”)
for a total principal amount of RMB 90 million (US$13 million). The Company recognized gain on extinguishment of debt amounting
to US$127,864, consisting of both the debt redemption price amounting to US$128,426 and unamortized deferred debt issuance costs
amounting to US$562.
From March 14, 2019
to August 14, 2019, the Company redeemed the 8.2% onshore corporate bonds due 2021 (the “Third Tranche Bonds”) for
a total principal amount of RMB0.5 billion (US$71 million). The Company recognized loss on extinguishment of debt amounting to
US$743,034, consisting of both the debt redemption price amounting to US$740,934 and unamortized deferred debt issuance costs amounting
to US$2,100.
On April 7, 2019,
the Company redeemed the 8.2% onshore corporate bonds due 2020 (the “2017 Tranche”) remaining amount of RMB 0.63 billion
(US$90 million), recognizing loss on extinguishment of debt amounting to US$1,535,132 in 2019, consisting of the debt redemption
price amounting to US$1,535,132.
From August 26,
2019 to September 23, 2019, the Company redeemed the 8.5% onshore corporate bonds due 2020 (the “2018 Tranche”) for
a total principal amount of RMB76 million (US$11 million). The Company recognized loss on extinguishment of debt amounting to US$20,958,
consisting of unamortized deferred debt issuance costs amounting to US$20,958.
From
January 4, 2019 to June 21, 2019, the Company redeemed 8.5% onshore corporate bonds due 2022 (the “2019 Tranche”)
for a total principal amount of RMB591 million (US$85 million). The Company recognized loss on extinguishment of debt amounting
to US$1,894,262 in 2019, consisting of both the debt redemption price amounting to US$1,428,945 and unamortized deferred debt
issuance costs amounting to US$465,317.
From April 1, 2019
to June 21, 2019, the Company redeemed the 8.4% onshore corporate bonds due 2022 (the “2019 First Tranche Bonds”) for
a total principal amount of RMB637 million (US$91 million). The Company recognized loss on extinguishment of debt amounting to
US$3,977,493 in 2019, consisting of both the debt redemption price amounting to US$3,494,668 and unamortized deferred debt issuance
costs amounting to US$482,825.
From January 1, 2019
to December 31, 2019, the Company redeemed 8.125% senior notes due 2011 ("August 2019 Senior Secured Notes") for a total
principal amount of US$288.1 million. The Company recognized loss on extinguishment of debt amounting to US$1,111,583 in 2019,
consisting of the loss from the difference between repurchase price and principal amount of the debt amounting to US$125,165 and
the loss from unamortized deferred debt issuance costs amounting to US$986,418.
From
January 1, 2019 to December 31, 2019, the Company redeemed the February 2021 Senior Secured Notes for a total principal amount
of US$10.6 million. The Company recognized gain on extinguishment of debt amounting to US$1,126,617, consisting of the gain from
the difference between repurchase price and principal amount of the debt amounting to US$1,246,256 and the loss from unamortized
deferred debt issuance costs amounting to US$119,639.
From January 1, 2019
to December 31, 2019, the Company redeemed the November 2020 Senior Secured Notes for a total principal amount of US$0. 9 million.
The Company recognized gain on extinguishment of debt amounting to US$38,136, consisting of the gain from the difference between
repurchase price and principal amount of the debt amounting to US$47,200 and the loss from unamortized deferred debt issuance costs
amounting to US$9,064.
From January 1, 2019
to December 31, 2019, the Company redeemed the March 2020 Senior Secured Notes for a total principal amount of US$75.7 million.
The Company recognized loss on extinguishment of debt amounting to US$563,941, mainly consisting of the loss from unamortized deferred
debt issuance costs amounting to US$563,941.
From January 1, 2019
to December 31, 2019, the Company redeemed the October 2021 Senior Secured Notes for a total principal amount of US$2.5 million.
The Company recognized loss on extinguishment of debt amounting to US$25,240, consisting of the gain from the difference between
repurchase price and principal amount of the debt amounting to US$52,500 and the loss from unamortized deferred debt issuance costs
amounting to US$77,740.
Income
Taxes
The following table
sets forth the components of income taxes for the periods indicated:
|
|
2018
|
|
|
2019
|
|
|
|
US$
|
|
|
%
|
|
|
US$
|
|
|
%
|
|
|
|
(in thousands, except for percentages)
|
|
Corporate income tax
|
|
|
141,400
|
|
|
|
97.9
|
|
|
|
133,862
|
|
|
|
89.0
|
|
Land appreciation tax
|
|
|
62,996
|
|
|
|
43.6
|
|
|
|
68,631
|
|
|
|
45.6
|
|
Deferred tax benefit
|
|
|
(59,949
|
)
|
|
|
(41.5
|
)
|
|
|
(52,015
|
)
|
|
|
(34.6
|
)
|
Income taxes
|
|
|
144,447
|
|
|
|
100.0
|
|
|
|
150,478
|
|
|
|
100.0
|
|
For
an explanation of deferred tax benefit, see Notes 2(v) and 15 of the consolidated financial statements included elsewhere in this
annual report on Form 20-F. For a discussion of corporate income tax and land appreciation tax, see below.
Corporate Income Tax and Unrecognized
Tax Benefit
Cayman Islands
We are incorporated
in the Cayman Islands. The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income,
gains or appreciation and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely
to be material to us levied by the government of the Cayman Islands except for stamp duties which may be applicable on instruments
executed in, or after execution, brought within the jurisdiction of the Cayman Islands. In addition, the Cayman Islands does not
impose withholding tax on dividend payments.
People’s
Republic of China
In general, enterprises in the PRC are subject to income tax
at a statutory rate of 25%. For our subsidiaries located in various cities, income tax is levied at the statutory rate of 25% on
income as reported in the statutory financial statements after appropriate tax adjustments. Further, under the same tax laws and
regulations, dividends paid by PRC enterprises out of profits earned post-2007 to non-PRC tax resident investors are subject to
PRC dividend withholding tax of 10%. A lower withholding tax rate may be applied based on applicable tax treaty with certain jurisdictions.
We
have made provision for the corporate income tax, or CIT, payable by our PRC subsidiaries based on the statutory income tax rate
of 25%, after appropriate adjustments to our taxable income used in the calculation. The difference between tax payable on our
actual taxable income and tax levied on the deemed taxable income basis had been treated as an unrecognized tax benefit under
ASC 740-10 “Income Tax,” or ASC 740-10, which has a balance of US$73.6 million as of December 31, 2019. The increase
in the current year liability for unrecognized tax benefits is attributable to deemed interest income from subsidiaries of us
during the year amounting to US$12.7 million, reclassification from prior year tax payable amounting to US$12.8 million and related
late payment interests amounting to US$2.2 million.
Hong Kong
Our HK subsidiaries
are subject to income tax at the statutory rate of 16.5% in accordance to the HK profits tax laws and regulations. We did not make
any provisions for Hong Kong Profits Tax as there were no assessable profits arising in or derived from Hong Kong for any of the
periods presented. Under the Hong Kong tax law, our HK subsidiaries are exempted from income tax on its foreign-derived income
and there are no withholding taxes in Hong Kong on remittance of dividends.
The United States
Our US subsidiaries
are subject to income tax at the effective rate of approximately 33% in accordance with US corporate income tax laws and regulations,
dividends and interests paid by US enterprises to non-US tax resident enterprises are subject to US withholding tax of 30%.
Land Appreciation Tax
Under PRC laws and
regulations, our PRC subsidiaries engaging in property development are subject to LAT, which is levied by the local tax authorities
upon the “appreciation value” as defined in the relevant tax laws. All taxable gains from the sale or transfer of land
use rights, buildings and related facilities in China are subject to LAT at progressive rates that range from 30% to 60%. Certain
exemptions are allowed for sales of ordinary residential properties if the appreciation value does not exceed a threshold specified
in the relevant tax laws. Gains from sales of commercial properties are not eligible for this exemption. Whether a property qualifies
for the ordinary residential property exemption is determined by the local government taking into consideration the property’s
plot ratio, aggregate GFA and sales price.
On May 30, 2014,
the Modern City project developed by Henan Xinyuan Real Estate Co., Ltd., completed the LAT final settlement with the local tax
bureau. We received a tax clearance certificate, which confirmed that our accrual under the deemed profit method was adequate and
there were no additional tax adjustments assessed by the local tax bureau as of May 30, 2014. Based on the above, management performed
a reassessment and concluded that the likelihood of the deemed profit method being overturned is only reasonably possible, and
accordingly reversed the LAT liability accrued for the project amounting to US$16.2 million as of December 31, 2014. Our estimate
for the reasonably possible contingency for LAT related to the Modern City project amounted to US$16.2 million and US$16.2 million,
respectively, as of December 31, 2015 and December 31, 2016. The statute of limitation has lapsed as of May 30, 2017 and therefore,
there is no related contingency as of December 31, 2018 or December 31, 2019.
For
the years ended December 31, 2019, we have made provision for LAT with respect to properties sold up to December 31, 2019 in accordance
with the requirements set forth in the relevant PRC tax laws and regulations.
Share-based Compensation Expense
We
have five share-based compensation plans: (1) our 2007 long-term incentive plan (which expired in 2017 but for which options remain
outstanding), (2) our 2014 Restricted Stock Unit Plan (the "2014 RSU Plan"), (3) our 2015 incentive plan. Under our
2007 long-term incentive plan, as of December 31, 2019, 212,138 options remain outstanding and exercisable. Under our 2014 RSU
Plan, we have granted 12,453,194 restricted common shares to employees and directors that vest ratably over a three year service
vesting period. Under our 2015 long-term incentive plan, we may grant options, restricted shares, restricted stock units, stock
appreciation rights and other stock-based awards for the purchase of up to 20,000,000 common shares. As of December 31, 2019,
2,796,734 options remain outstanding and exercisable. As of December 31, 2019, 14,865,808 shares remained eligible for future
grants under the plan, (4) on 31 January 2019, Cayman Property Management Service (Cayman) Ltd., a subsidiary of us, operates
a restricted share award scheme (the “Scheme”)
and (5) on September 28, 2019, we approved the employee stock option plan of Xinchuang Technology Co. Ltd. ("Xinchuang Technology").
We charged compensation
cost of US$3.4 million and US$5.6 million as of December 31, 2018 and December 31, 2019 in the general and administrative expenses.
For a description of the grants under each of the plans, see Note 16 of the consolidated financial statements included elsewhere
in this annual report.
Results
of Operations
The following table
presents a summary of our consolidated statements of comprehensive income by amount and as a percentage of our total revenue during
the periods indicated. Our historical results presented below are not necessarily indicative of the results that may be expected
for any other future period.
|
|
2018
|
|
|
2019
|
|
|
|
US$
|
|
|
%
|
|
|
US$
|
|
|
%
|
|
|
|
(in thousands, except for percentages)
|
|
Revenue
|
|
|
2,217,551
|
|
|
|
100.0
|
|
|
|
2,482,633
|
|
|
|
100.0
|
|
Costs of revenue
|
|
|
(1,602,073
|
)
|
|
|
(72.2
|
)
|
|
|
(1,922,323
|
)
|
|
|
(77.4
|
)
|
Gross profit
|
|
|
615,478
|
|
|
|
27.8
|
|
|
|
560,310
|
|
|
|
22.6
|
|
Selling and distribution expenses
|
|
|
(83,592
|
)
|
|
|
(3.8
|
)
|
|
|
(86,761
|
)
|
|
|
(3.5
|
)
|
General and administrative expenses
|
|
|
(156,456
|
)
|
|
|
(7.1
|
)
|
|
|
(163,687
|
)
|
|
|
(6.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
375,430
|
|
|
|
16.9
|
|
|
|
309,862
|
|
|
|
12.5
|
|
Interest income
|
|
|
31,226
|
|
|
|
1.4
|
|
|
|
51,494
|
|
|
|
2.1
|
|
Interest expense
|
|
|
(99,246
|
)
|
|
|
(4.5
|
)
|
|
|
(113,775
|
)
|
|
|
(4.6
|
)
|
Exchange loss
|
|
|
(25,678
|
)
|
|
|
(1.2
|
)
|
|
|
(7,376
|
)
|
|
|
(0.3
|
)
|
Other income
|
|
|
1,742
|
|
|
|
0.1
|
|
|
|
5,849
|
|
|
|
0.2
|
|
Share of loss of equity investees
|
|
|
(9,374
|
)
|
|
|
(0.4
|
)
|
|
|
(5,416
|
)
|
|
|
(0.2
|
)
|
Net loss on debt extinguishment
|
|
|
(21,444
|
)
|
|
|
(1.0
|
)
|
|
|
(8,581
|
)
|
|
|
(0.3
|
)
|
(Loss)/gain on short-term investments
|
|
|
(2,257
|
)
|
|
|
(0.1
|
)
|
|
|
1,451
|
|
|
|
0.1
|
|
Income from operations before income taxes
|
|
|
250,399
|
|
|
|
11.2
|
|
|
|
233,508
|
|
|
|
9.4
|
|
Income taxes
|
|
|
(144,447
|
)
|
|
|
(6.5
|
)
|
|
|
(150,478
|
)
|
|
|
(6.1
|
)
|
Net income
|
|
|
105,952
|
|
|
|
4.7
|
|
|
|
83,030
|
|
|
|
3.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to non-controlling interest
|
|
|
(32,917
|
)
|
|
|
(1.5
|
)
|
|
|
(14,684
|
)
|
|
|
(0.6
|
)
|
Net income attributable to Xinyuan Real Estate Co., Ltd. shareholders
|
|
|
73,035
|
|
|
|
3.2
|
|
|
|
68,346
|
|
|
|
2.7
|
|
Year Ended December 31, 2019 Compared
to Year Ended December 31, 2018
Revenue
Revenue increased
by US$265.0 million, or 11.9%, to US$2,482.6 million for the year ended December 31, 2019 from US$2,217.6 million for the year
ended December 31, 2018.
Real estate sales
Revenue from real
estate sales increased by US$247.6 million, or 11.6%, to US$2,387.0 million for the year ended December 31, 2019 from US$2,139.4
million for the year ended December 31, 2018, principally due to the revenue from the sales of units in new projects, especially
Zhengzhou International New City IV, Qingdao Royal Dragon Bay, and Zhengzhou International New City IV B10, launched in the forth
quarter of 2018 and 2019.
Revenues
related to the projects in the United States are recognized at a point in time. For the year ended December 31, 2018, revenue
was recognized in the amount of US$8.8 million for the sale of 4 of 216 finished condominium units located in Brooklyn, New York.
For the year ended December 31, 2019, revenue was recognized in the amount of US$0.75 million for the sale of 1 of 216 finished
condominium units located in Brooklyn, New York.
The following table
sets forth the percentage of completion, the percentage sold and related revenues for our pre-sold projects for each of the years
ended December 31, 2018 and 2019. The revenues for our new pre-sold projects since January 1, 2018 are recognized on an over time
basis upon the adoption of ASC 606 and recognized at a point in time in the United States. For information regarding revenue recognition
on an over time basis and at a point in time, see “Critical Accounting Policies,” below.
Project
|
|
Total GFA
|
|
|
Percentage
Complete as of
December 31, (1)
|
|
|
Percentage Sold (2)
Accumulated as of
December 31,
|
|
|
Revenues Recognized For The Year Ended
December 31,
|
|
|
|
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
|
m 2
|
|
|
%
|
|
|
%
|
|
|
%
|
|
|
%
|
|
|
US$
|
|
|
% (3)
|
|
|
US$
|
|
|
% (3)
|
|
Chengdu region
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chengdu Xinyuan Splendid I
|
|
|
231,032
|
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
99.0
|
|
|
|
99.0
|
|
|
|
939,171
|
|
|
|
–
|
|
|
|
28,871
|
|
|
|
–
|
|
Chengdu Xinyuan Splendid II
|
|
|
217,009
|
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
99.9
|
|
|
|
100.0
|
|
|
|
(628
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Chengdu Thriving Family
|
|
|
203,379
|
|
|
|
98.8
|
|
|
|
98.8
|
|
|
|
70.0
|
|
|
|
78.7
|
|
|
|
49,529,230
|
|
|
|
2.3
|
|
|
|
12,108,905
|
|
|
|
0.5
|
|
Chengdu Xinyuan City (4)
|
|
|
741,874
|
|
|
|
30.4
|
|
|
|
39.2
|
|
|
|
6.4
|
|
|
|
17.0
|
|
|
|
30,248,316
|
|
|
|
1.4
|
|
|
|
73,052,145
|
|
|
|
3.1
|
|
Shanghai region
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shanghai Royal Palace
|
|
|
57,770
|
|
|
|
99.9
|
|
|
|
99.9
|
|
|
|
64.3
|
|
|
|
64.9
|
|
|
|
(90,187
|
)
|
|
|
–
|
|
|
|
413,385
|
|
|
|
–
|
|
Suzhou International City Garden
|
|
|
204,872
|
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
99.5
|
|
|
|
99.5
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Suzhou Xin City
|
|
|
127,291
|
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(100,116
|
)
|
|
|
–
|
|
Suzhou Lake Royal Palace
|
|
|
169,674
|
|
|
|
99.6
|
|
|
|
99.9
|
|
|
|
99.0
|
|
|
|
100.0
|
|
|
|
12,796,455
|
|
|
|
0.6
|
|
|
|
945,133
|
|
|
|
–
|
|
Kunshan International City Garden
|
|
|
497,948
|
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
99.9
|
|
|
|
100.0
|
|
|
|
448,833
|
|
|
|
–
|
|
|
|
33,466
|
|
|
|
–
|
|
Kunshan Royal Palace
|
|
|
280,591
|
|
|
|
99.9
|
|
|
|
99.9
|
|
|
|
98.3
|
|
|
|
99.1
|
|
|
|
27,417,062
|
|
|
|
1.3
|
|
|
|
3,284,198
|
|
|
|
0.1
|
|
Kunshan Xindo Park
|
|
|
89,002
|
|
|
|
94.8
|
|
|
|
99.3
|
|
|
|
90.3
|
|
|
|
97.5
|
|
|
|
209,372,107
|
|
|
|
9.8
|
|
|
|
35,066,962
|
|
|
|
1.5
|
|
Xuzhou Colorful City
|
|
|
130,840
|
|
|
|
94.9
|
|
|
|
98.7
|
|
|
|
91.9
|
|
|
|
95.4
|
|
|
|
3,188,457
|
|
|
|
0.1
|
|
|
|
63,073,916
|
|
|
|
2.6
|
|
Kunshan Xinyu Jiayuan (4)
|
|
|
107,935
|
|
|
|
65.2
|
|
|
|
71.6
|
|
|
|
22.6
|
|
|
|
48.3
|
|
|
|
54,645,671
|
|
|
|
2.6
|
|
|
|
73,412,318
|
|
|
|
3.1
|
|
Suzhou Galaxy Bay (4)
|
|
|
76,546
|
|
|
|
48.3
|
|
|
|
78.3
|
|
|
|
31.7
|
|
|
|
76.9
|
|
|
|
22,063,505
|
|
|
|
1.0
|
|
|
|
65,459,271
|
|
|
|
2.7
|
|
Suzhou Gusu Shade I (4)
|
|
|
11,957
|
|
|
|
73.4
|
|
|
|
91.5
|
|
|
|
1.1
|
|
|
|
75.4
|
|
|
|
425,016
|
|
|
|
–
|
|
|
|
38,144,452
|
|
|
|
1.6
|
|
Shandong region
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jinan International City Garden
|
|
|
264,357
|
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
99.6
|
|
|
|
99.8
|
|
|
|
(90,151
|
)
|
|
|
–
|
|
|
|
616,449
|
|
|
|
–
|
|
Jinan Xinyuan Splendid
|
|
|
572,170
|
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
99.3
|
|
|
|
99.4
|
|
|
|
(134,252
|
)
|
|
|
–
|
|
|
|
362,592
|
|
|
|
–
|
|
Shandong Royal Palace
|
|
|
449,613
|
|
|
|
91.9
|
|
|
|
95.7
|
|
|
|
92.8
|
|
|
|
98.0
|
|
|
|
170,647,448
|
|
|
|
8.0
|
|
|
|
127,737,479
|
|
|
|
5.4
|
|
Jinan Xin Central
|
|
|
194,410
|
|
|
|
99.2
|
|
|
|
99.0
|
|
|
|
84.0
|
|
|
|
88.0
|
|
|
|
80,882,965
|
|
|
|
3.8
|
|
|
|
11,680,481
|
|
|
|
0.5
|
|
Qingdao Royal Dragon Bay (4)
|
|
|
156,531
|
|
|
|
44.6
|
|
|
|
54.0
|
|
|
|
12.0
|
|
|
|
52.1
|
|
|
|
26,146,767
|
|
|
|
1.2
|
|
|
|
107,136,726
|
|
|
|
4.5
|
|
Jinan Royal Spring Bay (4)
|
|
|
116,818
|
|
|
|
63.2
|
|
|
|
78.4
|
|
|
|
10.7
|
|
|
|
25.5
|
|
|
|
14,327,827
|
|
|
|
0.7
|
|
|
|
27,591,363
|
|
|
|
1.2
|
|
Henan region
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zhengzhou Xinyuan Colorful Garden
|
|
|
191,781
|
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
(138,075
|
)
|
|
|
–
|
|
|
|
361,119
|
|
|
|
–
|
|
Zhengzhou Finance Square
|
|
|
67,225
|
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
(164,285
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Zhengzhou Modern City
|
|
|
231,905
|
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(341,364
|
)
|
|
|
–
|
|
Zhengzhou Century East A
|
|
|
76,588
|
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
96.8
|
|
|
|
99.8
|
|
|
|
(1,763
|
)
|
|
|
–
|
|
|
|
41,350
|
|
|
|
–
|
|
Zhengzhou Century East B
|
|
|
166,470
|
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
99.9
|
|
|
|
100.0
|
|
|
|
277,099
|
|
|
|
-
|
|
|
|
175,955
|
|
|
|
–
|
|
Zhengzhou Xin City
|
|
|
210,724
|
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
92.2
|
|
|
|
98.5
|
|
|
|
1,137,703
|
|
|
|
0.1
|
|
|
|
1,189,804
|
|
|
|
–
|
|
Henan Thriving Family
|
|
|
131,510
|
|
|
|
98.2
|
|
|
|
98.8
|
|
|
|
86.9
|
|
|
|
89.4
|
|
|
|
540,145
|
|
|
|
0.0
|
|
|
|
7,237,244
|
|
|
|
0.3
|
|
Henan Xin Central I
|
|
|
261,492
|
|
|
|
96.3
|
|
|
|
97.8
|
|
|
|
85.8
|
|
|
|
92.5
|
|
|
|
36,045,553
|
|
|
|
1.7
|
|
|
|
18,549,383
|
|
|
|
0.8
|
|
Xingyang Splendid I
|
|
|
115,431
|
|
|
|
83.2
|
|
|
|
89.2
|
|
|
|
78.0
|
|
|
|
78.2
|
|
|
|
1,709,126
|
|
|
|
0.1
|
|
|
|
(435,808
|
)
|
|
|
–
|
|
Xingyang Splendid II
|
|
|
118,530
|
|
|
|
80.0
|
|
|
|
80.2
|
|
|
|
51.4
|
|
|
|
74.7
|
|
|
|
2,071,589
|
|
|
|
0.1
|
|
|
|
5,793,602
|
|
|
|
0.2
|
|
Xingyang Splendid III
|
|
|
121,113
|
|
|
|
73.3
|
|
|
|
95.2
|
|
|
|
93.4
|
|
|
|
97.7
|
|
|
|
29,186,670
|
|
|
|
1.4
|
|
|
|
84,937,721
|
|
|
|
3.6
|
|
Xingyang Splendid IV (4)
|
|
|
151,835
|
|
|
|
39.1
|
|
|
|
38.2
|
|
|
|
94.2
|
|
|
|
37.1
|
|
|
|
8,289,847
|
|
|
|
0.4
|
|
|
|
16,148,676
|
|
|
|
0.7
|
|
Zhengzhou Xindo Park
|
|
|
134,064
|
|
|
|
91.9
|
|
|
|
95.2
|
|
|
|
86.1
|
|
|
|
88.3
|
|
|
|
33,200,492
|
|
|
|
1.6
|
|
|
|
6,086,531
|
|
|
|
0.3
|
|
Zhengzhou Fancy City I
|
|
|
166,709
|
|
|
|
95.0
|
|
|
|
98.2
|
|
|
|
86.6
|
|
|
|
88.6
|
|
|
|
25,988,903
|
|
|
|
1.2
|
|
|
|
9,406,840
|
|
|
|
0.4
|
|
Zhengzhou Fancy City III (4)
|
|
|
80,603
|
|
|
|
66.8
|
|
|
|
79.2
|
|
|
|
18.1
|
|
|
|
82.9
|
|
|
|
18,518,481
|
|
|
|
0.9
|
|
|
|
80,148,278
|
|
|
|
3.4
|
|
Zhengzhou International New City I
|
|
|
356,587
|
|
|
|
84.4
|
|
|
|
89.9
|
|
|
|
90.6
|
|
|
|
95.8
|
|
|
|
280,219,753
|
|
|
|
13.2
|
|
|
|
292,248,993
|
|
|
|
12.2
|
|
Zhengzhou International New City II
|
|
|
176,037
|
|
|
|
62.5
|
|
|
|
76.3
|
|
|
|
92.4
|
|
|
|
97.0
|
|
|
|
–
|
|
|
|
–
|
|
|
|
290,908,227
|
|
|
|
12.2
|
|
Zhengzhou International New City III A
|
|
|
96,018
|
|
|
|
54.2
|
|
|
|
68.6
|
|
|
|
95.4
|
|
|
|
99.4
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Zhengzhou Fancy City II (South)
|
|
|
84,274
|
|
|
|
91.5
|
|
|
|
90.4
|
|
|
|
95.1
|
|
|
|
96.8
|
|
|
|
127,681,618
|
|
|
|
6.0
|
|
|
|
8,341,028
|
|
|
|
0.3
|
|
Zhengzhou Fancy City II (North)
|
|
|
108,724
|
|
|
|
50.9
|
|
|
|
73.9
|
|
|
|
55.3
|
|
|
|
88.0
|
|
|
|
-
|
|
|
|
-
|
|
|
|
32,778,802
|
|
|
|
1.4
|
|
Henan Xin Central II
|
|
|
109,522
|
|
|
|
90.4
|
|
|
|
88.6
|
|
|
|
89.1
|
|
|
|
92.1
|
|
|
|
149,649,698
|
|
|
|
7.0
|
|
|
|
9,173,528
|
|
|
|
0.4
|
|
Zhengzhou International New City III B (4)
|
|
|
118,780
|
|
|
|
52.5
|
|
|
|
63.8
|
|
|
|
96.7
|
|
|
|
98.8
|
|
|
|
115,976,163
|
|
|
|
5.4
|
|
|
|
27,370,402
|
|
|
|
1.1
|
|
Zhengzhou International New City III C (4)
|
|
|
82,290
|
|
|
|
58.9
|
|
|
|
73.2
|
|
|
|
29.7
|
|
|
|
76.3
|
|
|
|
24,008,930
|
|
|
|
1.1
|
|
|
|
55,497,173
|
|
|
|
2.4
|
|
Zhengzhou International New City III D (4)
|
|
|
46,074
|
|
|
|
66.0
|
|
|
|
71.5
|
|
|
|
84.9
|
|
|
|
88.8
|
|
|
|
55,864,324
|
|
|
|
2.6
|
|
|
|
7,844,282
|
|
|
|
0.3
|
|
Zhengzhou International New City IV (4)
|
|
|
199,651
|
|
|
|
54.1
|
|
|
|
67.6
|
|
|
|
4.3
|
|
|
|
86.7
|
|
|
|
9,585,470
|
|
|
|
0.4
|
|
|
|
225,080,429
|
|
|
|
9.4
|
|
Zhengzhou Hangmei International Wisdom City I (4)
|
|
|
143,181
|
|
|
|
49.8
|
|
|
|
70.6
|
|
|
|
48.5
|
|
|
|
60.5
|
|
|
|
31,569,589
|
|
|
|
1.5
|
|
|
|
27,893,446
|
|
|
|
1.2
|
|
Xinyuan Golden Water View City (4)
|
|
|
331,369
|
|
|
|
61.9
|
|
|
|
71.6
|
|
|
|
10.7
|
|
|
|
24.2
|
|
|
|
51,824,928
|
|
|
|
2.4
|
|
|
|
87,703,634
|
|
|
|
3.7
|
|
Xingyang Splendid V (4)
|
|
|
80,486
|
|
|
|
–
|
|
|
|
40.5
|
|
|
|
–
|
|
|
|
66.1
|
|
|
|
–
|
|
|
|
–
|
|
|
|
22,310,294
|
|
|
|
0.9
|
|
Zhengzhou International New City IV B10 (4)
|
|
|
92,294
|
|
|
|
–
|
|
|
|
58.3
|
|
|
|
–
|
|
|
|
57.3
|
|
|
|
–
|
|
|
|
–
|
|
|
|
43,132,963
|
|
|
|
1.8
|
|
Zhengzhou International New City A04 (4)
|
|
|
104,949
|
|
|
|
–
|
|
|
|
56.9
|
|
|
|
–
|
|
|
|
21.2
|
|
|
|
–
|
|
|
|
–
|
|
|
|
23,001,979
|
|
|
|
1.0
|
|
Project
|
|
Total GFA
|
|
|
Percentage
Complete as of
December 31, (1)
|
|
|
Percentage Sold (2)
Accumulated as of
December 31,
|
|
|
Revenues Recognized For The Year Ended
December 31,
|
|
|
|
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
|
m 2
|
|
|
%
|
|
|
%
|
|
|
%
|
|
|
%
|
|
|
US$
|
|
|
% (3)
|
|
|
US$
|
|
|
% (3)
|
|
Anhui region
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hefei Wangjiang Garden
|
|
|
145,455
|
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
(21
|
)
|
|
|
–
|
|
|
|
3,804
|
|
|
|
–
|
|
Beijing region
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beijing Xindo Park
|
|
|
133,095
|
|
|
|
99.9
|
|
|
|
99.9
|
|
|
|
86.1
|
|
|
|
86.5
|
|
|
|
12,612,057
|
|
|
|
0.6
|
|
|
|
76,051
|
|
|
|
–
|
|
Tianjin Spring Royal Palace I
|
|
|
139,691
|
|
|
|
80.8
|
|
|
|
91.3
|
|
|
|
83.1
|
|
|
|
83.9
|
|
|
|
31,615,644
|
|
|
|
1.5
|
|
|
|
76,965,744
|
|
|
|
3.2
|
|
Tianjin Spring Royal Palace II (4)
|
|
|
144,581
|
|
|
|
56.7
|
|
|
|
73.8
|
|
|
|
36.0
|
|
|
|
53.1
|
|
|
|
54,549,636
|
|
|
|
2.5
|
|
|
|
49,528,788
|
|
|
|
2.1
|
|
Changsha region
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changsha Xinyuan Splendid
|
|
|
251,652
|
|
|
|
97.0
|
|
|
|
98.1
|
|
|
|
94.6
|
|
|
|
95.6
|
|
|
|
45,186,779
|
|
|
|
2.1
|
|
|
|
2,045,776
|
|
|
|
0.1
|
|
Changsha Mulian Royal Palace
|
|
|
90,992
|
|
|
|
89.4
|
|
|
|
99.1
|
|
|
|
99.4
|
|
|
|
100.0
|
|
|
|
–
|
|
|
|
–
|
|
|
|
140,722,641
|
|
|
|
5.9
|
|
Changsha Furong Thriving Family (4)
|
|
|
72,257
|
|
|
|
54.6
|
|
|
|
69.3
|
|
|
|
99.4
|
|
|
|
99.7
|
|
|
|
52,060,438
|
|
|
|
2.4
|
|
|
|
15,174,132
|
|
|
|
0.6
|
|
Sanya region
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sanya Yazhou Bay No.1
|
|
|
117,585
|
|
|
|
90.3
|
|
|
|
98.1
|
|
|
|
80.1
|
|
|
|
96.4
|
|
|
|
169,606,832
|
|
|
|
7.9
|
|
|
|
43,820,015
|
|
|
|
1.8
|
|
Xi’an region
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Xi’an Metropolitan
|
|
|
285,997
|
|
|
|
97.5
|
|
|
|
98.0
|
|
|
|
82.9
|
|
|
|
87.4
|
|
|
|
58,687,113
|
|
|
|
2.7
|
|
|
|
6,919,122
|
|
|
|
0.3
|
|
Dalian region
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dalian International Health Technology Town I (4)
|
|
|
103,845
|
|
|
|
25.0
|
|
|
|
45.2
|
|
|
|
1.2
|
|
|
|
32.4
|
|
|
|
430,818
|
|
|
|
–
|
|
|
|
18,625,567
|
|
|
|
0.8
|
|
Guangdong region
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foshan Xinchuang AI International Science and Technology Innovation Valley (4)
|
|
|
194,404
|
|
|
|
–
|
|
|
|
53.9
|
|
|
|
–
|
|
|
|
5.7
|
|
|
|
–
|
|
|
|
–
|
|
|
|
9,767,421
|
|
|
|
0.4
|
|
US
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Northern Nevada Land Portfolio
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Lennox Project
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
New York Oosten
|
|
|
30,855
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
8,815,926
|
|
|
|
0.4
|
|
|
|
750,000
|
|
|
|
–
|
|
Total
|
|
|
10,968,244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,139,370,792
|
|
|
|
100.0
|
|
|
|
2,387,031,568
|
|
|
|
100.0
|
|
|
(1)
|
Percentage of completion is calculated by dividing total costs incurred by total estimated costs
for the relevant project, estimated as of the time of preparation of our financial statements as of and for the year indicated.
|
|
(2)
|
Percentage sold is calculated by dividing contracted sales value from property sales by total estimated
sales value of the relevant project, estimated as of the time of preparation of our financial statements as of and for the year
indicated.
|
|
(3)
|
Percentage of all real estate sales revenues for the financial period, including revenues recognized
on an “over time” basis and until title was transferred.
|
|
(4)
|
The revenues for these projects are recognized on an over time basis.
|
The following table
sets forth the square meters sold and average selling price per square meter for each pre-sold project, each reportable segment
and on a consolidated basis for each of the years ended December 31, 2018 and 2019:
Project
|
|
Year Ended December 31,
|
|
|
|
2018
|
|
|
2019
|
|
|
|
Contract
Sales
|
|
|
Square
Meters
Sold
|
|
|
Average
Selling
Price
|
|
|
Contract
Sales
|
|
|
Square
Meters
Sold
|
|
|
Average
Selling
Price
|
|
|
|
US$
|
|
|
m 2
|
|
|
US$/m 2
|
|
|
US$
|
|
|
m 2
|
|
|
US$/m 2
|
|
Chengdu region
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chengdu Xinyuan Splendid I
|
|
|
612,844
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Chengdu Xinyuan Splendid II
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
140,502
|
|
|
|
64
|
|
|
|
2,195
|
|
Chengdu Thriving Family
|
|
|
18,462,199
|
|
|
|
6,870
|
|
|
|
2,687
|
|
|
|
(2,792,165
|
)
|
|
|
(2,837
|
)
|
|
|
984
|
|
Chengdu Xinyuan City
|
|
|
111,650,607
|
|
|
|
74,093
|
|
|
|
1,507
|
|
|
|
176,767,268
|
|
|
|
121,908
|
|
|
|
1,450
|
|
Total
|
|
|
130,725,650
|
|
|
|
80,963
|
|
|
|
1,615
|
|
|
|
174,115,605
|
|
|
|
119,135
|
|
|
|
1,461
|
|
Shanghai region
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shanghai Royal Palace
|
|
|
492,560
|
|
|
|
88
|
|
|
|
5,597
|
|
|
|
39,149
|
|
|
|
–
|
|
|
|
–
|
|
Suzhou Lake Royal Palace
|
|
|
1,193,367
|
|
|
|
357
|
|
|
|
3,343
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Suzhou Galaxy Bay
|
|
|
51,072,067
|
|
|
|
24,350
|
|
|
|
2,097
|
|
|
|
100,719,796
|
|
|
|
48,415
|
|
|
|
2,080
|
|
Suzhou Gusu Shade I
|
|
|
685,139
|
|
|
|
123
|
|
|
|
5,570
|
|
|
|
45,325,562
|
|
|
|
8,409
|
|
|
|
5,390
|
|
Suzhou Suhe Bay *
|
|
|
78,933,983
|
|
|
|
24,000
|
|
|
|
3,289
|
|
|
|
120,862,573
|
|
|
|
38,557
|
|
|
|
3,135
|
|
Suzhou Gusu Shade II **
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
38,297,807
|
|
|
|
6,909
|
|
|
|
5,543
|
|
Huzhou Silk Town ***
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
52,713,399
|
|
|
|
21,883
|
|
|
|
2,409
|
|
Kunshan International City Garden
|
|
|
800,057
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Kunshan Royal Palace
|
|
|
936
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
KunshanXindo Park
|
|
|
47,405,570
|
|
|
|
14,053
|
|
|
|
3,373
|
|
|
|
(4,366,292
|
)
|
|
|
(1,739
|
)
|
|
|
2,511
|
|
Kunshan Xinyu Jiayuan
|
|
|
93,231,283
|
|
|
|
23,669
|
|
|
|
3,939
|
|
|
|
104,943,652
|
|
|
|
30,469
|
|
|
|
3,444
|
|
Xuzhou Colorful City
|
|
|
15,229,543
|
|
|
|
6,879
|
|
|
|
2,214
|
|
|
|
(809,093
|
)
|
|
|
940
|
|
|
|
(861
|
)
|
Total
|
|
|
289,044,505
|
|
|
|
93,519
|
|
|
|
3,091
|
|
|
|
457,726,553
|
|
|
|
153,843
|
|
|
|
2,975
|
|
Shandong region
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jinan International City Garden
|
|
|
19,553
|
|
|
|
–
|
|
|
|
–
|
|
|
|
811,327
|
|
|
|
896
|
|
|
|
905
|
|
Jinan Xinyuan Splendid
|
|
|
26,841
|
|
|
|
795
|
|
|
|
34
|
|
|
|
669,617
|
|
|
|
1,414
|
|
|
|
474
|
|
Shandong Royal Palace
|
|
|
187,338,918
|
|
|
|
77,185
|
|
|
|
2,427
|
|
|
|
28,512,389
|
|
|
|
8,691
|
|
|
|
3,281
|
|
Jinan Xin Central
|
|
|
56,530,792
|
|
|
|
26,293
|
|
|
|
2,150
|
|
|
|
5,703,601
|
|
|
|
3,549
|
|
|
|
1,607
|
|
Qingdao Royal Dragon Bay
|
|
|
65,455,833
|
|
|
|
20,512
|
|
|
|
3,191
|
|
|
|
211,377,608
|
|
|
|
72,466
|
|
|
|
2,917
|
|
Jinan Royal Spring Bay
|
|
|
25,237,505
|
|
|
|
18,217
|
|
|
|
1,385
|
|
|
|
35,772,711
|
|
|
|
28,459
|
|
|
|
1,257
|
|
Total
|
|
|
334,609,442
|
|
|
|
143,002
|
|
|
|
2,340
|
|
|
|
282,847,253
|
|
|
|
115,475
|
|
|
|
2,449
|
|
Project
|
|
Year Ended December 31,
|
|
|
|
2018
|
|
|
2019
|
|
|
|
Contract
Sales
|
|
|
Square
Meters
Sold
|
|
|
Average
Selling
Price
|
|
|
Contract
Sales
|
|
|
Square
Meters
Sold
|
|
|
Average
Selling
Price
|
|
|
|
US$
|
|
|
m 2
|
|
|
US$/m 2
|
|
|
US$
|
|
|
m 2
|
|
|
US$/m 2
|
|
Henan region
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zhengzhou Royal Palace
|
|
|
(5,771
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
328
|
|
|
|
–
|
|
|
|
–
|
|
Zhengzhou Modern City
|
|
|
107,384
|
|
|
|
(183
|
)
|
|
|
(587
|
)
|
|
|
93,470
|
|
|
|
125
|
|
|
|
748
|
|
Zhengzhou Yipin Xiangshan Phase II
|
|
|
6,712
|
|
|
|
–
|
|
|
|
–
|
|
|
|
7,324
|
|
|
|
–
|
|
|
|
–
|
|
Zhengzhou Century East A
|
|
|
3,710,144
|
|
|
|
–
|
|
|
|
–
|
|
|
|
6,516
|
|
|
|
–
|
|
|
|
–
|
|
Zhengzhou Century East B
|
|
|
679,445
|
|
|
|
–
|
|
|
|
–
|
|
|
|
2,259
|
|
|
|
–
|
|
|
|
–
|
|
Zhengzhou Xin City
|
|
|
11,641,648
|
|
|
|
1,555
|
|
|
|
7,487
|
|
|
|
2,909,721
|
|
|
|
1,677
|
|
|
|
1,735
|
|
Zhengzhou Thriving Family
|
|
|
9,725,156
|
|
|
|
13,484
|
|
|
|
721
|
|
|
|
95,552
|
|
|
|
255
|
|
|
|
375
|
|
Henan Xin Central I
|
|
|
7,357,550
|
|
|
|
1,626
|
|
|
|
4,525
|
|
|
|
3,705,213
|
|
|
|
1,246
|
|
|
|
2,974
|
|
Zhengzhou Xindo Park
|
|
|
5,560,095
|
|
|
|
4,579
|
|
|
|
1,214
|
|
|
|
1,654,974
|
|
|
|
1,459
|
|
|
|
1,134
|
|
Xingyang Splendid I
|
|
|
19,743,246
|
|
|
|
17,701
|
|
|
|
1,115
|
|
|
|
7,284,479
|
|
|
|
6,722
|
|
|
|
1,084
|
|
Xingyang Splendid II
|
|
|
3,890,821
|
|
|
|
2,099
|
|
|
|
1,854
|
|
|
|
15,905,450
|
|
|
|
14,469
|
|
|
|
1,099
|
|
Xingyang Splendid III
|
|
|
38,553,679
|
|
|
|
33,254
|
|
|
|
1,159
|
|
|
|
5,619,346
|
|
|
|
3,022
|
|
|
|
1,859
|
|
Zhengzhou Fancy City I
|
|
|
6,185,567
|
|
|
|
1,836
|
|
|
|
3,369
|
|
|
|
(1,727,292
|
)
|
|
|
(962
|
)
|
|
|
1,796
|
|
Zhengzhou Fancy City II (South)
|
|
|
10,027,260
|
|
|
|
2,400
|
|
|
|
4,178
|
|
|
|
30,931,489
|
|
|
|
12,176
|
|
|
|
2,540
|
|
Zhengzhou International New City I
|
|
|
65,919,724
|
|
|
|
10,922
|
|
|
|
6,035
|
|
|
|
1,901,146
|
|
|
|
667
|
|
|
|
2,850
|
|
Henan Xin Central II
|
|
|
25,996,237
|
|
|
|
14,182
|
|
|
|
1,833
|
|
|
|
2,139,322
|
|
|
|
160
|
|
|
|
13,371
|
|
Zhengzhou Fancy City II (North)
|
|
|
68,689,834
|
|
|
|
45,002
|
|
|
|
1,526
|
|
|
|
23,943,077
|
|
|
|
17,237
|
|
|
|
1,389
|
|
Zhengzhou International New City II
|
|
|
59,792,620
|
|
|
|
17,524
|
|
|
|
3,412
|
|
|
|
17,152,144
|
|
|
|
6,793
|
|
|
|
2,525
|
|
Zhengzhou International New City III A
|
|
|
45,081,658
|
|
|
|
21,613
|
|
|
|
2,086
|
|
|
|
1,911,484
|
|
|
|
617
|
|
|
|
3,098
|
|
Zhengzhou International New City III B
|
|
|
246,489,399
|
|
|
|
116,223
|
|
|
|
2,121
|
|
|
|
3,562,470
|
|
|
|
1,743
|
|
|
|
2,044
|
|
Zhengzhou International New City III D
|
|
|
94,315,724
|
|
|
|
43,693
|
|
|
|
2,159
|
|
|
|
4,214,784
|
|
|
|
1,485
|
|
|
|
2,838
|
|
Zhengzhou Hangmei International Wisdom City I
|
|
|
71,036,589
|
|
|
|
65,129
|
|
|
|
1,091
|
|
|
|
30,795,601
|
|
|
|
29,086
|
|
|
|
1,059
|
|
Xingyang Splendid IV
|
|
|
23,662,693
|
|
|
|
20,749
|
|
|
|
1,140
|
|
|
|
44,924,042
|
|
|
|
40,056
|
|
|
|
1,122
|
|
Xinyuan Golden Water View City
|
|
|
93,930,378
|
|
|
|
32,643
|
|
|
|
2,878
|
|
|
|
122,873,568
|
|
|
|
42,220
|
|
|
|
2,910
|
|
Zhengzhou Fancy City III
|
|
|
32,599,264
|
|
|
|
16,774
|
|
|
|
1,943
|
|
|
|
104,640,984
|
|
|
|
57,108
|
|
|
|
1,832
|
|
Zhengzhou International New City III C
|
|
|
47,768,032
|
|
|
|
28,551
|
|
|
|
1,673
|
|
|
|
72,881,352
|
|
|
|
40,871
|
|
|
|
1,783
|
|
Zhengzhou International New City IV
|
|
|
19,773,543
|
|
|
|
9,266
|
|
|
|
2,134
|
|
|
|
360,369,948
|
|
|
|
169,948
|
|
|
|
2,120
|
|
Zhengzhou International New City IV B10
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
80,702,344
|
|
|
|
51,211
|
|
|
|
1,576
|
|
Zhengzhou International New City A04
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
45,067,930
|
|
|
|
22,117
|
|
|
|
2,038
|
|
Xingyang Splendid V
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
60,104,343
|
|
|
|
54,266
|
|
|
|
1,108
|
|
Total
|
|
|
1,012,238,631
|
|
|
|
520,622
|
|
|
|
1,944
|
|
|
|
1,043,673,368
|
|
|
|
575,774
|
|
|
|
1,813
|
|
Beijing region
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beijing Xindo Park
|
|
|
11,948,438
|
|
|
|
1,413
|
|
|
|
8,456
|
|
|
|
(278,714
|
)
|
|
|
(52
|
)
|
|
|
5,360
|
|
Tianjin Spring Royal Palace I
|
|
|
3,529,790
|
|
|
|
1,491
|
|
|
|
2,367
|
|
|
|
502,391
|
|
|
|
302
|
|
|
|
1,664
|
|
Tianjin Spring Royal Palace II
|
|
|
107,184,203
|
|
|
|
53,076
|
|
|
|
2,019
|
|
|
|
54,594,531
|
|
|
|
28,547
|
|
|
|
1,912
|
|
Total
|
|
|
122,662,431
|
|
|
|
55,980
|
|
|
|
2,191
|
|
|
|
54,818,208
|
|
|
|
28,797
|
|
|
|
1,904
|
|
Hunan region
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changsha Xinyuan Splendid
|
|
|
24,789,311
|
|
|
|
10,139
|
|
|
|
2,445
|
|
|
|
(5,201,934
|
)
|
|
|
(2,719
|
)
|
|
|
1,913
|
|
Changsha Mulian Royal Palace
|
|
|
62,988,918
|
|
|
|
36,669
|
|
|
|
1,718
|
|
|
|
(277,083
|
)
|
|
|
(159
|
)
|
|
|
1,743
|
|
Changsha Furong Thriving Family
|
|
|
106,233,985
|
|
|
|
71,824
|
|
|
|
1,479
|
|
|
|
1,725,396
|
|
|
|
321
|
|
|
|
5,375
|
|
Total
|
|
|
194,012,214
|
|
|
|
118,632
|
|
|
|
1,635
|
|
|
|
(3,753,621
|
)
|
|
|
(2,557
|
)
|
|
|
1,468
|
|
Hainan region
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sanya Yazhou Bay No.1
|
|
|
153,933,564
|
|
|
|
42,304
|
|
|
|
3,639
|
|
|
|
31,111,507
|
|
|
|
13,882
|
|
|
|
2,241
|
|
Xi’an region
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Xi’an Metropolitan
|
|
|
16,547,579
|
|
|
|
9,536
|
|
|
|
1,735
|
|
|
|
5,270,757
|
|
|
|
2,848
|
|
|
|
1,851
|
|
Dalian region
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dalian International Health Technology Town I
|
|
|
1,934,496
|
|
|
|
900
|
|
|
|
2,149
|
|
|
|
44,175,421
|
|
|
|
32,151
|
|
|
|
1,374
|
|
Guangdong region
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foshan Xinchuang AI International Science and Technology Innovation Valley
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
19,834,112
|
|
|
|
12,671
|
|
|
|
1,565
|
|
U.S.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New York Oosten Project
|
|
|
8,815,926
|
|
|
|
735
|
|
|
|
11,994
|
|
|
|
750,000
|
|
|
|
108
|
|
|
|
6,944
|
|
Grand Total
|
|
|
2,264,524,438
|
|
|
|
1,066,192
|
|
|
|
2,124
|
|
|
|
2,110,569,163
|
|
|
|
1,052,127
|
|
|
|
2,006
|
|
* The Company owns
16.66% equity interest in a joint venture, Suzhou Hengwan Real Estate Co., Ltd. which develops Suzhou Suhe Bay. The Company accounts
for its investment under the equity method.
** The Company owns
a 19.99% equity interest in Suzhou Litai Real Estate Co., Ltd., which develops Suzhou Gusu Shade II. The Company accounts for its
investment under the equity method.
*** The Company
owns 78.46% equity interest in a joint venture, Huzhou Xinhong Town Construction and Development Co., Ltd. which develops Huzhou
Silk Town. The Company accounts for its investment under the equity method.
Total square meters
sold decreased to 1,052,127 square meters for the year ended December 31, 2019 from 1,066,192 square meters for the year ended
December 31, 2018. The decrease was mainly due to decreased sales of newly launched projects in 2019.
The overall aggregate average selling price per square meter
for the year ended December 31, 2019 decreased to US$2,006 from US$2,124 for the year ended December 31, 2018, primarily due to
decreased pr-sales of higher margin saleable units that occurred in 2019.
Chengdu region.
Total square meters in this region sold for the year ended December 31, 2019 increased to 119,135 square meters from 80,963 square
meters for the year ended December 31, 2018, primarily due to increased sales of Chengdu Xinyuan City. The average selling price
per square meter for the year ended December 31, 2019 decreased to US$1,461 from US$1,615 for the year ended December 31, 2018.
Shanghai region.
Total square meters sold for the year ended December 31, 2019 increased to 153,843 square meters from 93,519 square meters for
the year ended December 31, 2018, mainly due to increased sales of Suzhou Galaxy Bay, Suzhou Suhe Bay, Suzhou Gusu Shade II and
Huzhou Silk Town, partially offset by reductions of saleable units of KunshanXindo Park. The average selling price per square meter
for the year ended December 31, 2019 slightly decreased to US$2,975 from US$3,091 for the year ended December 31, 2018.
Shandong region.
Total square meters sold for the year ended December 31, 2019 decreased to 115,475 square meters from 143,002 square meters for
the year ended December 31, 2018, mainly due to decreased sales of Shandong Royal Palace and Jinan Xin Central, partially offset
by increased sales of Qingdao Royal Dragon Bay. The average selling price per square meter for the year ended December 31, 2019
increased to US$2,449 from US$2,340 for the year ended December 31, 2018.
Henan region.
Total square meters sold for the year ended December 31, 2019 increased to 575,774 square meters from 520,622 square meters for
the year ended December 31, 2018, mainly due to newly launched pre-sales of Zhengzhou International New City IV B10, Zhengzhou
International New City A04, and Xingyang Splendid V, increased sales of Xingyang Splendid IV, Zhengzhou Fancy City III, and Zhengzhou
International New City IV, partially offset by reductions of saleable units of Xingyang Splendid III, Zhengzhou Fancy City II (North),
Zhengzhou International New City III A, Zhengzhou International New City III B, Zhengzhou International New City III D, and Zhengzhou
Hangmei International Wisdom City I. The average selling price per square meter for the year ended December 31, 2019 decreased
to US$1,813 from US$1,944 for the year ended December 31, 2018.
Beijing
region. Total square meters sold for the year ended December 31, 2019 decreased to 28,797 square meters from 55,980 square
meters for the year ended December 31, 2018, mainly due to reductions of saleable units of Tianjin Spring Royal Palace II. The
average selling price per square meter for the year ended December 31, 2019 decreased to US$1,904 from US$2,191 for the year ended
December 31, 2018.
Hunan
region. Total square meters sold for the year ended December 31, 2019 decreased to
(2,557) square meters from 118,632 square meters for the year ended December 31, 2018,
mainly due to reductions of saleable units of Changsha Furong Thriving Family, Changsha
Mulian Royal Palace and Changsha Xinyuan Splendid, and sales returns from previous trasactions
outpacing new sales.
Hainan region.
Total square meters sold for the year ended December 31, 2019 decreased to 13,882 square meters from 42,304 square meters for the
year ended December 31, 2018, mainly due to reductions of saleable units of Sanya Yazhou Bay No.1. The average selling price per
square meter for the year ended December 31, 2019 decreased to US$2,241 from US$3,639 for the year ended December 31, 2018, resulting
from the decrease in high margin units available for sale.
Xi’an
region. Total square meters sold for the year ended December 31, 2019 decreased to 2,848 square meters from 9,536 square meters
for the year ended December 31, 2018, mainly due to deductions of saleable units of Xi’an Metropolitan. The average selling
price per square meter for the year ended December 31, 2019 increased to US$1,851 from US$1,735 for the year ended December 31,
2018, resulting from the increment in high margin units available for sale.
Dalian region.
Total square meters sold for the year ended December 31, 2019 increased to 32,151 square meters from 900 square meters for the
year ended December 31, 2018, mainly due to the increase of saleable units of Dalian International Health Technology Town I. The
average selling price per square meter for the year ended December 31, 2019 decreased to US$1,374 from US$2,149 for the year ended
December 31, 2018, resulting from the decrease in high margin units available for sale.
Guangdong
region. Total square meters sold for the year ended December 31, 2019 was 12,671 square meters, mainly due to the increase
of saleable units of Foshan Xinchuang AI International Science and Technology Innovation Valley. The average selling price per
square meter for the year ended December 31, 2019 was US$1,565.
United
States region. Total square meters sold for the year ended December 31, 2019 decreased to 108 square meters from 735 square
meters for the year ended December 31, 2018, mainly due to deductions of saleable units of New York Oosten Project. The average
selling price per square meter for the year ended December 31, 2019 decreased to US$6,944 million from US$11,994 million for the
year ended December 31, 2018, resulting from the decrease in high margin units available for sale.
Real estate leasing
Real estate leasing
income increased by US$6.5 million, or 67.7% to US$16.1 million for the year ended December 31, 2019 from US$9.6 million for
the year ended December 31, 2018.
Real estate management services income
Real estate management
services income increased by US$4.1 million, or 6.5%, to US$67.5 million for the year ended December 31, 2019 from US$63.4 million
for the year ended December 31, 2018. The increase primarily resulted from expanded property management service operations.
Other revenue
Other revenue increased
by US$6.9 million, or 135.3%, to US$12.0 million for the year ended December 31, 2019 from US$5.1 million for the year ended December
31, 2018.
Costs of Revenue
Costs of revenue
increased by US$320.3 million, or 20.0%, to US$1,922.3 million for the year ended December 31, 2019 from US$1,602.1 million for
the year ended December 31, 2018, generally in line with our revenue increases.
Cost of real estate sales
Cost
of real estate sales increased by US$307.8 million, or 19.9%, to US$1,851.8 million for the year ended December 31, 2019 from
US$1,544.0 million for the year ended December 31, 2018. Total land use rights cost increased by US$201.3 million, or 29.8%, from
US$676.3 million (42.2% of cost of real estate sales) for the year ended December 31, 2018 to US$877.6 million (45.7% of cost
of real estate sales) for the year ended December 31, 2019, the increase was consistent with the revenue. Construction cost, including
capitalized interest, increased by US$106.5 million, or 12.3%, to US$974.2 million for the year ended December 31, 2019 from US$867.7
million for the year ended December 31, 2018, primarily due to increased project construction activity.
Cost of real estate leasing
Cost of real estate
leasing increased by US$3.4 million, or 36.5%, to US$12.8 million for the year ended December 31, 2019 from US$9.3 million
for the year ended December 31, 2018. The increase was primarily attributable to the increase of depreciation.
Cost of real estate management services
Cost
of real estate management services decreased by US$3.7 million, or 8.4%, to US$40.9 million for the year ended December 31, 2019
from US$44.6 million for year ended December 31, 2018. The decrease was primarly attributable to the new projects delivered which
could share labor resources within the existing projects.
Other costs
Other
costs increased by US$12.7 million, or 308.1%, to US$16.9 million for the year ended December 31, 2018 from US$4.1 million for
year ended December 31, 2018. The increase as primarily attributable to the rise in deputy property management costs and the increasing
of software consulting service cost.
Gross Profit
Gross profit decreased
by US$55.2 million, or 9.0%, to US$560.3 million for the year ended December 31, 2019 from US$615.5 million for the year ended
December 31, 2018. Gross profit margin was 22.6% for the year ended December 31, 2019 compared to 27.8% for the year ended December
31, 2018.
Selling and Distribution Expenses
Selling
and distribution expenses increased by US$3.2 million, or 3.8%, to US$86.8 million for the year ended December 31, 2019 from US$83.6
million for the year ended December 31, 2018. As a percentage of revenue, selling and distribution expenses was 3.5% for the year
ended December 31, 2019 compared to 3.8% for the year ended December 31, 2018. The increase was primarily due to a US$4.5 million
increase in advertising and promotion expenses for new projects launched in 2019 as well as existing projects, partially offset
by a US$1.8 million decrease in salary and welfare expenses. As revenue grows in the future, we expect selling and distribution
expenses as a percentage of revenue to be flat or slightly increase.
General and Administrative Expenses
General and administrative
expenses increased by US$7.2 million, or 4.6% to US$163.7 million for the year ended December 31, 2019 from US$156.5 million for
the year ended December 31, 2018. The increase was primarily due to an increase in consulting fees of US$4.6 million, and an increase
in research and development expenses of US$2.0 million.
As a percentage
of revenue, general and administrative expenses were 6.6% for the year ended December 31, 2019, compared to 7.1% for the year ended
December 31, 2018.
Interest Income
Interest income
was US$51.5 million for the year ended December 31, 2019, compared to US$31.2 million for the year ended December 31, 2018.
Interest Expenses
For the year ended
December 31, 2019, out of total interest costs incurred, US$113.8 million did not qualify for interest capitalization treatment
under U.S. GAAP and was charged to the 2019 Statement of Comprehensive Income. Total gross interest costs incurred amounted to
US$317.9 million for the year of 2019, including US$308.7 million of interest on loans and notes, US$8.1 million of amortization
of debt issuance costs and US$1.0 million of amortization of aircraft finance lease related interest.
For the year ended
December 31, 2018, out of total interest costs incurred, US$99.2 million did not qualify for interest capitalization treatment
under U.S. GAAP and was charged to the 2018 Statement of Comprehensive Income. Total gross interest costs incurred amounted to
US$281.8 million for the year of 2018, including US$271.8 million of interest on loans and notes, US$8.6 million of amortization
of debt issuance costs and US$1.4 million of amortization of aircraft finance lease related interest.
Income Taxes
Income taxes increased
by US$6.1 million, or 4.2%, to US$150.5 million for the year ended December 31, 2019 from US$144.4 million for the year ended December
31, 2018 mainly due to the increase in taxable income in the PRC.
Our effective tax
rate increased to 64.4% for the year ended December 31, 2019, from 57.7% for the year ended December 31, 2018.
Net Income Attributable to our Shareholders
Net income decreased
by US$4.7 million to US$68.3 million for the year ended December 31, 2019, from US$73.0 million for the year ended December 31,
2018.
Discussion
of Segment Operations
We consider each
of our individual property developments as a discrete operating segment. As a presentation of segment information for each property
development would not be meaningful, we have aggregated our segments on a provincial basis as property development projects undertaken
within a province have similar expected economic characteristics, type of properties offered, customers and market and regulatory
environment. Our reporting segments are: (i) property developments in Zhengzhou, Henan Province, (ii) property developments in
Jinan and Qingdao, Shandong Province, (iii) property developments in Suzhou, Xuzhou and Kunshan, Jiangsu Province and Shanghai,
(iv) property developments in Chengdu, Sichuan Province (v) property developments in Beijing and Tianjin, (vi) property developments
in Sanya, Hainan Province, (vii) property developments in Changsha, Hunan Province, (viii) property developments in Xi’an,
Shaanxi Province, (ix) property developments in Zhuhai and Foshan Guangdong Province, (x) property developments in Wuhan, Hubei
Province, (xi) property developments in Dalian, Liaoning Province, (xii) property developments in the United States, (xiii) property
management and (xiv) “other.” Each geographic operating segment is principally engaged in the construction and development
of residential real estate units. The “property management” category relates to property management services. The “other”
category relates to investment holdings, installation of intercom systems, landscaping, engineering and management, real estate
sale, purchase and lease activities. The accounting policies of the various segments are the same as those described in Note 2,
“Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements included in this report.
|
|
2018
|
|
|
2019
|
|
|
|
(US$ in thousands, except for percentages)
|
|
Zhengzhou, Henan
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
1,010,783
|
|
|
|
1,396,895
|
|
Total cost of revenue
|
|
|
(706,606
|
)
|
|
|
(1,091,987
|
)
|
Gross profit
|
|
|
304,177
|
|
|
|
304,908
|
|
Gross margin
|
|
|
30.1
|
%
|
|
|
21.8
|
%
|
Operating income
|
|
|
241,365
|
|
|
|
234,068
|
|
Jinan and Qingdao, Shandong
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
292,266
|
|
|
|
276,143
|
|
Total cost of revenue
|
|
|
(230,042
|
)
|
|
|
(222,755
|
)
|
Gross profit
|
|
|
62,224
|
|
|
|
53,388
|
|
Gross margin
|
|
|
21.3
|
%
|
|
|
19.3
|
%
|
Operating income
|
|
|
49,613
|
|
|
|
38,618
|
|
Suzhou, Kunshan and Xuzhou, Jiangsu, and Shanghai
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
332,385
|
|
|
|
283,475
|
|
Total cost of revenue
|
|
|
(217,349
|
)
|
|
|
(204,270
|
)
|
Gross profit
|
|
|
115,036
|
|
|
|
79,205
|
|
Gross margin
|
|
|
34.6
|
%
|
|
|
27.9
|
%
|
Operating income
|
|
|
99,588
|
|
|
|
61,125
|
|
Chengdu, Sichuan
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
81,107
|
|
|
|
86,981
|
|
Total cost of revenue
|
|
|
(76,833
|
)
|
|
|
(82,568
|
)
|
Gross profit
|
|
|
4,274
|
|
|
|
4,413
|
|
Gross margin
|
|
|
5.3
|
%
|
|
|
5.1
|
%
|
Operating income/(loss)
|
|
|
(2
|
)
|
|
|
(3,599
|
)
|
Beijing and Tianjin
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
77,813
|
|
|
|
130,468
|
|
Total cost of revenue
|
|
|
(73,875
|
)
|
|
|
(98,126
|
)
|
Gross profit
|
|
|
3,938
|
|
|
|
32,342
|
|
Gross margin
|
|
|
5.1
|
%
|
|
|
24.8
|
%
|
Operating loss
|
|
|
(66,329
|
)
|
|
|
(40,991
|
)
|
Sanya, Hainan
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
170,083
|
|
|
|
43,820
|
|
Total cost of revenue
|
|
|
(87,715
|
)
|
|
|
(31,767
|
)
|
Gross profit
|
|
|
82,368
|
|
|
|
12,053
|
|
Gross margin
|
|
|
48.4
|
%
|
|
|
27.5
|
%
|
Operating income
|
|
|
70,279
|
|
|
|
9,539
|
|
|
|
2018
|
|
|
2019
|
|
|
|
(US$ in thousands, except for percentages)
|
|
Changsha, Hunan
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
97,756
|
|
|
|
158,658
|
|
Total cost of revenue
|
|
|
(102,979
|
)
|
|
|
(112,402
|
)
|
Gross profit
|
|
|
(5,223
|
)
|
|
|
46,256
|
|
Gross margin
|
|
|
-5.3
|
%
|
|
|
29.2
|
%
|
Operating income/(loss)
|
|
|
(16,232
|
)
|
|
|
42,265
|
|
Xi’an, Shaanxi
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
86,165
|
|
|
|
13,002
|
|
Total cost of revenue
|
|
|
(56,487
|
)
|
|
|
(9,985
|
)
|
Gross profit
|
|
|
29,678
|
|
|
|
3,017
|
|
Gross margin
|
|
|
34.4
|
%
|
|
|
23.2
|
%
|
Operating income
|
|
|
23,774
|
|
|
|
(2,792
|
)
|
Zhuhai and Foshan, Guangdong
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
–
|
|
|
|
9,738
|
|
Total cost of revenue
|
|
|
–
|
|
|
|
(6,822
|
)
|
Gross profit
|
|
|
–
|
|
|
|
2,917
|
|
Gross margin
|
|
|
–
|
|
|
|
30.0
|
%
|
Operating loss
|
|
|
(1,185
|
)
|
|
|
950
|
|
Wuhan, Hubei
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
–
|
|
|
|
–
|
|
Total cost of revenue
|
|
|
–
|
|
|
|
(23
|
)
|
Gross profit
|
|
|
–
|
|
|
|
(23
|
)
|
Gross margin
|
|
|
–
|
|
|
|
0.0
|
%
|
Operating loss
|
|
|
(1,950
|
)
|
|
|
(3,453
|
)
|
Dalian, Liaoning
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
427
|
|
|
|
18,622
|
|
Total cost of revenue
|
|
|
(298
|
)
|
|
|
(13,441
|
)
|
Gross profit
|
|
|
129
|
|
|
|
5,181
|
|
Gross margin
|
|
|
30.2
|
%
|
|
|
27.8
|
%
|
Operating loss
|
|
|
(1,357
|
)
|
|
|
2,380
|
|
US
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
9,387
|
|
|
|
1,940
|
|
Total cost of revenue
|
|
|
(9,358
|
)
|
|
|
(2,793
|
)
|
Gross profit
|
|
|
29
|
|
|
|
(853
|
)
|
Gross margin
|
|
|
0.3
|
%
|
|
|
-44.0
|
%
|
Operating income/(loss)
|
|
|
(4,626
|
)
|
|
|
(10,267
|
)
|
Property Management
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
51,751
|
|
|
|
58,798
|
|
Total cost of revenue
|
|
|
(32,122
|
)
|
|
|
(36,736
|
)
|
Gross profit
|
|
|
19,629
|
|
|
|
22,062
|
|
Gross margin
|
|
|
37.9
|
%
|
|
|
37.5
|
%
|
Operating loss
|
|
|
13,946
|
|
|
|
14,985
|
|
Others
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
7,628
|
|
|
|
4,093
|
|
Total cost of revenue
|
|
|
(8,411
|
)
|
|
|
(8,649
|
)
|
Gross profit
|
|
|
(783
|
)
|
|
|
(4,556
|
)
|
Gross margin
|
|
|
-10.3
|
|
|
|
-111.3
|
%
|
Operating loss
|
|
|
(31,456
|
)
|
|
|
(32,966
|
)
|
Year Ended December 31,
2019 Compared to Year Ended December 31, 2018
Zhengzhou,
Henan. Total revenue increased by US$386.1 million, or 38.2%, from US$1,396.9 million for the year ended December 31, 2018
to US$1,010.8 million for the year ended December 31, 2019. Gross profit for this region was US$304.9 million, or 21.8% of revenue,
in the year ended December 31, 2019, as compared to US$304.2 million, or 30.1%, in the year ended December 31, 2018. The operating
income was US$234.1 million for the year ended December 31, 2019, representing a decrease of US$7.3 million, or 3.0%, from US$241.4
million for the year ended December 31, 2018.
Jinan and Qingdao,
Shandong. Total revenue decreased by US$16.2 million, from US$292.3 million for the year ended December 31, 2018 to US$276.1
million for the year ended December 31, 2019. The gross profit decreased to US$53.4 million, or 19.3% of revenue, for the year
ended December 31, 2019 from US$62.2 million, or 21.3% of revenue, for the year ended December 31, 2018. The operating income was
US$38.6 million for the year ended December 31, 2019, representing a decrease of US$11.0 million from US$49.6 million for the year
ended December 31, 2018.
Suzhou, Kunshan
and Xuzhou, Jiangsu and Shanghai. Total revenue decreased by US$48.9 million, or 14.7%, from US$332.4 million for the year
ended December 31, 2018 to US$283.5 million for the year ended December 31, 2019. Gross profit for the Jiangsu and Shanghai segment
was US$79.2 million for the year ended December 31, 2019, decreasing by US$35.8 million from US$115.0 million for the year ended
December 31, 2018. Operating income was US$61.1 million for the year ended December 31, 2019, representing a decrease of US$38.5
million, or 38.7%, from US$99.6 million for the year ended December 31, 2018.
Chengdu, Sichuan.
Total revenue increased by US$5.9 million from US$81.1 million for the year ended December 31, 2018 to US$87.0 million for the
year ended December 31, 2019. Gross profit for the Sichuan segment was US$4.4 million for the year ended December 31, 2019, as
compared to US$4.3 million for the year ended December 31, 2018. Operating loss was US$3.6 million for the year ended December
31, 2019, representing a decrease of US$3.6 million from the operating loss of US$32 thousand for the year ended December 31, 2018.
Beijing and Tianjin.
Total revenue increased by US$52.7 million, or 67.7%, from US$77.8 million for the year ended December 31, 2018 to US$130.5 million
for the year ended December 31, 2019. Gross profit for the Beijing and Tianjin segment was US$32.3 million for the year ended December
31, 2019, increasing by US$28.4 million from US$3.9 million for the year ended December 31, 2018. Operating loss was US$41.0 million
for the year ended December 31, 2019, representing a decrease of US$25.3 million, or 38.2%, from the operating loss of US$66.3
million for the year ended December 31, 2018.
Sanya, Hainan.
Total revenue decreased by US$126.3 million, or 74.3%, from US$170.1 million for the year ended December 31, 2018 to US$43.8 million
for the year ended December 31, 2019. Gross profit for the Hainan segment was US$12.1 million for the year ended December 31, 2019,
decreasing by US$70.3 million from US$82.4 million for the year ended December 31, 2018. Operating income was US$9.5 million for
the year ended December 31, 2019, representing a decrease of US$60.8 million, or 86.5%, from income of US$70.3 million for the
year ended December 31, 2018.
Changsha, Hunan.
Total revenue increased by US$60.9 million, or 62.3%, from US$97.8 million for the year ended December 31, 2018 to US$158.7 million
for the year ended December 31, 2019. Gross profit for the Hunan segment was US$46.3 million for the year ended December 31, 2019,
increasing by US$51.5 million from gross loss of US$5.2 million for the year ended December 31, 2018. Operating income was US$42.3
million for the year ended December 31, 2019, representing an increase of US$58.5 million from operating loss of US$16.2 million
for the year ended December 31, 2018.
Xi’an,
Shaanxi. Total revenue decreased by US$73.2 million, or 84.9%, from US$86.2 million for the year ended December 31, 2018 to
US$13.0 million for the year ended December 31, 2019. Gross profit for the Shaanxi segment was US$3.0 million for the year ended
December 31, 2019, decreasing by US$26.7 million from US$29.7 million for the year ended December 31, 2018. Operating loss was
US$2.8 million for the year ended December 31, 2019, representing a decrease of US$26.6 million from US$23.8 million from operating
inome for the year ended December 31, 2018.
Zhuhai and Foshan,
Guangdong. Total revenue increased by US$9.7 million, or 100.0%, from zero for the year ended December 31, 2018 to US$9.7 million
for the year ended December 31, 2019. Gross profit for the Guangdong segment was US$2.9 million for the year ended December 31,
2019, increasing by US$2.9 million from zero for the year ended December 31, 2018. Operating income was US$1.0 million for the
year ended December 31, 2019, representing an increase of US$2.2 million from operating loss of US$1.2 million for the year ended
December 31, 2018.
Wuhan, Hubei.
Total revenue for the year ended December 31, 2018 and 2019 was zero. The gross loss decreased to US$23 thouand for the year ended
December 31, 2019 from zero for the year ended December 31, 2018. Operating loss was US$3.5 million for the year ended December
31, 2019, representing an increase of US$1.5 million from operating loss of US$2.0 million for the year ended December 31, 2018.
Dalian, Liaoning.
Total revenue increased by US$18.2 million from US$0.4 million for the year ended December 31, 2018 to US$18.6 million for the
year ended December 31, 2019. Gross profit for the Liaoning segment was US$5.2 million for the year ended December 31, 2019, increasing
by US$5.1 million from US$0.1 million for the year ended December 31, 2018. Operating income was US$2.4 million for the year ended
December 31, 2019, representing an increase of US$3.8 million from operating loss of US$1.4 million for the year ended December
31, 2018.
The
United States. Total revenue decreased by US$7.5 million, or 79.8%, to US$1.9 million for the year ended December 31, 2019
from US$9.4 million for the year ended December 31, 2018. This region had a gross loss of US$0.9 million, compared to zero for
the year ended December 31, 2018. This region has an operating loss of US$10.3 million for the year ended December 31, 2019, increasing
by US$5.7 million from operating loss of US$4.6 million in the year ended December 31, 2018.
Property Management.
Property management revenue increased by US$7.0 million, or 13.5%, to US$58.8 million for the year ended December 31, 2019 from
US$51.8 million for the year ended December 31, 2018. Gross profit was US$22.1 million for the year ended December 31, 2019, increasing
by US$2.5 million from US$19.6 million for the year ended December 31, 2018. Operating income was US$15.0 million for the year
ended December 31, 2019, representing an increase of US$1.1 million from US$13.9 million for the year ended December 31, 2018.
Others. Other
revenue of US$4.1 million for the year ended December 31, 2019 consisted of real estate-related services, including, among others,
property management services, broadband network installation, landscaping services and consulting services. These services generated
a gross loss of US$4.6 million in the year ended December 31, 2019, compared to a gross loss of US$0.8 million in the year ended
December 31, 2018.
Critical Accounting
Policies
We prepare our consolidated
financial statements in accordance with U.S. GAAP, which requires us to make judgments, estimates and assumptions that affect (i)
the reported amounts of our assets and liabilities, (ii) the disclosure of our contingent assets and liabilities at the end of
each reporting period and (iii) the reported amounts of revenues and expenses during each reporting period. We continually evaluate
these estimates based on our own experience, knowledge and assessment of current business and other conditions, and our expectations
regarding the future based on available information and reasonable assumptions, which together form our basis for making judgments
about matters that are inherently uncertain. Since the use of estimates is an integral component of the financial reporting process,
our actual results could differ from those estimates. Some of our accounting policies require a higher degree of judgment than
others in their application.
When reading our
financial statements, you should consider (i) our selection of critical accounting policies, (ii) the judgment and other uncertainties
affecting the application of such policies and (iii) the sensitivity of reported results to changes in conditions and assumptions.
We believe the following accounting policies involve the most significant judgments and estimates used in the preparation of our
financial statements.
Revenue recognition
Revenue
is recognized when control of the goods or services are transferred to the customer at an amount that reflects the consideration
to which we expect to be entitled in exchange for those goods or services. We also elected to exclude sales taxes and other similar
taxes from the measurement of the transaction price. Therefore, revenues are recognized net of business tax, value added taxes
(“VAT”).
A significant portion
of our revenue is derived from real estate sales of development properties in the PRC, with revenue recognized using the percentage-of-completion
(“POC”) method in previous years. Under ASC 606, to recognize revenue over time similar to the POC method, contractual
provisions need to provide us with an enforceable right to payment. Historically, our contracts did not include a specific term
on enforceable right to payment. For all contracts executed starting from January 1, 2018, we modified certain terms to establish
an enforceable right to payment for performance completed to date, including a reasonable profit. Under ASC 606, we recognize revenue
on an “over time” basis prospectively for these new contracts by using cost inputs to measure progress towards the
completion of the performance obligation. The progress towards complete satisfaction of the performance obligation is measured
based on our efforts or inputs to the satisfaction of the performance obligation, by reference to the contract costs incurred up
to the end of reporting period as a percentage of total estimated costs for each contract. For those contracts that did not include
enforceable right to payment terms, revenue is recognized at a point in time when title to the property is transferred to the customer.
For the periods presented, all the revenues related to projects in the U.S. were recognized until title is transferred.
Generally,
we receive short-term advances from its customers for real estate sales. Using the practical expedient, we do not adjust the promised
amount of consideration for the effects of a significant financing component if it expects, at contract inception, that the period
between the transfer of the promised good or service to the customer and when the customer pays for that good or service will
be one year or less. We also receive long-term advances from customers for real estate sales. The transaction price for such contracts
is adjusted for the effects of a financing component, if long-term advances from customers is assessed as significant at the individual
contract level.
Contract assets
We
pay sales commission to its real estate sales agencies for each real estate sales contract. We have elected to apply the optional
practical expedient for costs to obtain a contract which allows us to immediately expense sales commissions (included under selling
and distribution expenses) when the amortization period of the asset that we otherwise would have used is one year or less. For
incremental costs of obtaining real estate sales contracts that extend beyond a one-year period, these incremental costs of obtaining
real estate sales contracts are recognized as assets if the real estate sales are collectible and amortized as we transfer the
control of the assets to customers.
Contract liabilities
A
contract liability is the obligation to transfer goods or services to a customer for which we have received consideration (or
an amount of consideration is due) from the customer. If a customer pays consideration before we transfer goods or services to
the customer, a contract liability is recognized when the payment is made or the payment is due (whichever is earlier). Our contract
liabilities are comprised of customer deposits, which are recognized as revenue when we perform under the contract.
Income taxes
We
account for income tax using the balance sheet method. Deferred taxes are provided for the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes,
as well as unutilized net operating losses. A valuation allowance is provided for deferred tax assets if it is more likely than
not these items will either expire before we are able to realize our benefits, or that future utilization is uncertain. We assess
the need for valuation allowances by tax reporting unit by jurisdiction. Generally, each of our reportable operating segments
is organized in a separate tax reporting unit in a single tax jurisdiction.
Late payment interests
and penalties arising from underpayment of income taxes is recognized according to the relevant tax law. The amount of interest
expense to be recognized is computed by applying the applicable statutory rate of interest to the difference between the tax position
recognized and the amount previously taken or expected to be taken in a tax return. Interest recognized in accordance with ASC
740-10, “Income Tax” (“ASC 740-10”) is classified in the consolidated financial statements as interest
expense, while penalties recognized in accordance with this interpretation are classified in the consolidated financial statements
as other expenses.
In accordance with
the provisions of ASC 740-10, we recognize in our consolidated financial statements the impact of a tax position if a tax return’s
position or future tax position is “more likely than not” to prevail (defined as a likelihood of more than fifty percent
of being sustained upon audit, based on the technical merits of the tax position). Tax positions that meet the “more likely
than not” threshold are measured (using a probability weighted approach) at the largest amount of tax benefit that has a
greater than fifty percent likelihood of being realized upon settlement. Our estimated liability for unrecognized tax benefits
is periodically assessed for adequacy and may be affected by changing interpretations of laws, rulings by tax authorities, certain
changes and/or developments with respect to audits, and expiration of the statute of limitations. The outcome for a particular
audit cannot be determined with certainty prior to the conclusion of the audit and, in some cases, appeal or litigation process.
The actual benefits ultimately realized may differ from our estimates. As each audit is concluded, adjustments, if any, are appropriately
recorded in our consolidated financial statements. Additionally, in future periods, changes in facts, circumstances, and new information
may require us to adjust the recognition and measurement estimates with regards to individual tax positions. Changes in recognition
and measurement estimates are recognized in the period in which the changes occur.
Please see the more
detailed discussion in Note 15 to our consolidated financial statements included elsewhere in this annual report.
Land
Appreciation Tax (“LAT”)
In accordance with the relevant taxation laws for real estate
companies of the provinces in which the subsidiaries operate in the PRC, the local tax authorities levy LAT based on progressive
rates ranging from 30% to 60% on the appreciation of land value, being the proceeds of sales of properties less deductible expenditures,
including borrowing costs and all property development expenditures. LAT is generally prepaid based on a fixed percentage (varying
by local tax jurisdiction) of customer deposits and is expensed when the related revenue is recognized. Please see the more detailed
discussion in Note 15 to our consolidated financial statements included elsewhere in this annual report.
Share-based compensation
Under
ASC 718, “Compensation -Stock Compensation,” we are required to recognize
share-based compensation as compensation expense based on the fair value of stock options
and other equity awards on the date of the grant. We have elected to recognize compensation
expense using the straight-line method for all restricted shares and stock options granted
with service conditions that have a graded vesting schedule. We have a policy of using
authorized shares in the existing pool to satisfy any future exercise of share options
and shares repurchased held by a third party trustee to satisfy the restricted shares
granted under our 2014 RSU Plan.
For options granted with performance conditions, share-based
compensation expense is recognized based on the probable outcome of the performance condition using the accelerated method over
the requisite service period. A performance condition is not taken into consideration in determining fair value of the non-vested
shares granted.
Real estate properties development
completed and under development
Real estate properties completed and under development consist
of residential unit sites and commercial offices. We lease the land for the residential unit sites under land use right leases
with various terms from the PRC. Real estate properties development completed, under development stated at the lower of carrying
amounts or fair value less selling costs.
Expenditures for
land development, including cost of land use rights, deed tax, pre-development costs and engineering costs, are capitalized and
allocated to development projects by the specific identification method. Costs are allocated to specific units within a project
based on the ratio of the sales value of units to the estimated total sales value times the total project costs.
Costs of amenities
transferred to buyers are allocated as common costs of the project that are allocated to specific units as a component of total
construction costs. For amenities retained by us, costs in excess of the related fair value of the amenities are also treated
as common costs. Results of operations of amenities retained by us are included in current operating results.
In accordance with ASC 360, “Property, Plant and Equipment”
(“ASC 360”), real estate property development completed and under development are subject to valuation adjustments
when the carrying amount exceeds fair value. An impairment loss is recognized only if the carrying amount of the assets is not
recoverable and exceeds fair value. The carrying amount is not recoverable if it exceeds the sum of the undiscounted cash flows
expected to be generated by the assets.
When
the profitability of a current project deteriorates due to a slowdown in the sales pace, reduction of pricing or some other factor,
this indicates that there may be a possible future loss on delivery and possible impairment in the recoverability of the assets.
Accordingly, the assets of such project are subsequently reviewed for future losses and impairment by comparing the estimated
future undiscounted cash flows for the project to the carrying value of such project. If the estimated future undiscounted cash
flows are less than the asset’s carrying value, such deficit will be charged as a future loss and the asset will then be
written down to its estimated fair value.
We determine estimated
fair value primarily by discounting the estimated future cash flows relating to the asset. In estimating the cash flows for a project,
we use various factors including (a) the expected pace at which the planned number of units will be sold, based on competitive
market conditions, historical trends in sales pace and actual average selling prices of similar product offerings and any other
long or short-term economic conditions which may impact the market in which the project is located; (b) the estimated net sales
prices expected to be attained based on the current market conditions and historical price trends, as well as any estimated increases
in future sales prices based upon the projected rate of unit sales, the estimated time gap between presale and expected delivery,
the impact of government policies, the local and regional competitive environment, and certain external factors such as the opening
of a subway line, school or factory; and (c) the expected costs to be incurred in the future by us, including, but not limited
to, construction cost, construction overhead, sales and marketing, sales taxes and interest costs.
Our
determination of fair value requires discounting the estimated cash flows at a rate commensurate with the inherent risk associated
with the assets and related estimated cash flows. The discount rate used in determining each project’s fair value depends
on the stage of development, location and other specific factors that increase or decrease the risk associated with the estimated
cash flows.
For the years ended
December 31, 2018 and 2019, we did not recognize any impairment for real estate properties completed and under development.
Real estate properties held for lease,
net
Real estate properties
held for lease are recorded at cost less accumulated depreciation. Depreciation is computed using the straight-line method over
the estimated useful lives of the assets. Estimated useful lives of the real estate properties held for lease are 20-60 years.
Maintenance, repairs
and minor renewals are charged directly to expenses as incurred. Major additions and improvements to the real estate properties
held for lease are capitalized.
In accordance with ASC 360, Property, Plant and Equipment,
real estate properties held for lease is subject to valuation adjustments when the carrying amount exceeds fair value. An impairment
loss is recognized only if the carrying amount of the assets is not recoverable and exceeds fair value. The carrying amount is
not recoverable if it exceeds the sum of the undiscounted cash flows expected to be generated by the assets.
For the years ended
December 31, 2018 and 2019, we did not recognize any impairment for real estate properties held for lease.
Leases
We adopted ASU No. 2016-02, Leases (Topic
842) (“ASU 2016-02”) from January 1, 2019 by using the modified retrospective method and did not restate the comparable
periods. We have elected the package of practical expedients, which allows us to carry forward our original assessment of whether
contracts contained lease, lease classification, and the initial direct cost. Lastly, we elected the short-term lease exemption
for all contracts with lease terms of 12 months or less.
We determines if an arrangement is or contains
a lease at inception or modification of a contract. A contract is or contains a lease if the contract conveys the right to control
the use of an identified asset for a period in exchange for consideration. Control over the use of the identified asset means the
lessee has both (a) the right to obtain substantially all of the economic benefits from the use of the asset and (b) the right
to direct the use of the asset.
Lessee
We categorize leases with contractual
terms longer than twelve months as either operating or finance. Finance leases are generally those leases that transfer ownership
to us or allow us to purchase assets at a nominal amount by the end of the lease term. Assets acquired under finance leases are
recorded in property and equipment, net and real estate properties held for lease, net. All other leases are recorded as operating
lease right-of-use (“ROU”) assets.
Lease liability is recorded based the present
value of the lease payments over the lease term using a discount rate at commencement date. As the implicit rate in our leases
is not typically readily available, we use an incremental borrowing rate based on the information available at the lease commencement
date in determining the present value of lease payments. This incremental borrowing rate reflects the fixed rate at which we could
borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar economic
environment. Leased assets are recognized based on the initial present value of the lease payments, reduced by lease incentives.
Operating lease expense for lease payments
is recognized on a straight-line basis over the lease term. The expected lease terms are based on the non-cancelable term of the
lease and may contain options to extend or terminate the lease when it is reasonably certain that we will exercise that option.
Finance lease assets are amortized in a manner consistent with our normal depreciation policy for owned assets. Variable lease
payments not dependent on an index or rate are excluded from the ROU assets and lease liability calculations and are recognized
in expense in the period which the obligation for those payments is incurred.
Lessor
As a lessor, our leases are classified
as operating leases under ASC 842, and thus the pattern of recognition of real estate lease income remains unchanged from previous
lease accounting guidance. Leases, in which we are the lessor, are substantially all accounted for as operating leases and the
lease components and non-lease components are accounted for separately.
Effect of change in estimate
Revisions in estimated gross profit margins related to estimated
costs and revenues are made in the period in which circumstances requiring the revisions become known. During the year ended December
31, 2019, real estate development projects (Zhengzhou International New City IV, Zhengzhou Hangmei International Wisdom City I,
Henan Xin Central I, Jinan Royal Palace, Chengdu Xinyuan City and Sanya Yazhou Bay No.1), which recognized gross profit in 2018,
had changes in their estimated gross profit margins. As these projects moved closer to completion during 2019, we adjusted our
prior estimates related to selling prices and development costs. As a result of the changes in estimate above, gross profit, net
income and basic and diluted earnings per share decreased by US$59.1 million (2017: decreased US$11.1 million, 2018: increased
US$34.5 million), US$44.3 million (2017: decreased US$8.3 million, 2018: increased US$25.9 million), US$0.39 per share (2017: decreased
US$0.06 per share, 2018: increased US$0.20 per share), and US$0.39 per share (2017: decreased US$0.06 per share, 2018: increased
US$0.20 per share), respectively, for the year ended December 31, 2019.
Recently Issued Accounting Pronouncements
Please see the more
detailed discussion in Note 2 to our consolidated financial statements included elsewhere in this annual report.
|
B.
|
Liquidity and Capital Resources
|
As
previously discussed, a principal factor affecting our results of operations and our growth is the acquisition of land and land
use rights in target markets. Under current regulations and market practice, land use rights for residential development purposes
in the PRC may be acquired from local governments through a competitive auction or other bidding process. These competitive auctions
and bidding processes are typically announced 20 days before they are about to take place. To participate in these auctions, we
are required to make a minimum deposit of 20-50% of the opening auction price in cash. If we are successful on our bids, we are
also generally required to remit the remaining purchase price within one to six months of the auction. Further, under current
regulations we are not permitted to borrow money from local banks to fund land purchases. As a result we have to fund land purchases
either from cash flows from project sales or from financing transactions in foreign markets which have been and continue to be
relatively expensive and not easily accessible. (See “Item 3. Key Information D. Risk Factors — Our business requires
access to substantial financing. Our failure to obtain adequate financing in a timely manner could severely adversely (1) restrict
our ability to complete existing projects, expand our business, or repay our debts and (2) affect our financial performance and
condition.”) As a result of entering into other markets, we will also require adequate U.S. dollar and other currency financing
for our offshore operations, one of the sources of which is back-to-back loan arrangements with our subsidiaries, which is subject
to foreign exchange rate fluctuation and regulatory risk. See “Item 3. Key Information — D. Risk Factors — We
face risks related to our back-to back loans.”
In addition to our
land acquisitions, we expect to incur material project development costs on the acquired land. Our cash needs can only be partially
satisfied by construction loans and future cash flows from real estate projects under development in the upcoming fiscal year.
To ensure that we have sufficient funds to secure attractive land parcels and cover material project development costs, which are
vital to our growth strategy, we have chosen to maintain a certain level of cash reserves on hand. In addition, we are required
to maintain restricted cash deposits by banks that provide loans to us and our customers. The amount of the restricted cash deposits
will vary based on the amount of the related loans. As of December 31, 2019, approximately US$440.0 million, or 39.9% of our total
cash balance reserve, were restricted cash.
We have and will
continue to closely monitor our cash flow position to support our operations. We believe we manage land acquisition activities
in a rational manner to control land expenditure and achieve reasonable profit of each project investment. We also closely monitor
collection of accounts receivable, and obtain funds through a variety of both domestic and overseas financing activities to provide
a solid cash flow position for sustainable development.
Cash
Flows
|
|
2018
|
|
|
2019
|
|
|
|
(US$ in thousands)
|
|
Net cash (used in)/provided by operating activities
|
|
|
(22,902
|
)
|
|
|
272,257
|
|
Net cash provided by/(used in) investing activities
|
|
|
34,563
|
|
|
|
(43,030
|
)
|
Net cash used in by financing activities
|
|
|
(189,581
|
)
|
|
|
(278,473
|
)
|
Net decrease in cash, cash equivalents and restricted cash
|
|
|
(177,920
|
)
|
|
|
(49,246
|
)
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
(97,291
|
)
|
|
|
(34,185
|
)
|
Cash, cash equivalents and restricted cash, at beginning of year
|
|
|
1,461,227
|
|
|
|
1,186,016
|
|
Cash, cash equivalents and restricted cash, at end of year
|
|
|
1,186,016
|
|
|
|
1,102,585
|
|
Operating
Activities
Net cash
provided by operating activities was US$272.3 million for the year ended December 31, 2019, primarily attributable to a
decrease in real estate properties under development of US$914.9 million, an increase in accounts payable of US$392.3
million, partially offset by a decrease in customer deposits of US$747.9 million, an increase in real estate properties held
for lease of US$151.5 million, and an increase in amounts due from related party of US$118.9 million.
Net cash used in
operating activities was US$22.9 million for the year ended December 31, 2018, primarily attributable to an increase in deposits
for land use rights of US$452.1 million, an increase in other receivable of US$118.4 million, an increase in other asset of US$95.0
million, a decrease in other payables and accrued liabilities of US$73.3 million, and an increase in amounts due from related party
of US$104.5 million, partially offset by proceeds from disposal of trading securities of US$77.8 million, an increase in customer
deposits of US$264.2 million, a decrease in real estate properties development completed of US$232.5 million, an increase in accounts
payable of US$127.2 million and an increase in income tax payable of US$88.8 million.
Proceeds
from pre-sales of our properties under development are an important source of cash flow for our operations. PRC law allows us
to pre-sell properties before their completion upon satisfaction of certain requirements and requires us to use the pre-sales
proceeds to develop the particular project pre-sold. The amount and timing of cash flows from pre-sales are affected by a number
of factors, including restrictions on pre-sales imposed by PRC law, market demand for our properties subject to pre-sales, prices
at which we can pre-sell and the number of properties we have available for pre-sale. Any pre-sales payments we receive before
we recognize revenue are recorded as current liabilities under customer deposits. At December 31, 2018 and 2019, we recorded current
liabilities consisting of customer deposits of US$1,921.9 million, and US$1,106.1 million respectively. We actively market pre-sales
of our properties in accordance with regulations to accelerate cash in flow to the extent possible.
Investing Activities
Net cash used in investing activities was US$43.0 million in
the year ended December 31, 2019, and was mainly attributable to the acquisition of long-term investment, and proceeds from return
of capital.
Net cash provided
by investing activities was US$34.6 million in the year ended December 31, 2018, and was mainly attributable to the acquisition
of long-term investment, and proceeds from return of capital.
Financing Activities
Net cash used in financing activities was US$278.5 million in
the year ended December 31, 2019, and was primarily attributable to repayments of short-term, long-term bank loans and other debt
in the aggregate of US$1,847.9 million, dividend to shareholders of US$19.6 million, partially offset by proceeds from short-term,
long-term bank loans and other debt in the aggregate of US$1,635.8 million.
Net
cash used in by financing activities was US$189.6 million in the year ended December 31, 2018, and was primarily attributable to
repayments of short-term, long-term bank loans and other debt in the aggregate of US$1,429.0 million, distribution to non-controlling
interests and dividend to shareholders of US$61.3 million, partially offset by proceeds from short-term, long-term bank loans and
other debt in the aggregate of US$1,387.8 million.
Bank Borrowings and Other Debt
Bank borrowings
and other debt are an important source of funding for our property developments. Our borrowings as of December 31, 2018 and 2019,
respectively, were as follows.
|
|
2018
|
|
|
2019
|
|
|
|
US$
|
|
|
US$
|
|
Short-term bank loans and other debt
|
|
|
43,711,388
|
|
|
|
73,419,108
|
|
Long-term bank loans
|
|
|
720,038,940
|
|
|
|
686,064,696
|
|
Other long-term debt
|
|
|
1,040,455,200
|
|
|
|
1,036,690,627
|
|
Current portion of long-term bank loans and other debt
|
|
|
1,647,918,456
|
|
|
|
1,418,955,459
|
|
Total
|
|
|
3,452,123,984
|
|
|
|
3,215,129,890
|
|
As of December
31, 2018 and 2019 the weighted average interest rate on our short-term bank loans and other debt was 10.68%, and 8.33% respectively.
As of December 31, 2018, US$43.7 million of the short-term borrowings were denominated in RMB. As of December 31, 2019, US$53.52
million of the short-term bank loans were denominated in Renminbi and are secured by real estate properties completed and the
Group's real estate properties held for lease. The remaining US$19.9 million were denominated in U.S. dollars and are secured
by an equivalent amount of RMB bank deposits.
As
of December 31, 2018 and 2019, the weighted average interest rate on our long-term bank loans, including their current portion,
was 7.16% and 6.94% respectively. As of December 31, 2018, US$1,136.5 million of the long-term bank loans were denominated in
Renminbi and were secured by associated land use rights, real estate under development and real estate properties held for lease.
The remaining US$113.5 million of the long-term bank loans were denominated in U.S. dollars and were secured by the equivalent
amount of RMB bank deposits. As of December 31, 2019, US$582.44 million of the long-term bank loans were denominated in Renminbi
and were secured by associated land use rights, real estate under development, real estate properties held for lease, and real
estate properties completed. The remaining US$103.62 million of the long-term bank loans were denominated in U.S. dollars and
were secured by the equivalent amount of RMB bank deposits.
Since
June 2003, commercial banks have been prohibited under the PBOC guidelines from advancing loans to fund the payment of land use
rights. In addition, the PRC government also encourages property developers to use internal funds to develop their property projects.
Under guidelines jointly issued by the MOHURD and other PRC government authorities in August 2004, commercial banks in China are
not permitted to lend funds to property developers with an internal capital ratio, calculated by dividing the internal funds available
by the total capital required for the project, of less than 35%. These internal capital ratio requirements have limited the amount
of bank financing that property developers, including us, are able to obtain.
Debt Securities
In addition to bank
loans, the group from time to time raises funds through the issuance of debt securities. On December 6, 2013, we issued US$200
million aggregate principal amount of June 2019 Senior Secured Notes, which notes we subsequently redeemed in 2017. On August 30,
2016, we issued US$300 million aggregate principal amount of the August 2019 Senior Secured Notes. On February 28, 2017, we issued
US$300 million aggregate principal amount of the February 2021 Senior Secured Notes. On November 22, and December 1, 2017 we issued
collectively US$300 million aggregate principal amount of November 2020 Senior Secured Notes. On March 19, 2018, we issued US$200
million aggregate principal amount of March 2020 Senior Secured Notes. On April 15, 2019 and April 26, 2019, the Company issued
a collective aggregate principal amount of US$300 million of October 2021 Senior Secured Notes. The October 2021 Notes bear interest
at 14.2% per annum, payable semi-annually. Interest will be payable on April 15 and October 15 of each year, commencing October
15, 2019. The October 2021 Notes have a two and a half year (thirty month) term maturing on October 15, 2021.
The May 2018 Senior
Secured Notes, the June 2019 Senior Secured Notes, the August 2019 Senior Secured Notes, the February 2021 Senior Secured Notes,
the November 2020 Senior Secured Notes, the March 2020 Senior Secured Notes and the October 2021 Senior Secured Notes were issued
without registration under the Securities Act in offerings conducted outside the United States pursuant to Regulation S under the
Securities Act.
Senior Secured
Notes
Our obligations
under the August 2019 Senior Secured Notes, the February 2021 Senior Secured Notes, the November 2020 Senior Secured Notes and
the March 2020 Senior Secured Notes, the indenture governing the August 2019 Senior Secured Notes (the “August 2019 Indenture”),
the indenture governing the February 2021 Senior Secured Notes (the “February 2021 Indenture”), the indenture governing
the November 2020 Senior Secured Notes (the “November 2020 Indenture”), the indenture governing the March 2020 Senior
Secured Notes (the “March 2020 Indenture”) and the indenture governing the October 2021 Senior Secured Notes (the "October
2021 Indenture") have been guaranteed initially by certain of our wholly-owned subsidiaries, Xinyuan Real Estate, Ltd., Xinyuan
International Property Investment Co., Ltd., Victory Good Development Limited, South Glory International Limited, Elite Quest Holdings
Limited and Xinyuan International (HK) Property Investment Co., Limited (the “Subsidiary Guarantors”) and will be guaranteed
by such other of our future subsidiaries in accordance with the terms of the applicable Indenture. Our obligations under the August
2019 Senior Secured Notes, the February 2021 Senior Secured Notes, the November 2020 Senior Secured Notes, the March 2020 Senior
Secured Notes, the August 2019 Indenture, the February 2021 Indenture, the November 2020 Indenture, the March 2020 Indenture and
the Octobetr 2021 Indenture are secured by a pledge of the capital stock of our wholly-owned subsidiaries, Xinyuan Real Estate,
Ltd., Xinyuan International Property Investment Co., Ltd., Victory Good Development Ltd., South Glory International Ltd. and Elite
Quest Holdings Ltd.
The
August 2019 Indenture, the February 2021 Indenture, the November 2020 Indenture, the March 2020 Indenture and the October 2021
Indenture contain certain covenants that, among others, restrict our ability and the ability of our restricted subsidiaries (as
defined in the applicable Indenture) to incur additional debt or to issue preferred stock, to make certain payments or investments,
to pay dividends or purchase or redeem capital stock, to sell assets (including limitations on the use of proceeds of asset sales),
to grant liens on the collateral securing the August 2019 Senior Secured Notes, the February 2021 Senior Secured Notes, the November
2020 Senior Secured Notes, the March 2020 Senior Secured Notes, or the October 2021 Senior Secured Notes as applicable, or other
assets, to make certain other payments and to engage in transactions with affiliates and holders of more than 10% of our common
shares, subject to certain qualifications and exceptions and the satisfaction, in certain circumstances of specified conditions,
such as a Fixed Charge Coverage Ratio (as defined in the applicable Indenture) of 2.50 to 1.0, 2.0 to 1.0, 2.0 to 1.0, 2.0 to
1.0, and 2.0 to 1.0, respectively. Certain of these limitations, including restrictions on the incurrence of certain indebtedness
or issuances of preferred stock, the making of certain payment or investments, payments of dividends, and sales of assets will
be suspended if the August 2019 Senior Secured Notes, the February 2021 Senior Secured Notes, the November 2020 Senior Secured
Notes, the March 2020 Senior Secured Notes or the October 2021 Senior Secured Notes as applicable, obtain and retain an investment
grade rating.
At
any time prior to the maturity date of a series of Senior Secured Notes, we may at our option redeem the outstanding notes of the
series in whole but not in part, at a redemption price equal to 100.0% of the principal amount of that series of Senior Secured
Notes plus the Applicable Premium as of, and accrued and unpaid interest, if any, to (but not including) the redemption date. “Applicable
Premium” means with respect to a Series Secured Note of any series at any redemption date, the greater of (i) 1.00% of the
principal amount of such the Senior Secured Note and (ii) the excess of (A) the present value at such redemption date of the principal
amount of such Senior Secured Note plus all required remaining scheduled interest payments due on such Senior Secured Note through
its maturity date (but excluding accrued and unpaid interest to the redemption date), computed using a discount rate equal to the
Adjusted Treasury Rate (as defined in the applicable Indenture) plus 100 basis points, over (B) the principal amount of such Senior
Secured Note on such redemption date.
At any time prior
to maturity date of a series of Senior Secured Notes, we may redeem up to 35% of the aggregate principal amount of that series
of Senior Secured Notes with the net cash proceeds of one or more sales of our common shares in certain equity offerings, within
a specified period after the equity offering, at a redemption price of (a) in the case of the August 2019 Senior Secured Notes,
108.125% of the principal amount, (b) in the case of the February 2021 Senior Secured Notes, 107.75% of the principal amount, (c)
in the case of the November 2020 Senior Secured Notes, 108.875% of the principal amount, (d) in the case of the March 2020 Senior
Secured Notes, 109.875% of the principal amoun and (e) in the case of the October 2021 Senior Secured Notes, 114.2%, plus, in each
case, accrued and unpaid interest, if any, to (but not including) the redemption date. At least 65% of the aggregate principal
amount of a series being so redeemed must remain outstanding after such redemption.
Following any Change
of Control Triggering Event applicable to a series of Senior Secured Notes, we must make an offer to purchase all outstanding Senior
Secured Notes of that series at a purchase price equal to 101.0% of the principal amount thereof plus accrued and unpaid interest,
if any, to (but not including) the offer to purchase payment date. A “Change of Control Triggering Event” means the
occurrence of both a Change of Control (as defined in the applicable Indenture Indenture) and specified decline in the ratings
of the Senior Secured Notes within six months after the date of public notice of the occurrence of a Change of Control or the intention
by us or any other person to effect a Change of Control.
June 2019 Senior
Secured Notes
The June 2019 Senior
Secured Notes bore interest at 13% per annum payable semi-annually. Interest was payable on June 6 and December 6 of each year,
commencing June 6, 2014. The final maturity date of the June 2019 Senior Secured Notes was June 6, 2019.
On July 10,
2017, we redeemed an aggregate principal amount of US$200,000,000 of all outstanding June 2019 Senior Secured Notes at the
redemption price equal to 106.5% of the principal amount thereof, being US$213,000,000, plus accrued and unpaid interest of
US$2,456,000 to July 10, 2017. The total redemption price paid by the Company on July 10, 2017 was US$215,456,000. The
Company funded the redemption using the proceeds from the offering of its February 2021 Senior Secured Notes. As of December
31, 2019, we have a total principal amount of US$296.0 million of October 2021 Senior Secured Notes outstanding.
August 2019 Senior
Secured Notes
On August 30, 2016,
we issued an aggregate principal amount of US$300,000,000 of the August 2019 Senior Secured Notes. The August 2019 Senior Secured
Notes bear interest at 8.125% per annum payable semi-annually. Interest will be payable on February 28 and August 30 of each year,
commencing February 28, 2017. The August 2019 Senior Secured Notes have a three year term maturing on August 30, 2019.
From
August 31, 2018 to December 31, 2018, the Company redeemed August 2019 Senior Secured Notes for a total principal amount of US$11.9
million. The Company recognized gain on extinguishment of debt amounting to US$511,919, consisting of the gain from the difference
between repurchase price and principal amount of the debt amounting to US$577,449 and the loss from unamortized deferred debt
issuance costs amounting to US$65,530.
On
April 15, 2019, the Company completed the repurchase of US$119,989,000 in principal amount of the August 2019 Senior Secured Notes
pursuant to an Offer to Purchase for an aggregate purchase price of US$121,861,755 including accrued interest. As of December 31,
2019, we have a total principal amount of nil of August 2019 Senior Secured Notes outstanding.
February 2021
Senior Secured Notes
On February 28,
2017, we issued an aggregate principal amount of US$300,000,000 of the February 2021 Senior Secured Notes. The February 2021 Senior
Secured Notes bear interest at 7.75% per annum payable semiannually. Interest will be payable on February 28 and August 28 of each
year, commencing August 28, 2017. The February 2021 Senior Secured Notes have a four year term maturing on February 28, 2021. From
August 31, 2018 to December 31, 2018, the Company redeemed February 2021 Senior Secured Notes for a total principal amount
of US$25.4 million. The Company recognized gain on extinguishment of debt amounting to US$2,642,710, consisting of the gain from
the difference between repurchase price and principal amount of the debt amounting to US$3,043,135 and the loss from unamortized
deferred debt issuance costs amounting to US$400,425. As of December 31, 2019, we have a total principal amount of US$262.2 million
of February 2021 Senior Secured Notes outstanding.
November 2020
Senior Secured Notes
On November 22,
2017 and December 1, 2017, we issued an aggregate principal amount of US$200,000,000 and US$100,000,000 of the November 2020 Senior
Secured Notes, respectively. The November 2020 Senior Secured Notes bear interest at 8.875% per annum payable semi-annually. Interest
will be payable on May 22 and November 22 of each year, commencing May 22, 2018. The November 2020 Senior Secured Notes have
a three year term maturing on November 22, 2020. As of December 31, 2019, we have a total principal amount of US$296.9 million
of November 2020 Senior Secured Notes outstanding.
March 2020 Senior
Secured Notes
On March 19, 2018,
we issued an aggregate principal amount of US$200,000,000 of the March 2020 Senior Secured Notes. The March 2020 Senior Secured
Notes bear interest at 9.875% per annum payable semi-annually. Interest will be payable on March 19 and September 19 of each year,
commencing September 19, 2018. The March 2020 Senior Secured Notes have a two year term maturing on March 19, 2020.
On April 15, 2019,
the Company completed the repurchase of US$75,700,000 in principal amount of the March 2020 Senior Secured Notes pursuant to a
privately negotiated transaction for an aggregate purchase price of US$76,239,888 including accrued interest. As of December 31,
2019, we have a total principal amount of US$123.1 million of March 2020 Senior Secured Notes outstanding.
October
2021 Senior Secured Notes
On April 15, 2019
and April 26, 2019, the Company issued a collective aggregate principal amount of US$300,000,000 of the October 2021 Senior Secured
Notes. The October 2021 Senior Secured Notes bear interest at 14.2% per annum, payable semi-annually. Interest will be payable
on April 15 and October 15 of each year, commencing October 15, 2019. The October 2021 Notes have a two and a half year (thirty
month) term maturing on October 15, 2021.
Onshore Corporate
Bonds
On
December 28, 2015, Xinyuan China issued the first tranche of the onshore corporate bonds with an aggregate principal amount of
US$154 million due on December 28, 2020 (the “First Tranche Bonds”) at a coupon rate of 7.5% per annum payable annually.
Interest is payable on December 28 of each year, commencing December 28, 2016. Given that First Tranche Bonds is debt in its legal
form and is not a derivative in its entirety, it has been classified as other long-term debt. The Company has evaluated and determined
that there was no embedded derivative requiring bifurcation from the First Tranche Bonds under the requirements of ASC 815 “Derivatives
and Hedging.” The First Tranche Bonds were issued at par. On January 27, 2016, Xinyuan China issued the second tranche of
the onshore corporate bonds with an aggregate principal amount of US$107 million due on January 27, 2021 (the “Second Tranche
Bonds”) at a coupon rate of 7.47% per annum payable annually. On March 14, 2016, Xinyuan China issued the third tranche
of the onshore corporate bonds with an aggregate principal amount of US$77 million due on March 14, 2021 (the “Third Tranche
Bonds”) at a coupon rate of 7.09% per annum payable annually. As of December 31, 2019, we have a total principal amount
of US$2.0 million、US$8.2 million and US$7.6 million of
First Tranche Bonds、Second Tranche Bonds and Third Tranche
Bonds outstanding.
Upon the third anniversary
of the issuance of each tranche of bonds, Xinyuan China may adjust the applicable coupon rate and the holders have the right within
a specified time period to require the Company to repurchase the bonds following the Company’s announcement of whether it
intends to adjust the interest rate.
The
bonds contain restrictions on certain business activities of Xinyuan (China) Real Estate Ltd. when in default on payment of interest
or principal, including, among others, limitations on distributions of net income, limitations on certain expenditures, or business
combination transactions.
On August 15, 2016,
Xinyuan China issued a new tranche of onshore corporate bonds with an aggregate principal amount of RMB1.5 billion (US$216 million)
due on August 15, 2019 (the “New Tranche”) at a coupon rate of 7.5% per annum payable annually. Interest was payable
on August 15 of each year, commencing August 15, 2017. On April 7, 2017, Xinyuan China issued a new second tranche of onshore
corporate bonds with an aggregate principal amount of RMB1.13 billion (US$173 million) due on April 7, 2020 (the “2017 Tranche”)
at a coupon rate of 8.2% per annum payable annually. Interest was payable on April 7 of each year, commencing April 7, 2018. Upon
the first anniversary of the issuance of the New Tranche and 2017 Tranche, respectively, Xinyuan China could adjust the applicable
coupon rate and the holders have the right within a specified time period to require the Company to repurchase the bonds following
the Company’s announcement of whether it intends to adjust the interest rate. On August 15, 2017, Xinyuan
China adjusted the annual interest rate of the New Tranche Bonds to 8.2% from 7.5%. As of December 31, 2019, we have a total principal
amount of nil both of New Tranche and 2017 Tranche outstanding, seperately.
On September 20,
2018, Xinyuan China issued a new tranche of onshore corporate bonds with an aggregate principal amount of RMB 600 million (US$87
million) due on September 21, 2020 (the “2018 Tranche”) at a coupon rate of 8.5% per annum payable annually. Interest
is payable on September 21 of each year, commencing September 21, 2019. As of December 31, 2019, we have a total principal
amount of US$22.1 million of 2018 Tranche outstanding. The above three tranches of onshore corporate bonds were issued at par.
On January 4, 2019,
Xinyuan (China) Real Estate, Ltd. issued a new tranche of the onshore corporate bonds with an aggregate principal amount of RMB
600 million due on January 4, 2022 (the “2019 Tranche”) at a coupon rate of 8.5% per annum payable annually. Interest
is payable on January 4 of each year, commencing January 4, 2020. As of December 31, 2019, we have a total principal amount of
US$650,673 of 2019 Tranche outstanding.
On April 1, 2019,
Xinyuan (China) Real Estate, Ltd. completed the issuance of a new tranche of the onshore corporate bonds with an aggregate principal
amount of RMB 980 million due on April 1, 2024 (the “2019 First Tranche Bonds”) at a coupon rate of 8.4% per annum
payable annually. Interest is payable on April 1 of each year, commencing April 1, 2020. As of December 31, 2019, we have a total
principal amount of US$59.1 million of 2019 First Tranche Bonds outstanding.
Capital
Expenditures
Our capital expenditures were US$16.7 million, and US$11.6 million
in 2018 and 2019, respectively. Our capital expenditures in 2018, and 2019 were mainly used for building improvements, and purchase
of aircraft, vehicles, fixtures and furniture and computer network equipment. The source of our capital expenditures is primarily
the cash flow generated from operating activities.
As
of December 31, 2019, we had outstanding commitments with respect to non-cancelable construction contracts for real estate development
in the amount of US$1, 372.1 million.
|
C.
|
Research and Development, Patent and Licenses, etc.
|
Not applicable.
Other than as disclosed
elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the period from
January 1, 2019 to December 31, 2019 that are reasonably likely to have a material adverse effect on our net revenues, income,
profitability, liquidity or capital resources, or that caused the disclosed financial information to be not necessarily indicative
of future operating results or financial conditions .
Since January 2020,
the coronavirus pandemic (“the COVID-19”) has spread across China and other countries, governments have implemented
a series of measures including travel restrictions and quarantines to contain COVID-19, which adversely affected the real estate
industry where the Group operates. We currently believe our first quarter results of operations will be negatively impacted by
these developments. The development and evolution of the COVID-19 in China and globally still has great uncertainty in the duration
and severity, which may further amplify and delay the impact on the recovery of the real estate industry. Given the uncertainty
about the situation, the Group currently cannot estimate the impact to the 2020 financial performance and cash flows.
|
E.
|
Off-Balance Sheet Arrangements
|
As is customary
in the property industry in China, we provide guarantees to commercial banks in respect of the mortgage loans they extend to our
customers prior to the issuance of their property ownership certificates. These guarantees remain outstanding until the completion
of the registration of the mortgage with the relevant mortgage registration authorities. In most cases, guarantees for mortgages
on residential properties are discharged when we submit the individual property ownership certificates and certificates of other
interests in the property to the mortgagee bank. In our experience, the application for and issuance of the individual property
ownership certificates typically takes six to twelve months, so the guarantee periods typically last for up to six to twelve months
after we deliver the related property.
As of December 31,
2018 and 2019, we guaranteed mortgage loans in the aggregate outstanding amount of US$1,988.6 million and US$2,617.2 million, respectively.
We generally pre-sell
properties prior to the completion of their construction. Sales contracts are executed during the pre-sales period and mortgages
are generally executed within 30 days after the buyer signs the sales contract.
The pre-sales period
begins upon receipt of a government permit which is issued soon after groundbreaking on a given phase of the project. The period
from groundbreaking to delivery consists of building construction, landscaping, municipal government inspections and issuance of
a certificate of occupancy. This “delivery period” will generally range from one to two years. The buyers only request
the government to record buyer ownership in their official records after the delivery period is completed. Typically, the government
will provide certificates of ownership six to twelve months after being requested to record. Therefore, the total elapsed time
between our receipt of mortgage proceeds and the buyer’s receipt of an ownership certificate can range from one and a half
years to three years.
Due to the time
lag above, our mortgage guarantees will exceed the real estate balances at any given point in time.
We
paid US$1.7 million and US$1.8 million to satisfy guarantee obligations related to customer defaults for the years ended December
31, 2018 and 2019, respectively. The fair value of the guarantees is not significant and we consider that in case of default in
payments, the net realizable value of the related properties can cover the repayment of the outstanding mortgage principal together
with the accrued interest and penalty and therefore, no provision has been made for the guarantees in our consolidated financial
statements.
Except
for the contingent liabilities set forth above, we have not entered into any financial guarantees or other commitments to guarantee
the payment obligations of any third parties. We have not entered into any transactions with unconsolidated entities, derivative
contracts that are indexed to our shares and classified as shareholders’ equity, or that are not reflected in our consolidated
financial statements. Other than as described above, there are no off-balance sheet arrangements that have or are reasonably likely
to have effect on our financial position.
We have no obligation
arising out of a variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support
to us, or that engages in leasing, hedging, or research and development arrangements with us.
At December 31,
2019, the Group provided financial guarantees for bank loans of two of its equity method investees. The Group could incur losses
in the event of defaults under or foreclosure of these loans and its maximum exposure to credit losses is approximately US$202
million. The fair value of the guarantees is not significant and the Group considers that in case of default in payments, the net
realizable value of the related properties can cover the repayment of the outstanding bank loans together with the accrued interest
and penalty and therefore, no provision has been made for the guarantees in the consolidated financial statements.
|
F.
|
Tabular Disclosure of Contractual Obligations
|
As of December 31,
2019, our contractual obligations amounted to US$5,004.9 million, primarily arising from contracted construction costs or other
capital commitments for future property developments and debt obligations. The following table sets forth our contractual obligations
for the periods indicated:
|
|
Payments due by period
|
|
|
|
Total
|
|
|
less than
1 year
|
|
|
1-3
years
|
|
|
3-5
years
|
|
|
more
than
5 years
|
|
|
|
(US$ in thousands)
|
|
Long-term debt obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term bank loans
|
|
|
686,065
|
|
|
|
-
|
|
|
|
636,898
|
|
|
|
8,744
|
|
|
|
40,423
|
|
Interest on long-term bank loans (1)
|
|
|
97,657
|
|
|
|
45,431
|
|
|
|
31,809
|
|
|
|
7,774
|
|
|
|
12,643
|
|
Other long-term debt
|
|
|
1,036,691
|
|
|
|
-
|
|
|
|
920,624
|
|
|
|
116,067
|
|
|
|
-
|
|
Interest on other long-term debt (2)
|
|
|
85,358
|
|
|
|
-
|
|
|
|
85,358
|
|
|
|
-
|
|
|
|
-
|
|
Current portion of long-term bank loan and other debt
|
|
|
1,418,955
|
|
|
|
1,418,955
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Interest on current portion of long-term bank loan and other debt (1)
|
|
|
209,082
|
|
|
|
209,082
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Short-term debt obligations
|
|
|
44,198
|
|
|
|
44,198
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term bank loans
|
|
|
28,501
|
|
|
|
28,501
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Interest on short-term debt obligations (3)
|
|
|
1,860
|
|
|
|
1,860
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Operating lease obligations
|
|
|
12,216
|
|
|
|
6,471
|
|
|
|
5,451
|
|
|
|
294
|
|
|
|
-
|
|
Non-cancellable construction contract obligations
|
|
|
1,372,065
|
|
|
|
559,280
|
|
|
|
779,273
|
|
|
|
33,512
|
|
|
|
-
|
|
Capital lease obligations (4)
|
|
|
11,570
|
|
|
|
7,511
|
|
|
|
4,059
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
|
5,004,938
|
|
|
|
2,322,009
|
|
|
|
2,463,472
|
|
|
|
16,6391
|
|
|
|
53,066
|
|
|
(1)
|
Our long-term bank loans, including current portion, bear variable interest at rates adjustable
based on the PBOC benchmark rate. Interest on long-term loans, including current portion, is calculated based on the current interest
rate of each loan, ranging from 1.10% plus 1 month LIBOR to 9.80% per annum, using the PBOC benchmark rate of 4.75% as of December
31, 2019.
|
|
(2)
|
Interest on other long-term debt is calculated based on the interest rates for relevant loans,
ranging from 5.20% to 15.0% per annum.
|
|
(3)
|
Interest on short-term loans is calculated based on the interest rates for relevant loans, ranging
from 3.61% to 12.00% per annum.
|
|
(4)
|
In 2012, Henan Xinyuan Real Estate Co., Ltd. (“Henan Xinyuan”), one of our subsidiaries,
entered into a capital lease agreement with MinshengHongtai (Tianjin) Aviation Leasing Co., Ltd. (“Minsheng”) to lease
an aircraft. Under the terms of the agreement, Minsheng purchased a Gulf 450 from Gulfstream Aerospace Corporation and leased the
aircraft to Henan Xinyuan for a term of 96 months starting from September 12, 2013. We measured a capital lease asset and capital
lease obligation at an amount equal to the present value of the minimum lease payments during the lease term, excluding the portion
of the payments representing executory costs (such as insurance, maintenance, and taxes to be paid by the lessor) as well as any
profit thereon. As of December 31, 2019, we are contractually committed to pay the amount of US$11.6 million. See Note 13 to the
consolidated financial statements contained elsewhere in this annual report on Form 20-F.
|
In 2018, another one of our subsidiaries
entered into a sale and leaseback agreement for shopping mall equipment.
We
have projected cash flows for each of our existing projects, considering a number of factors, including the relative stage of each
of our projects under construction and our projects under planning and the demand for and the average selling prices of our projects.
For any given project, we use cash early in the project life and generate cash later in the project life. Costs for land acquisition,
site preparation, foundation, and early above-ground framing are all incurred before we obtain licenses from local governing authorities
to enter into pre-sales activity. The construction of many of our projects is carried-out in phases, the timing of which is primarily
determined by us based on the pace of the market demand for units in the project. Accordingly, after receiving the pre-sale permits
relating to a project, we are in a better position to manage some of our construction activities to coincide with the timing of
expected pre-sales.
We believe our cash
on hand, projected cash flow from operations, available construction loan borrowing capability, and potential access to capital
markets, should be sufficient to meet our expected cash requirements, including our non-cancellable construction contract obligations
and capital lease obligations that are due on various dates through April 1, 2020, the outstanding principal amount of our February
2021 Senior Secured Notes due in February 2021, the outstanding principal amount of our November 2020 Senior Secured Notes due
in November 2020, the outstanding principal amount of our March 2020 Senior Secured Notes due in March 2020 (which were repaid
in full upon maturity), the outstanding principal amount of our October 2021 Senior Secured Notes due in October 2021, and for
Xinyuan China to satisfy its obligations under the First, Second, Third, 2018 Tranche Bonds, 2019 Tranche and 2019 First Tranche
Bonds.
Our ability to secure
sufficient financing for land use rights acquisition and property development depends on internal cash flows in addition to a number
of other factors that are not completely under our control, including lenders’ perceptions of our creditworthiness, market
conditions in the capital markets, investors’ perception of our securities, the PRC economy and the PRC government regulations
that affect the availability and cost of financing for real estate companies or property purchasers and the U.S. economy and recovery
of the U.S. real estate markets.
There can be no
assurance that our internally generated cash flow and external financing will be sufficient for us to meet our contractual and
financing obligations in a timely manner. We may require additional cash due to changing business conditions or other future developments,
including any decline in cash flow from operations or any investments or acquisitions we may decide to pursue. In the event that
proceeds from the sale of units for a project are insufficient to meet our contractual and financing obligations, we would need
to raise the required funds through new borrowings, refinancing of existing borrowings, public or private sales of equity securities,
or a combination of one or more of the above. We cannot assure you that we will be able to obtain adequate funding in a timely
manner and on reasonable terms, or at all.
See
“Forward-Looking Statements” at the beginning of this annual report.
|
ITEM 6.
|
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
|
|
A.
|
Directors and Senior Management
|
The following table
sets forth information regarding our executive officers and directors as of April 1, 2020:
Name
|
|
Age
|
|
Position
|
Yong Zhang
|
|
57
|
|
Executive Director, Chairman of the Board, Chief Executive Officer
|
Shangrong Li
|
|
49
|
|
Executive Director and President of Xinyuan (China)
|
Yu (Brian) Chen
|
|
45
|
|
Chief Financial Officer
|
Yuyan Yang
|
|
57
|
|
Director
|
Yong Cui
|
|
46
|
|
Director
|
Hao Gao
|
|
38
|
|
Director*
|
Thomas Gurnee
|
|
69
|
|
Director and Chairman of the Audit Committee*
|
Wendy Hayes
|
|
50
|
|
Director*
|
Yifan (Frank) Li
|
|
52
|
|
Director*
|
Samuel Shen
|
|
55
|
|
Director*
|
|
*
|
Independent director per NYSE listing standards.
|
Unless otherwise
indicated, the business address of each director and executive officer is 27/F, China Central Place, Tower II, 79 Jianguo Road,
Chaoyang District, Beijing, 100025, the People’s Republic of China.
A description of
the business experience and present position of each director and executive officer is provided below:
Yong Zhang
founded our company in 1997 and has been the Chairman of the board of directors since 2007 and has been the Chief Executive Officer
since June 2019, previously holding the position from 1997 to 2013. Mr. Zhang has more than 20 years of working experience in the
real estate industry. Prior to founding our company, he worked at several construction and property development companies, including
Zhengzhou City Construction and Development Inc. and China Antai Real Estate Development Inc. Mr. Zhang is also vice chairman of
Henan Real Estate Association, a member of China Democratic National Construction Association and a deputy to the 11th and 12th
People’s Congress of Henan Province in China. He serves as a director of Beijing Ruizhuo Xihe Technology Development Co.,
Ltd., Beijing Ruizhuo Xitou Technology Development Co., Ltd., Beijing Ruizhuo Xichuang Technology Development Co., Ltd, Beijing
XinyuanXin Technology Development Co., Ltd., Beijing Ruizhuo Xirong Technology Development Co., Ltd., Beijing Ruizhuo Xihui Technology
Development Co., Ltd., Beijing Ruizhuo Xijia Technology Development Co., Ltd.,Huayi Xincheng (Beijing) Intelligent City Construction
Co., Ltd., Beijing Xinyuan Future Investment Management Co., Ltd., Ningbo Zhongxin Xitou investment management Co., Ltd., Beijing
Aijieli Technology Development Co., Ltd., Xinyuan Holding Ltd. and Madison Developments Limited. Mr. Zhang received a Ph.D. in
finance from Renmin University of China in 2014, an executive master’s degree in business administration from Tsinghua University
in 2005 and a bachelor’s degree in architecture from Henan Zhongzhou University in 1985.
Shangrong Li
is currently the president of Xinyuan (China) Real Estate Co., Ltd., in charge of the company's overall operation and management.
He was the vice president of JD Digits, the digital technology business unit under JD.com, one of the China's largest online retailer.
Mr. Li previously held various senior positions at China Construction Bank (CCB), including president of Henan branch and Gansu
branch, general manager of production innovation department, and roles in management at CCB headquarters.
Yu
(Brian) Chen joined Xinyuan in February 2019 as an Assistant President and the
General Manager of the Company's Capital Markets department. Before joining Xinyuan, Mr. Chen held senior management positions
in various publicly listed companies including Pacific Securities, RioCan REIT, Husky Injection Molding Systems, MDS, and ZTE.
He has close to two decades of experience in accounting, financial management, business turnarounds, and capital market operations.
Mr. Chen received his Bachelor of Economics from Peking University in 1998 and his MBA from the Schulich School of Business at
York University in 2004. He also obtained CPA designations from Canada in 2007 and the U.S. in 2010.
Yuyan Yang
co-founded our company in 1997 with Mr. Yong Zhang. Ms. Yang is a director and previously a Vice President of our company. Ms.
Yang has more than 10 years’ working experience in the real estate industry. Ms. Yang received a bachelor’s degree
in education management from Henan University in 1985. Ms. Yang received her executive master’s degree in business administration
at the National University of Singapore in May 2008.
Yong Cui
has been a director of our company since April 2007 and served as our President from September 2013 through January 2018. With
a doctorate degree in finance from Renmin University of China, Mr. Cui has extensive experience in corporate finance. For the past
five years, Mr. Cui has worked at Beijing Runzheng Consulting Company as President.
Hao Gao was
appointed as an independent director of the Company in May 2018. Mr. Gao is the director of the Global Family Business Research
Center and the director of Strategic Partnership and Development Office at Tsinghua University PBC School of Finance, as well as
the chief editor of the Family Business Series and Family Wealth Series published by the People’s Publishing House/Oriental
Press. Mr. Gao is also an independent director of Modern Media Holdings Limited (HKEX: 00072) and Hope Education Group Co., Ltd.
(HKEX: 01765). Mr. Gao obtained a Bachelor’s Degree in Automation Engineering from Tsinghua University, a Bachelor’s
Degree in Economics from Peking University, and a Ph.D. Degree in Management Science and Engineering from Tsinghua University.
Mr. Gao has completed the Corporate Boards Program, the Audit Committees Program, and the Compensation Committees Program at Harvard
Business School, as well as the Mergers and Acquisitions Program and the People, Culture, and Performance Program at the Graduate
School of Business of Stanford University.
Thomas Gurnee
was appointed as a director of our company in December 2007 and served as our Chief Financial Officer from February 2009 through
September 2013. In 2015, Mr. Gurnee was appointed as the Chairman of the Audit Committee. Mr. Gurnee is owner and manager of Chalet
Development LLC, a U.S.-based real estate company. Prior to joining our company, Mr. Gurnee was the Chief Financial Officer of
GEM Services Inc., a semiconductor contract manufacturer based in China. Prior to that, Mr. Gurnee served as the president of Globitech
Inc., a Texas-based epitaxial semiconductor wafer manufacturer, the Chief Financial Officer of Artest Inc., a California-based
semiconductor test subcontractor, and the Chief Financial Officer of Sohu.com (NASDAQ: SOHU), a Beijing-based internet portal.
Mr. Gurnee is a director of Planar Semiconductor AG. Mr. Gurnee obtained his bachelor’s degree from Stanford University and
master’s degree in business administration from the University of Santa Clara. His business address is 5920 Sky Terrace Court,
Reno, NV 89511.
Wendy Hayes
was appointed to be our independent director in January 2020. Ms. Hayes is also an independent director of Tuanche Limited
and an advisor to several other companies. Between May 2013 and September 2018, Ms. Hayes served as the inspections leader at
the Public Company Accounting Oversight Board (PCAOB) in the United States. Prior to that, Ms. Hayes was an audit partner at Deloitte
(Beijing). Ms. Hayes received her bachelor’s degree in international finance from University of International Business and
Economics in 1991, and her executive MBA from Cheung Kong Graduate School of Business in 2012. Ms. Hayes is a certified public
accountant in the United States (California) and China.
Yifan (Frank)
Li was appointed as a director of our company in February 2017. Mr. Li has been
a director and Vice President of Geely Holding Group since October 2014. Prior to joining Geely, he was Vice President and international
Chief Financial Officer of Sanpower Group from April in 2014. Prior to joining Sanpower Group, he served as Chief Financial Officer
of China Zenix Auto International (NYSE:ZX) from December 2010 - 2014. Prior to joining China Zenix Auto International, Mr. Li
was the Chief Financial Officer of Standard Water and Time Share Media from December 2007. Mr. Li is also an independent director
of Shanghai International Port (Group) Co. Ltd. (600018-CN), Heilongjiang Interchina Water Treatment Co., Ltd. (600187-CN), Zhongan
Online Insurance Co., Ltd. (HKEX: 06060) and Qudian Inc.(NYSE:QD). Mr. Li received his MBA from the University of Chicago Booth
School of Business in 2000, MSc in Accounting from University of Texas at Dallas in 1994, and Bachelor of Economics in World Economy
from Fudan University in 1989. He is a Certified Public Accountant in the United States and a Chartered Global Management Accountant.
His business address is Room 815, 1760 Jiangling Road, Binjiang District, Hangzhou, Zhejiang, PRC, 310051.
Samuel Shen
was appointed as an independent director of the Company in May 2018. Mr. Shen is president of JD Cloud, the cloud business unit
under JD.com, China’s largest online retailer. Reporting directly to Richard Liu, JD.com CEO and chairman, Mr. Shen leads
the efforts of JD Cloud to extend its offerings of tailored service solutions to a wide range of vertical industries. Mr. Shen
previously held various senior positions at Microsoft, including chairman of the Microsoft Asia-Pacific Technology Company, COO
of the Microsoft Asia-Pacific R&D Group, and general manager of Microsoft Cloud and Enterprise China. Before Microsoft, Mr.
Shen worked at IDT in California. Mr. Shen is also an non-executive director of Kingdee International Software Group Limited (HKEX:
00268) and an independent director of Insigma Technology Co., Ltd. (600797-CN). Mr. Shen holds a Master’s Degree in Computer
Science from the University of California, Santa Barbara.
As of the date of
this annual report on Form 20-F, there are no familial relationships between any directors and members of senior management.
For the fiscal year ended December 31, 2019, the aggregate compensation
to our executive officers, including all directors was US$7.7 million (which includes amounts paid to persons who are no longer
serving as executive officers),which the aggregate compensation to our non-executive directors was US$0.7 million (which includes
amounts paid to persons who are no longer serving as directors). As discussed below under “Item 6. Directors, Senior Management
and Employees — D. Employees” we made contributions of US$20.4 million to employee benefit plans for the fiscal year
ended December 31, 2019.
2007 Long Term
Incentive Plan
In November 2007,
we adopted our 2007 long term incentive plan (the “2007 Plan”) which provided for the grant of options, restricted
shares, restricted stock units, stock appreciation rights and other stock-based awards to purchase our common shares. The maximum
aggregate number of common shares which could be issued pursuant to all awards, including options, was 10 million common shares,
subject to adjustment to account for changes in the capitalization of our company. The 2007 Plan by its terms expired in 2017.
As of December 31,
2019, 212,138 of options granted prior to the expiration of the 2007 Plan remain exercisable.
The
following table summarizes the options granted to our current directors, executive officers, and other individuals as a group under
our 2007 Plan outstanding as of April 1, 2020:
Name
|
|
Common Shares
Underlying Options
Granted
|
|
Exercise Price of
Options Granted
(US$ per share)
|
|
Grant Date
|
|
Date of Expiration
|
Yong Zhang
|
|
|
39,400
|
|
|
1.21
|
|
June 30, 2014
|
|
|
June 29, 2024
|
Our employees as a group (1)
|
|
|
60,000
|
|
|
1.085
|
|
May 24, 2011
|
|
|
May 25, 2021
|
|
|
|
100,000
|
|
|
1.64
|
|
November 12, 2012
|
|
|
November 11, 2022
|
|
|
|
12,738
|
|
|
1.21
|
|
December 13, 2010
|
|
|
December 12, 2020
|
|
(1)
|
None of these employees is a director or executive officer of our company.
|
2014
Restricted Stock Unit Plan
Our board of directors
adopted the Xinyuan Real Estate Co., Ltd. 2014 Restricted Stock Unit Plan (the “RSU Plan”), effective May 23, 2014.
The RSU Plan provides for discretionary grants of restricted stock units, or RSUs, to or for the benefit of participating employees.
The purpose of the RSU Plan is to provide to us and our shareholders the benefits of the additional incentive inherent in the ownership
of our common shares by selected employees, including selected employees of our subsidiaries who are important to the success and
growth of our business, and to help us and our subsidiaries secure the services of those persons. The maximum number of shares
that may be delivered to RSU Plan participants in connection with RSUs granted under the RSU Plan is 10,000,000, subject to adjustment
if our outstanding common shares are increased, decreased, changed into or exchanged for a different number or kind of shares or
securities of our company through a reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other similar transaction. All of our and our subsidiaries’ employees and officers who are capable of contributing
significantly to our successful performance, in the determination of the Compensation Committee of our board of directors, are
eligible to be participants in the RSU Plan. Each eligible employee selected to participate may be granted an award of RSUs at
such times and subject to such conditions as determined by the Compensation Committee.
Incentive Pool;
Funding. Under the RSU Plan, we will establish a long-term incentive pool for participants for each fiscal year, a “Grant
Year,” based on our net income (or other performance goals) for the most recently completed prior fiscal year, a “Base
Year.” The long-term incentive pool is funded for any Grant Year and RSUs are granted only if 70% or more of the target
net income for applicable Base Year has been achieved in the Grant Year or if 70% or more of the total target net income for the
three fiscal years ending with the Base Year has been achieved. If neither of such targets is achieved for a Grant Year, no amount
is credited to the long-term incentive pool for that Grant Year and no RSUs will be awarded for the Grant Year. We have established
a trust and we will deposit or cause to be deposited in the trust amounts of cash not exceeding the amount of the long-term incentive
pool for a Grant Year. The trustee will use the funds to acquire in the open market or in private transactions that number of
ADSs representing common shares as we direct over a period of time as we and the trustee determine.
Administration.
The RSU Plan provides that it will be administered by one or more committees of our board of directors, which has designated the
Compensation Committee to administer the RSU Plan. Subject to the provisions of the RSU Plan, the Compensation Committee has the
discretionary authority and power to determine and designate those individuals selected to receive awards; determine the terms
of awards, including the time at which each award will be granted and the number of common shares subject to each award; establish
the terms and conditions upon which awards may be exercised, unlocked or paid (including any requirements that we or the participant
satisfy performance criteria or performance objectives); prescribe, amend, or rescind any rules and regulations necessary or appropriate
for the administration of the RSU Plan; correct any defect, supply any deficiency, and reconcile any inconsistency in the RSU Plan
or in any related award or agreement; and make other determinations and take such other action in connection with the administration
of the RSU Plan as it deems necessary or advisable.
Grant, Allocation
and Unlocking of RSUs. During the Grant Year, the Compensation Committee will allocate to each participant a percentage of
the long-term incentive pool, if any, for that Grant Year based on such factors as the Compensation Committee may determine from
time to time in its discretion. A participant will be allocated RSUs based on the aggregate of common shares represented by ADSs
purchased by the trustee for a Grant Year multiplied by the percentage of the long-term incentive pool allocated by the Compensation
Committee to that participant for the Grant Year. Each RSU represents a right to receive one common share to be delivered or made
available at the time or times specified in the award agreement, subject to a risk of cancellation and to the other terms and conditions
set forth in the RSU Plan, the award agreement and any additional terms and conditions set by the Compensation Committee. At our
election, RSUs may be settled by delivery of common shares or ADSs representing the number of common shares subject to the RSU.
Common shares (either
in the form of common shares or ADSs) in respect of RSUs allocated to a participant will not be eligible to be withdrawn by a participant
from the trust established pursuant to the RSU Plan for the period of time (the “lock-up period”) set forth in the
RSU Plan. Common shares or ADSs become “unlocked” and may be withdrawn or transferred from the trust at the election
of a participant as follows: one-third after the first anniversary of the grant date, one-third after the second anniversary of
the grant date, and one-third after the third anniversary of the Grant Date. In the event of (i) death, (ii) disability as the
result of a work injury, (iii) retirement on or after age 60, in each case prior to termination of service, or (iv) subject to
exceptions specified in the RSU Plan, the termination of employment or resignation by a participant, the locked portion of a participant’s
RSUs will continue to become unlocked on each subsequent anniversary of the Grant Date after such event. In the event of death,
a participant’s awards will be paid to his personal representative or estate as provided by applicable law. The locked portion
of a participant’s RSU award may be cancelled for no value for certain events specified in the RSU Plan. The Compensation
Committee, in its sole discretion, may (but will not be required to) reallocate all or a portion of RSUs forfeited by a participant
to a different participant or participants continuing in employment on such unlocking schedule as the Compensation Committee may
determine. If we are party to a “Change of Control,” as defined in the RSU Plan, the board of directors may determine
to cancel each outstanding award after payment to participants of the fair market value of the common shares subject to the award
at the time of the transaction constituting the Change of Control, provide for assumption of the awards or substitution of comparable
awards by the surviving or acquiring company in the transaction, or accelerate the unlocking, in whole or in part, of the awards,
subject to effectiveness of the transaction.
Amendments.
Our board of directors may amend, suspend or terminate the RSU Plan or the Compensation Committee’s authority to grant awards
under the RSU Plan without the consent of participants; provided, however, that, without the consent of an affected participant,
no such board action may materially and adversely affect the rights of the participant under any outstanding award. The Compensation
Committee may amend any outstanding award without the consent of the affected participant; provided, however, that, without such
consent, no such action may materially and adversely affect the rights of the participant under any outstanding award. Unless earlier
terminated by action of the board of directors, the RSU Plan will remain in effect until such time as no common shares remain available
for delivery under the RSU Plan and we have no further rights or obligations with respect to outstanding awards under the RSU Plan.
On May 23, 2014,
our company established a trust that is governed by a third party trustee and deposited US$7,042,725 into the trust. The trustee
used the funds to acquire 4,234,884 common shares in the open market through the purchase of ADSs. The awards vested ratably over
a three year service vesting period.
On
April 10, 2015, under the 2014 RSU Plan, our company deposited US$3,259,998 into the trust. The trustee used the funds to acquire
2,076,964 common shares in the open market through the purchase of ADSs. 2015 RSU awards vested ratably over a three year service
vesting period.
On April 18, 2016,
under the 2014 RSU Plan, our company deposited US$4,003,999 into the trust. The trustee used the funds to acquire 1,614,220 common
shares in the open market through the purchase of ADSs. 2016 RSU awards vest ratably over a three year service vesting period.
On July 27, 2017,
under the 2014 RSU Plan, the Company deposited US$3,485,952 into the trust. The trustee has used the funds to acquire 1,356,584
common shares from the open market as of December 31, 2018. The awards vest ratably over a three year service vesting period.
On July 30, 2018,
under the 2014 RSU Plan, the Company deposited US$3,976,660 into the trust. The trustee has used the funds to acquire 1,732,466
common shares in the open market through the purchase of ADSs as of December 31, 2018. The awards vest ratably over a three
year service vesting period.
On August 30, 2019,
under the 2014 RSU Plan, the Company deposited US$2,912,539 into the trust. The trustee has used the funds to acquire 1,438,076
common shares from the open market as of December 31, 2019. The awards vest ratably over a three year service vesting period.
2015 Stock Option
Plan
Our
board of directors adopted the Xinyuan Real Estate Co., Ltd. 2015 Stock Option Plan, or the Option Plan, effective June 24, 2015.
The Option Plan provides for discretionary grants of stock options (“Options”) to purchase shares of our company stock
to participating employees and directors. The purpose of the Option Plan is to promote the interests of our company by enabling
it to attract, retain and motivate key employees and directors responsible for the success and growth of our company and its subsidiaries
by providing them with appropriate incentives and rewards and enabling them to participate in the growth of our company. All employees
and directors of our company or any subsidiary who are capable of contributing significantly to the successful performance of
our company, in the determination of the board of directors, are eligible to be participants in the Option Plan. Each eligible
employee selected to participate may be granted an award of Options at such times and subject to such conditions as determined
by the board of directors.
Stock Subject
to Plan. The aggregate number of shares that may be issued under the Option Plan or covered by awards must not exceed 20,000,000
common shares. Shares offered under the Option Plan may be authorized but unissued shares or treasury shares. The number of shares
that are subject to awards outstanding at any time under the Option Plan should not exceed the number of shares that then remain
available for issuance under the Option Plan. In the event that any outstanding award for any reason expires, is terminated unexercised,
or is forfeited or settled or in a manner that results in fewer shares outstanding than were initially awarded, the shares subject
to the award, to the extent of such expiration, termination, or forfeiture, again will be available for purposes of the Option
Plan. If shares issued under the Option Plan are reacquired by our company, those shares again will be available for purposes of
the Option Plan. If the outstanding shares of our company are increased, decreased, changed into or exchanged for a different number
or kind of shares or securities of our company through a reorganization, recapitalization, reclassification, stock dividend, stock
split, reverse stock split or other similar transaction, the board of directors will make appropriate and proportionate adjustments
as it deems necessary or appropriate in one or more of (i) the number and class of shares subject to the Option Plan, and (ii)
the number of shares or class of shares covered by each outstanding award and (iii) the exercise price or grant price under each
outstanding Option.
Administration.
The Option Plan provides that it will be administered by the Compensation Committee. Subject to the provisions of the Option Plan,
the board of directors has the discretionary authority and power to determine and designate those individuals selected to receive
awards; determine the terms of awards, including the time at which each award will be granted and the number of shares subject
to each award; establish the terms and conditions upon which awards may be exercised, vested or paid (including any requirements
that we or the participant satisfy performance criteria or performance objectives); prescribe, amend, or rescind any rules and
regulations necessary or appropriate for the administration of the Option Plan; grant awards in substitution for options or other
equity interests held by individuals who become employees of our company or one of its subsidiaries as a result of our company’s
acquiring or merging with the individual’s employer (if necessary to conform the awards to the interests for which they are
substitutes, the board of directors may grant substitute awards under terms and conditions that vary from those the Option Plan
otherwise requires); correct any defect, supply any deficiency, and reconcile any inconsistency in the Option Plan or in any related
award or agreement; and make other determinations and take such other action in connection with the administration of the Option
Plan as it deems necessary or advisable.
Grant, Exercise
and Payment of Options. Each grant of an Option will be evidenced by an award agreement between the participant and our company.
Each award agreement will specify (i) the formula for determining the number of shares that are subject to the Option, (ii) the
exercise price, (iii) the term of the Option, and (iv) when all or any installment of the Option becomes exercisable. Options will
be exercised by delivering a signed written notice of exercise to our company which must be received as of a date set by our company
prior to the effective date of the proposed exercise. The exercise price upon exercise of any Option will be payable in the following
manner:
|
•
|
in cash or cash equivalents when the shares are purchased;
|
|
•
|
subject to prior approval by the board of directors, by surrendering or attesting to the ownership
of shares that are already owned by the participant. These shares will be surrendered to our company in good form for transfer
and will be valued at their Fair Market Value (as defined in the Stock Option Plan) on the date when the Option is exercised;
|
|
•
|
subject to prior approval by the board of directors, with a full recourse promissory note. These
shares will be pledged as a security for payment of the principal amount of the promissory note and interest on it. The interest
rate payable under the terms of the promissory note will not be less than the minimum rate (if any) required to avoid the imputation
of additional interest under the Code (as defined below). The board of directors will specify the term, interest rate, amortization
requirements (if any) and other provisions of the note;
|
|
•
|
subject to prior approval by the board of directors, if our company’s stock is publicly traded,
by the delivery of an irrevocable direction to a securities broker approved by our company to sell the shares and to deliver all
or part of the sales proceeds to our company in payment of all or part of the exercise price and any withholding taxes;
|
|
•
|
subject to prior approval by the board of directors, if our company’s stock is publicly traded,
by the delivery of an irrevocable direction to pledge the shares to a securities broker or lender approved by our company, as security
for a loan, and to deliver all or part of the loan proceeds to our company in payment of all or part of the exercise price and
any withholding taxes; or
|
|
•
|
any combination of the above methods of payment.
|
Termination of
Options. Upon termination of a participant’s service for any reason other than for death or disability, all unvested
portions of any outstanding awards will be immediately forfeited without consideration, and the participant will have a period
of three months (twelve months in the case of termination of service due to death or disability (as defined in the Option Plan),
commencing with the date the participant’s service has terminated, to exercise the vested portion of any outstanding Options,
subject to the term of the Option. The participant may exercise all or part of his or her Options at any time before their expiration
due to termination of the participant’s service, but only to the extent that the Options had become exercisable before the
date the participant’s service terminated. Those Options that are not exercisable immediately before the date of termination
of Service (as defined in the Option Plan) will expire on the date of termination of Service. Notwithstanding the forgoing, if
the participant’s Service is terminated due to any Cause (as defined in the Option Plan), then such participant’s Options
shall be terminated, whether or not such Options are vested or unvested, and/or whether or not such Options are exercised or unexercised.
If we are party to a Change in Control (as defined in the Option Plan), the board of directors may determine to cancel each outstanding
award after payment to participants of the Fair Market Value of the shares subject to the award at the time of the transaction
constituting the Change in Control minus, in the case of an Option, the exercise price and grant price of the shares subject to
the Option; provide for assumption of the awards or substitution of comparable awards by the surviving or acquiring company in
the transaction; accelerate the exercisability or vesting, in whole or in part, of the awards subject to effectiveness of the transaction;
or terminate awards if not exercised by the effective time of the Change in Control, and lapse any reacquisition or repurchase
rights held by our company with respect to such awards subject to effectiveness of the transaction.
Performance Awards.
The board of directors will have the authority to establish and administer performance-based grant and/or vesting conditions and
performance objectives with respect to such awards as it considers appropriate, which performance objectives must be satisfied
before the participant receives or retains an award or before the award becomes nonforfeitable.
Performance objectives
will be based on one or more of the following performance-based measures determined based on our company and its subsidiaries on
a group-wide basis or on the basis of subsidiary, business platform, or operating unit results: (i) earnings per share (on a fully
diluted or other basis), (ii) pretax or after tax net income, (iii) operating income, (iv) gross revenue, (v) profit margin, (vi)
stock price targets or stock price maintenance, (vii) working capital, (viii) free cash flow, (ix) cash flow, (x) return on equity,
(xi) return on capital or return on invested capital, (xii) earnings before interest, taxes, depreciation, and amortization (EBITDA),
(xiii) strategic business criteria, consisting of one or more objectives based on meeting specified revenue, market penetration,
geographic business expansion goals, cost targets, or objective goals relating to acquisitions or divestitures, or (xiv) any combination
of these measures.
Amendments.
Our board of directors may amend the terms of any award; provided, however, that the rights under any award not be impaired without
the consent of the participant. The Option Plan will terminate automatically on June 24, 2025. No shares will be issued or sold
under the Option Plan after its termination, except on exercise of an Option granted prior to the termination. No amendment, suspension,
or termination of the Option Plan will, without the consent of the participant, alter or impair any rights or obligations under
any award previously granted under the Option Plan.
On July 1, 2015,
under the 2015 Plan, our company granted options with service conditions to purchase up to 6,574,600 common shares to twenty-two
employees, at an exercise price of US$1.71 per share. These options have a weighted average grant date fair value of US$0.48 per
option and a total expected compensation cost, net of expected forfeitures, of US$3,165,867. These options have vesting periods
based on length of service of 34 months and will expire no later than July 1, 2025.
On July 29, 2015,
under the 2015 Plan, our company granted options with service conditions to purchase up to 81,600 common shares to one employee,
at an exercise price of US$1.71 per share. These options have a weighted average grant date fair value of US$0.42 per option and
a total expected compensation cost, net of expected forfeitures, of US$34,294. These options have vesting periods based on length
of service of 33 months and will expire no later than July 29, 2025.
Our company did
not grant any options under the 2015 Plan in 2017, 2018 and 2019.
As of December 31,
2019, 2,796,734 options were issued and outstanding under the 2015 plan and 14,865,808 shares remained eligible for future grants
under the plan. The following table summarizes the options granted to our current directors, executive officers, and other individuals
as a group under our 2015 Plan outstanding as of April 1, 2020:
Name
|
|
Common Shares
Underlying Options
Granted
|
|
|
Exercise Price of
Options Granted
(US$ per share)
|
|
|
Grant Date
|
|
Date of Expiration
|
Yong Zhang
|
|
|
2,497,600
|
|
|
|
1.71
|
|
|
July 1, 2015
|
|
June 30, 2025
|
Yong Cui
|
|
|
-
|
|
|
|
1.71
|
|
|
July 1, 2015
|
|
June 30, 2025
|
Other employees as a group (1)
|
|
|
27,200
|
|
|
|
1.71
|
|
|
July 1, 2015
|
|
June 30, 2025
|
|
|
|
54,334
|
|
|
|
1.71
|
|
|
July 1, 2015
|
|
June 30, 2025
|
|
|
|
54,400
|
|
|
|
1.71
|
|
|
July 1, 2015
|
|
June 30, 2025
|
|
|
|
81,600
|
|
|
|
1.71
|
|
|
July 1, 2015
|
|
June 30, 2025
|
|
|
|
81,600
|
|
|
|
1.71
|
|
|
July 1, 2015
|
|
June 30, 2025
|
|
(1)
|
None of these employees is a director or executive officer of our Company.
|
Other
awards
On September 28, 2019, our Board of Directors approved the employee
stock option plan of Xinchuang Technology, a subsidiary of us. Under the plan, we reserved 150 million shares, representing 30%
of Xinchuang Technology’s issued capital for purpose of providing share option awards to our senior management and employees.
In November 2019, we granted a total 100 million share options to certain employees of us with an exercise price of US$0.14 (RMB
1). The options become vested in 5 tranches subject to achievement of certain performance conditions as follows: (i) 5% on the
grant date with no performance condition; (ii) 5% for each of the first, second, third anniversary of the grant date, respectively;
and (iii) the remaining 80% shall vest upon the completion of the initial public offering of Xinchuang. The total fair value of
the share options granted in October 2019 is US$3.5 million, which shall be recognized as compensation expense using the accelerated
method. The fair value is determined by an external valuer using the discounted cash flow method to determine the underlying equity
fair value of Xinchuang Technology. Key assumptions, such as the discount rate, cash flow projections and the discount for lack
of marketability, are determined by the Group with best estimates.
Xinyuan Property Management Service (Cayman) Ltd., a subsidiary
of us, operates a restricted share award scheme (the “Scheme”) for the purpose of providing incentives and rewards
to eligible participants (the “Participants”) who contribute to the success of its operations. The Participants of
the Scheme include its directors and senior executives. The Scheme was adopted by our board on 31 January 2019 (the “Adoption
Date”). Pursuant to the Scheme, an award of 56,250 restricted shares (subdivided into 56,250,000 restricted shares in August
2019), representing 15% of its share capital, was granted to the Participants with a total exercise price at an aggregate consideration
of US$1,204,094 (RMB8,400,000). The considerations were fully settled in cash upon the issuance of restricted shares. And the restricted
shares vest in three tranches of 2%, 18% and 80% on 1 January 2020, 1 January 2021 and 1 January 2022, respectively, in accordance
with certain vesting conditions, that is, performance condition based on the completion of IPO which requires recognition on an
accelerated basis.
As of December 31, 2019, there were no shares expired and the
Group recognized expense relating to the options is immaterial (2018: nil, 2017: nil) in profit or loss during the period.
On June 14, 2019, Mr. Zhang Lizhou (one of the participants)
resigned as an executive director. Upon the resignation of Mr. Zhang Lizhou, we repurchased the 18,750 shares granted to him at
a consideration of US$401,365 (RMB2,800,000) which was equal to the amount paid by Mr. Zhang Lizhou to us at the issuance date.
The remaining settled aggregate consideration of US$802,729 (RMB5,600,000) according to the Scheme was recognized as liability
because the restricted shares will be repurchased by us at the original amount by participants upon the termination of employment.
The aggregate fair value of the restricted shares granted at
the grant date amounting to US$4,931,051 (RMB34,400,000) are recognized as compensation expense using the accelerated method. The
fair value is determined by an external valuer using the discounted cash flow method to determine the underlying equity fair value
of Xinyuan Property Management Service (Cayman) Ltd. Key assumptions, such as the discount rate, cash flow projections and the
discount for lack of marketability, are determined by us with best estimates.
As of December 31, 2019, there were no shares vested, expired
and we recognized expense relating to the Scheme of US$1,762,927 (RMB12,298,534) (2018: nil, 2017: nil) in profit or loss during
the period.
Our board of directors
currently has ten directors.
Committees
of the Board of Directors
We have established
four committees under the board of directors: the audit committee, the compensation committee, the corporate governance and nominating
committee and the investment committee. We have adopted a charter for each of the four committees. Each committee’s members
and functions are described below.
Audit Committee.
Our audit committee consists of Mr. Thomas Gurnee (Chairman), Mr. Yifan (Frank) Li, Mr. Hao Gao and Ms. Wendy Hayes. Under Section
303A of the NYSE Listed Company Manual, as a foreign private issuer, we are required to have an audit committee composed solely
of independent directors. However, unlike U.S. listed companies, we are not required to have a minimum number of committee members
and our audit committee members may be “independent” only as required by SEC Rule 10A-3 but need not meet the other
independence test of NYSE Rule 303A. Our audit committee charter provides that the committee will consist of at least three directors,
each of whom must meet applicable independence and financial literacy requirements of the NYSE and Rule 10A-3 under the Exchange
Act. Our board of directors has determined that Mr. Gurnee qualifies as an “audit committee financial expert” under
applicable SEC rules. The audit committee oversees our accounting and financial reporting processes and the audits of the financial
statements of our company. The audit committee is responsible for, among other things:
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selecting the independent registered public accounting firm and pre-approving all auditing and
non-auditing services permitted to be performed by the independent registered public accounting firm;
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reviewing with the independent registered public accounting firm any audit problems or difficulties
and management’s response;
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reviewing and approving all proposed related party transactions, as defined in Item 404 of Regulation
S-K under the Exchange Act, regardless of the dollar amount involved in such transactions;
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discussing the annual audited financial statements with management and the independent registered
public accounting firm;
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reviewing major issues as to the adequacy of our internal controls and any special audit steps
adopted in light of material control deficiencies; and
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meeting separately and periodically with management and the independent registered public accounting
firm.
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Compensation
Committee. Our compensation committee consists of Mr. Yong Zhang (Chairman), Mr. Samuel Shen and Mr. Yifan (Frank) Li. Our
compensation committee charter provides that the committee will be composed of at least three directors, at least half of whom
will be independent as defined by the NYSE and any other applicable laws and regulations. All decisions are subject to simple majority
approval. However, the committee may delete all or any portion of its duties and responsibilities to a subcommittee consisting
of one or more members.
The compensation
committee assists the board in reviewing and approving the design of and administering executive compensation programs. The compensation
committee is responsible for, among other things:
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reviewing our overall compensation philosophy at least annually;
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reviewing and approving the corporate goals and objectives relative to our Chief Executive Officer’s
compensation on an annual basis and determine the level of the Chief Executive Officer’s compensation;
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determine, or recommend for the board’s determination, the annual base and incentive compensation
for our Chief Financial Officer, Chief Operating Officer, Chief Administrative Officer and any other person who performs similar
functions for our company;
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make recommendations to the board with respect to equity-based compensation plans;
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determine compensation policies and practices and approval compensation to non-employee directors;
and
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review, approve or make recommendations on executive employments agreements or any severance or
similar termination payments proposed to be made to any current or former executive officer of the company.
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No member of senior
management may be present when his or her compensation is being discussed.
Corporate Governance
and Nominating Committee. Our corporate governance and nominating committee consists of Mr. Yong Zhang (Chairman), Mr. Hao
Gao and Mr. Yifan (Frank) Li.
The corporate governance
and nominating committee assists the board of directors in selecting individuals qualified to become our directors and in determining
the composition of the board and its committees. The corporate governance and nominating committee is responsible for, among other
things:
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identifying and recommending qualified candidates to the board for selection of directors, nominees
for board of directors, or for appointment to fill any vacancy;
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reviewing annually with the board of directors the current composition of the board of directors
with regards to characteristics such as independence, age, skills, experience and availability of service to us;
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advising the board of directors periodically with regards to significant developments in the law
and practice of corporate governance as well as our compliance with applicable laws and regulations, and making recommendations
to the board of directors on all matters of corporate governance and on any remedial action to be taken; and
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monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy
and effectiveness of our procedures to ensure proper compliance.
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Investment Committee.
Our investment committee consists of Mr. Yong Zhang (Chairman), Mr. Yong Cui, Mr. Shangrong Li and Mr. Samuel Shen.
The investment committee
assists the board of directors in overseeing our company’s real property acquisitions and developments and management of
other strategic assets. The investment committee is responsible for, among other things:
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reviewing and approving individual real property acquisitions;
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approving, without further board action, land acquisitions where the consideration is cash, seller
financing and/or conventional bank debt;
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land acquisitions involving use of the company’s shares, options or warrants; and
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approving acquisitions of assets, other than land, including shares in a third party or non-bank
financial assets.
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Duties of Directors
Under Cayman Islands
law, our directors have a fiduciary duty to act honestly in good faith with a view to our best interests. Our directors also have
a duty to exercise the skill they actually possess with the care and diligence that a reasonably prudent person would exercise
in comparable circumstances. In fulfilling their duty of care to us, our directors must ensure compliance with our memorandum and
articles of association, as amended and restated from time to time. Our company has the right to seek damages if a duty owed by
our directors is breached. A shareholder may in certain circumstances have rights to damages if a duty owed by the directors is
breached.
The functions and
powers of our board of directors include, among others:
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convening shareholders’ annual general meetings and reporting its work to shareholders at
such meetings;
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declaring dividends and distributions;
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appointing officers and determining the term of office of officers;
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exercising the borrowing powers of our company and mortgaging the property of our company; and
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approving the transfer of shares of our company, including the registering of such shares in our
register of members.
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Terms of Directors and Officers
Under our memorandum
and articles of association, a director holds office until he resigns or otherwise vacates his office or is removed by our shareholders
or directors. Accordingly, annual elections of directors by our shareholders are not required and we do not put to shareholder
vote on an annual or periodic basis election of directors to our company. A director may be removed by special resolution passed
by our shareholders before the expiration of such director’s term. Officers are appointed by and serve at the discretion
of the board of directors.
As of December 31,
2019 we had 1,947 full time employees. The following table sets forth the number of our full time employees categorized by function
as of the period indicated:
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As of December 31,
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2017
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2018
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2019
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Management
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34
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48
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60
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Finance
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145
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185
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188
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Planning and development
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389
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590
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472
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Project construction management
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217
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305
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265
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Sales and marketing
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101
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107
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108
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Property management
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234
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418
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484
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Administrative and human resources
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236
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359
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348
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Legal and audit
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20
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26
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22
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Total
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1,376
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2,038
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1,947
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As of December 31,
2019, our subsidiary, Xinyuan Property Service Co., Ltd, also hired approximately 4,599 contract employees and temporary employees,
most of whom provided security and housekeeping services relating to property management.
As required by PRC
regulations, we participate in various employee benefit plans that are organized by municipal and provincial governments, including
housing funds, pension, medical and unemployment benefit plans. We are required under PRC law to make contributions to the employee
benefit plans at specified percentages of the salaries, bonuses and certain allowances of our employees, up to a maximum amount
specified by the respective local government authorities where we operate our businesses from time to time. Members of the retirement
plan are entitled to a pension equal to a fixed proportion of the salary prevailing at the member’s retirement date. The
total amount of contributions we made to employee benefit plans for the years ended December 31, 2017, 2018 and 2019 was US$17,101,606,
US$18,422,330 and US$20,420,474 respectively.
We
have entered into non-competition agreements with our management and key personnel, which prohibit them from engaging in any activities
that compete with our business during, and for one or two years after, the period of their employment with our company. We have
also entered into confidentiality agreements with all of our employees.
We offer training
programs for our employees, third-party contractors and outsourced employees. We sponsor senior managers for executive MBA programs
and other senior employees for part-time non-degree MBA courses at top universities in China. We also invite industry experts to
give lectures to our employees and provide training to our third-party contractors.
We have not been
subjected to any strikes or other labor disturbances that have interfered with our operations, and we believe that we have a good
relationship with our employees. Our employees are not covered by any collective bargaining agreement.
The following table
sets forth information with respect to the beneficial ownership of our common shares as of April 1, 2020 (or such earlier date
as indicated below), by:
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each of our directors and executive officers;
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each person known to us to own beneficially more than 5% of our common shares; and
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all of our directors and executive officers as a group.
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Shares
Beneficially
Owned (1)
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Directors, Executive Officers and Principal Shareholders
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Number
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%
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Yong Cui
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-
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-
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Yu Chen
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4,000
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*
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Hao Gao
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-
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Thomas Gurnee
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-
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Wendy Hayes
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-
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-
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Shangrong Li
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-
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Yifan (Frank) Li
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-
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-
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Samuel Shen
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-
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-
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Yuyan Yang (2)
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28,400,000
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26.45
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Yong Zhang (3)
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32,027,724
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29.14
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All directors and executive officers as a group (4)
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60,431,724
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54.97
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* Beneficially owns less than 1% of our
outstanding common shares.
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(1)
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Beneficial ownership includes voting or investment power
with respect to the securities and, (except as indicated below, each person named has sole voting and investment power with respect
to the shares shown opposite his or her name. Beneficial ownership is determined in accordance with Rule 13d-3 of the General
Rules and Regulations under the Exchange Act, pursuant to which a person or group of persons is deemed to have “beneficial
ownership” of any shares of common stock that such person has the right to acquire within 60 days of the date of determination.
The percentage of beneficial ownership is based on 107,389,450 common shares outstanding as of April 1, 2020. In addition, for
purposes of computing the percentage of outstanding shares of common stock held by each person or group of persons named above,
any shares which such person or persons had the right to acquire on or within 60 days of April 1, 2020 are deemed to be outstanding
but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person.
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(2)
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Ms. Yang is the settlor of The Spectacular Stage Trust
established pursuant to the Trust Deed dated November 24, 2015 between Ms. Yang, as Settlor, and HSBC International Trustee Limited,
as Trustee (the “Spectacular Trust”). Pursuant to the Trust Deed, the Trustee is required to obtain the prior written
consent of Ms. Yang, as Protector, before making any direct or indirect dispositions of any common shares that constitute assets
of the Spectacular Trust and to vote common shares held by the Spectacular Trust and cause any entity owned by the Spectacular
Trust directly or indirectly that holds common shares to vote such shares in accordance with instructions from Ms. Yang. Accordingly,
pursuant to Section 13(d) of the Exchange Act, Ms. Yang may be deemed to beneficially own all of the common shares held directly
or indirectly by the Spectacular Trust. Spectacular Stage Limited, a British Virgin Islands company indirectly wholly owned by
the Spectacular Trust, owns 28,400,000 common shares.
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(3)
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Mr. Zhang is the settlor of The Juicy Seasons Trust established
pursuant to the Trust Deed dated June 21, 2019 between Mr.Zhang, as Settlor, and HSBC International Trustee Limited, as Trustee
(the “Juicy Trust”). Pursuant to the Trust Deed, the Trustee is required to obtain the prior written consent of Mr.
Zhang, as Protector, before making any direct or indirect dispositions of any common shares that constitute assets of the Juicy
Trust and to vote common shares held by the Juicy Trust and cause any entity owned by the Juicu Trust directly or indirectly that
holds common shares to vote such shares in accordance with instructions from Mr. Zhang. Accordingly, pursuant to Section 13(d)
of the Exchange Act, Mr. Zhang may be deemed to beneficially own all of the common shares held directly or indirectly by the Juicy
Trust. Juicy Seasons Limited, a British Virgin Islands company indirectly wholly owned by the Juicy Trust, owns 28,400,000 common
shares. The amount of common shares also includes 2,537,000 common shares issuable upon exercise of vested options and 1,090,724
common shares held by Universal World Development Co. Ltd., a British Virgin Islands company, of which Mr. Zhang is the sole owner.
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(4)
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Includes 2,537,000 common shares issuable upon exercise
of options exercisable within 60 days.
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ITEM 7.
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MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
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Please refer to
“Item 6. Directors, Senior Management and Employees — E. Share Ownership” for our major shareholders.
Our major shareholders
do not have voting rights that are different from other shareholders.
There are three record holders in the United States, including
the depositary for our ADSs, holding, collectively, 50.4% our outstanding common shares, as of April 1, 2020.
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B.
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Related Party Transactions
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On
March 2, 2018, the Group signed a partnership agreement with Yong Zhang, a senior management member and employee of the Company
to form Beijing Yuzhouyun Technology Development Center ("Yuzhouyun"). According to the partnership agreement, the design
and purpose of Yuzhouyun's activities are to provide technical services to the Group. The Group acts as a limited partner and
the senior management members are general partners. Substantially all significant activities require the approval from the senior
management members. The Group and senior management members agreed to share profits at the proportion of 51% and 49%, respectively.
The Group, as the limited partner, is the only party with the equity at risk to absorb losses of Yuzhouyun. Yuzhouyun's principal
activities are also to provide technical service to the Group, which indicates that Yuzhouyun's activities are conducted on behalf
of the Group.
In 2018, the Company
sold a small percentage of the equity interests (ranging from 0.50% to 5.54%) in eight real estate project companies to senior
management and employees for a total consideration of US$8,720,772. In 2019, the Company sold additional percentage of the equity
interests in the eight real estate project companies to senior management and employees for a total consideration of US$604,914
and the total sold equity interests ranges from 0.57% to 5.59% as of December 31, 2019. According to the equity transfer agreement,
as this arrangement is a form of an incentive plan, the Company is obligated to repurchase the equity interest back from senior
management and employees.
In 2019, the Company sold 6.03% of the equity interests in one
real estate project company to senior management and employees for a total consideration of US$1,300,135. According to the equity
transfer agreement, as this arrangement is a form of an incentive plan, the Company is obligated to repurchase the equity interest
back from senior management and employees.
On June 15, 2017, Xinyuan China, the Group's related parties,
and a third party signed a partnership agreement to form a limited partnership, Beijing Future Xinruifeng Science and Technology
Development Center (Limited Partnership) ("Xinruifeng"). The related parties that are partners of Xinruifeng comprise
of (i) Yong Zhang and other senior management members; and (ii) Beijing Xinyuan Future Investment Management Co., Ltd. ("Xinyuan
Future"), which is also owned by Yong Zhang, a senior management member of the Company. The third party and the related parties
are general partners of Xinruifeng whereas Xinyuan China is a limited partner.
Pursuant to the
framework agreement signed in June 2017 by Xinruifeng and Xinyuan China, both parties agreed to invest a total of RMB 30 million
in Xitou. After the completion of the arrangement, Xinruifeng and Xinyuan China will own 66.67% and 33.33% equity interest of Xitou,
respectively. The arrangement will be completed with two steps that form a single transaction designed to achieve an overall commercial
effect, 1) Xinyuan China will acquire 100% equity interest of Xitou for nil consideration ("Step one"); and 2) Xinruifeng
will inject a capital of RMB 20 million and acquire 66.67% equity interest of Xitou, and Xinyuan China will invest RMB 10 million
and obtain 33.33% of equity interest of Xitou ("Step two"). In November 2019, Step two was completed.
Pursuant to the framework agreement signed in June 2017 by Beijing
Future Xinhujin Science and Technology Development Center (Limited Partnership) ("Xinhujin"), owned in part by Yong Zhang,
a senior management member of the Company, and Xinyuan China, both parties agreed to invest a total of RMB30 million in Xichuang.
After the completion of the arrangement, Xinhujin and Xinyuan China will own 66.67% and 33.33% equity interest of Xichuang, respectively.
The arrangement will be completed with two steps that form a single transaction designed to achieve an overall commercial effect,
1) Xinyuan China will acquire 100% equity interest of Xichuang for nil consideration ("Step one"); and 2) Xinhujin will
inject capital of RMB20 million to Xichuang and acquire 66.67% equity interest of Xichuang, and Xinyuan China will invest RMB 10
million and obtain 33.33% of equity interest of Xichuang ("Step two"). These two steps are inseparable and the acquisition
of Xichuang will be completed only after both of these two steps are completed. In November 2019, Step two was completed.
Pursuant to the framework agreement signed in June 2017 by Beijing Future Xinzhihui Science and Technology
Development Center (Limited Partnership) ("Xinzhihui"), owned in part by Yong Zhang, Yong Cui, senior management members
of the Company, and Xinyuan China, both parties agreed to invest a total of RMB 40 million in Beijing I-Journey Science and Technology
Development Co., Ltd. ("I-Journey"). After the completion of the arrangement, Xinzhihui and Xinyuan China will own 75%
and 25% equity interest of I-journey, respectively. The acquisition will be completed with two steps that form a single transaction
designed to achieve an overall commercial effect, 1) Xinyuan China will acquire 100% equity interest of I-journey for nil consideration
("Step one"); and 2) Xinzhihui will inject a capital of RMB30 million and acquire 75% equity interest of I-journey, and
Xinyuan China will invest RMB10 million and obtain 25% of equity interest of I-journey ("Step two"). These two steps
are inseparable and the acquisition of I-journey will be completed only after both of these two steps are completed. In November
2019, Step two was completed.
Please refer to
Note 18 of our audited consolidated financial statements for additional information.
Review and Approval of Related
Party Transactions
Pursuant to our
audit committee charter, all transactions or arrangements with related parties, as such term is defined under Item 404 of Regulation
S-K, including directors, executive officers, beneficial owners of 5% or more of our voting securities and their respective affiliates,
associates and related parties, will require the prior review and approval of our audit committee, regardless of the dollar amount
involved in such transactions or arrangements.
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C.
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Interests of Experts and Counsel
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Not applicable.
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ITEM 8.
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FINANCIAL INFORMATION
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A.
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Consolidated Statements and Other Financial Information
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We have appended
consolidated financial statements filed as part of this annual report.
Dividend Policy
Payment of dividends
is subject to our board of directors’ discretion and the form, frequency and amount of any dividend will depend upon our
future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other
factors that the board of directors may deem relevant.
If we pay any dividends,
we will pay our ADS holders to the same extent as holders of our common shares, subject to the terms of the deposit agreement,
including the fees and expenses payable thereunder. Cash dividends on our common shares, if any, will be paid in U.S. dollars.
In previous years, the Company has paid quarterly dividends.
Legal
Proceeding
In May 2015, XIN
Development Management East, LLC (“XDME”) filed an arbitration claim for not less than US$10 million which was subsequently
reduced for the purpose of a prior mediation to US$8 million against Wanks Adams Slavin Associates LLP (“WASA”), the
design company for the Group’s Oosten project. WASA has asserted a total of approximately US$2 million in counterclaims.
XDME believes WASA’s counterclaims are without merit and intends to contest vigorously such claims. On November 26, 2018,
XDME reconciled with the design company WASA and settled the claim.
In
December 2016, 421 Kent Development LLC ("421 Kent"), the property company for the Group's Oosten project, terminated
its contract with its general contractor. The general contractor and various subcontractors have filed lawsuits against 421 Kent
and the Company for approximately US$22.0 million, in aggregate, plus punitive damages. In addition, the general contractor filed
mechanic's liens against 421 Kent and the Company for approximately US$8.0 million. 421 Kent has answered the claims and believes
the contractors' claims and liens are without merit and intends to contest vigorously such claims.
In May 2019, an authorized entity of local
government (the “Government Entity”) sued Beijing Huiju, the original controlling and existing shareholder of one of
the Group’s equity method investee, Qingdao Huiju, for disputes in construction contract entered into between the Government
Entity and Beijing Huiju. The Government Entity also claimed that Qingdao Huiju is jointly liable for the aforementioned construction
contract and a commitment letter issued by Beijing Huiju, and sued both Beijing Huiju and Qingdao Huiju to be jointly and severally
liable to a liquidated damage of US$230.9 million stipulated in the commitment letter. Qingdao Huiju received the local court verdict
of the first instance in April 2020 which held that Qingdao Huiju shall be jointly and severally liable to the liquidated damages
of US$230.9 million, and court cost of US$1,167,369. Qingdao Huiju appealed to the verdict in April 2020. Management believes that
the Government Entity’s claims against Qingdao Huiju are without merit and intends to contest vigorously against such claims
because the commitment letter was unilaterally issued by Beijing Huiju without any signature or confirmation by Qingdao Huiju.
Except as disclosed
elsewhere in this annual report, we have not experienced any significant changes since the date of our audited consolidated financial
statements included in this annual report.
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ITEM 9.
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THE OFFER AND LISTING
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A.
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Offer and Listing Details
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See “Item
9. The Offer and Listing — C. Markets” for price history data.
Not applicable
Our ADSs, each representing
two of our common shares, have been listed on the NYSE since December 12, 2007. Our ADSs trade under the symbol “XIN.”
Not applicable.
Not applicable.
Not applicable.
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ITEM 10.
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ADDITIONAL INFORMATION
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Not applicable.
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B.
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Memorandum and Articles of Association
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The Companies Law
differs from laws applicable to United States corporations and their shareholders. Set forth below is a summary of the significant
differences between the provisions of the Companies Law applicable to us and the laws applicable to companies incorporated in the
United States and their shareholders.
Mergers and similar
arrangements. The Companies Law (2020 Revision) permits mergers and consolidations between Cayman Islands companies and between
Cayman Islands companies and non-Cayman Islands companies. For these purposes, (a) “merger” means the merging of two
or more constituent companies and the vesting of their undertaking, property and liabilities in one of such companies as the surviving
company, and (b) “consolidation” means the combination of two or more constituent companies into a consolidated company
and the vesting of the undertaking, property and liabilities of such companies to the consolidated company. In order to effect
such a merger or consolidation, the directors of each constituent company must approve a written plan of merger or consolidation,
which must then be authorized by (a) a special resolution of each constituent company and (b) such other authorization, if any,
as may be specified in such constituent company’s articles of association. The written plan of merger or consolidation must
be filed with the Registrar of Companies together with a declaration as to the solvency of the consolidated or surviving company,
a list of the assets and liabilities of each constituent company and an undertaking that a copy of the certificate of merger or
consolidation will be given to the members and creditors of each constituent company and that notification of the merger or consolidation
will be published in the Cayman Islands Gazette. Dissenting shareholders have the right to be paid the fair value of their shares
(which, if not agreed between the parties, will be determined by the Cayman Islands court) if they follow the required procedures,
subject to certain exceptions. Court approval is not required for a merger or consolidation which is effected in compliance with
these statutory procedures.
In addition, there
are statutory provisions that facilitate the reconstruction and amalgamation of companies by way of scheme of arrangement, provided
that the arrangement is approved by a majority in number of each class of shareholders and creditors with whom the arrangement
is to be made, and who must in addition represent three-fourths in value of each such class of shareholders or creditors, as the
case may be, that are present and voting either in person or by proxy at a meeting, or meetings, convened for that purpose. The
convening of the meetings and subsequently the arrangement must be sanctioned by the Grand Court of the Cayman Islands. While a
dissenting shareholder has the right to express to the court the view that the transaction ought not to be approved, the court
can be expected to approve the arrangement if it determines that:
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the company is not proposing to act illegally or beyond the scope of its authority and the statutory
provisions as to the required majority vote have been met;
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the shareholders have been fairly represented at the meeting in question and the majority shareholders
are acting in good faith without coercion of the minority to promote interests adverse to those of the relevant class;
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the arrangement is such that may be reasonably approved by an intelligent and honest man of that
class acting in respect of his interest; and
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the arrangement is not one that would more properly be sanctioned under some other provision of
the Companies Law or that would amount to a “fraud on the minority.”
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If the arrangement
and reconstruction by way of scheme of arrangement is thus approved, the dissenting shareholder would have no rights comparable
to appraisal rights, which would otherwise ordinarily be available to dissenting shareholders of United States corporations, providing
rights to receive payment in cash for the judicially determined value of the shares.
When a tender offer
is made and accepted by holders of 90% of the shares within four months, the offeror may, within a two month period commencing
on the expiration of such four month period, require the holders of the remaining shares to transfer such shares on the terms of
the offer. An objection can be made to the Grand Court of the Cayman Islands but this is unlikely to succeed unless there is evidence
of fraud, bad faith or collusion.
Shareholders’
suits. In principle, we will normally be the proper plaintiff and as a general rule, a derivative action may not be brought
by a minority shareholder. However, based on English authorities, which would in all likelihood be of persuasive authority in
the Cayman Islands, the Cayman Islands courts can be expected (and have had occasion) to follow and apply the common law principles
(namely the rule in Foss v. Harbottle and the exceptions thereto) which permit a minority shareholder to commence a class action
against, or derivative actions in the name of, our company to challenge:
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an act which is ultra vires or illegal and is therefore incapable of ratification by the shareholders;
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an act which constitutes a fraud against the minority where the wrongdoer are themselves in control
of the company; and
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an act which requires a resolution with a qualified (or special) majority (i.e. more than a simple
majority) which has not been obtained.
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Anti-takeover
provisions. Some provisions of our amended and restated memorandum and articles of association may discourage, delay or prevent
a change in control of our company or management that shareholders may consider favorable, including provisions that authorize
our board of directors to redesignate authorized and unissued common shares as other shares or series of shares, to issue preference
shares in one or more series and to designate the price, rights, preferences, privileges and restrictions of such preference shares
without any further vote or action by our shareholders. However, under Cayman Islands law, our directors may only exercise the
rights and powers granted to them under our amended and restated memorandum and articles of association, as amended and restated
from time to time, for what they believe in good faith to be in the best interests of our company.
Directors’
fiduciary duties and powers. As a matter of Cayman Islands law, a director of a Cayman Islands company is in the position of
a fiduciary with respect to the company, and therefore it is considered that he or she owes the following duties to the company-a
duty to act bona fide in the best interests of the company, a duty not to make a profit out of his or her position as director
(unless the company permits him or her to do so) and a duty not to put himself or herself in a position where the interests of
the company conflict with his or her personal interests or his or her duty to a third party. A director of a Cayman Island company
owes to the company a duty to act with skill and care. It was previously considered that a director need not exhibit in the performance
of his or her duties a greater degree of skill than may reasonably be expected from a person of his or her knowledge and experience.
However, there are indications that the courts are moving towards an objective standard with regard to the required skill and care.
Under our memorandum
and articles of association, directors who are in any way, whether directly or indirectly, interested in a contract or proposed
contract with our company shall declare the nature of their interest at a meeting of the board of directors. Following such declaration,
a director may vote in respect of any contract or proposed contract notwithstanding his interest. Directors are not required to
hold shares; however, a minimum share requirement for directors may be established at a general meeting. Directors may exercise
all powers of our company to borrow money, under our memorandum and articles of association, in a variety of ways, including issuing
bonds and other securities either outright or as security for any debt liability or obligation of our company or of any third party.
Shareholder action
by written resolution. Under Cayman Islands law and our amended and restated articles of association, our shareholders may
approve corporate matters by way of a unanimous written resolution signed by or on behalf of each shareholder who would have been
entitled to vote on such matter at a general meeting without a meeting being held.
Removal of Directors.
Under our memorandum and articles of association, directors may be removed by a special resolution. In addition, a director’s
office shall be vacated if the director (i) gives notice in writing to our company that he resigns the office of director; (ii)
without special leave of absence from our board of directors, is absent from three consecutive meetings of the board and the board
resolves that his office be vacated; (iii) if he dies, becomes bankrupt or makes any arrangement or composition with his creditors;
(iv) is found to be or becomes of unsound mind or dies; (iii) resigns his office by notice in writing to the company; (v) if all
other directors (being not less than two in number) resolve that he should be removed as a director or; (v) is removed from office
pursuant to any other provisions of our amended and restated memorandum and articles of association.
Dissolution;
winding up. Under our memorandum and articles of association, if our company is wound up, the liquidator of our company may
distribute the assets only by the vote of holders of a two-thirds majority of our outstanding shares being entitled to vote in
person or by proxy at a shareholder meeting or by unanimous written resolution.
Amendment of
governing documents. Under Cayman Islands law and our memorandum and articles of association, our governing documents may only
be amended with the vote of holders of two-thirds of our shares entitled to vote in person or by proxy at a shareholder meeting
or, as permitted by our articles of association, by unanimous written consent.
Rights of Non-Resident
or Foreign Shareholders. There are no limitations imposed by foreign law or by our memorandum and articles of association on
the rights of non-resident or foreign shareholders to hold or exercise voting rights on our shares. In addition, there are no provisions
in our memorandum and articles of association governing the ownership threshold above which shareholder ownership must be disclosed.
During the two fiscal
years immediately preceding this annual report, we have entered into the following material contracts, excluding contracts entered
into in the ordinary course of business.
Bond Offerings
For a description
of the August 2019 Senior Secured Notes and the August 2019 Indenture, the February 2021 Senior Secured Notes and the February
2021 Indenture, the November 2020 Senior Secured Notes and the November 2020 Indenture and the March 2020 Senior Secured Notes,
the March 2020 Indenture and the October 2021 Senior Secured and the October 2021 Indenture, see “Item 5. Operating and Financial
Review And Prospects — B. Liquidity and Capital Resources — Debt Securities—Senior Secured Notes,” included
elsewhere in this annual report on Form 20-F.
For a description
of the onshore corporate bonds, see “Item 5. Operating and Financial Review and Prospects —B. Liquidity and Capital
Resources — Onshore Corporate Bonds” included elsewhere in this annual report on Form 20-F.
Under current PRC
foreign exchange rules, after complying with certain procedural requirements and producing commercial documents evidencing relevant
transactions, RMB is convertible into other currencies without prior approval from the SAFE only for current account items, such
as trade related payments, interest and dividends, etc., and certain capital account items, such as direct equity investments,
loans and repatriation of investment in non-sensitive industries. The conversion of RMB into other currencies and remittance of
the converted foreign currency outside the PRC under sensitive industries direct equity investments, loans and repatriation of
investment, requires prior approval from the SAFE or its local office. Foreign-invested enterprises may retain foreign exchange
in accounts with designated foreign exchange banks subject to a cap set by the SAFE or its local office. Under the SAFE regulations,
PRC companies and individuals may repatriate foreign currency revenues received from abroad back to China or they may retain the
foreign currency revenues abroad. The term and conditions for both alternatives are subject to provisions further provided by the
SAFE in accordance with international receipts and payments and the needs of foreign exchange administration. These restrictions
could affect our ability to obtain foreign currency through debt or equity financing, or for capital expenditures.
Cayman Islands Taxation
The
Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and
there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to us levied
by the government of the Cayman Islands except for stamp duties which may be applicable on instruments executed in, or brought
within the jurisdiction of the Cayman Islands. The Cayman Islands is not party to any double tax treaties which are applicable
to payments made to and by our company. There are no exchange control regulations or currency restrictions in the Cayman Islands.
People’s Republic of China Taxation
The PRC Corporate
Income Tax Law, or theEIT Law, became effective as of January 1, 2008 and was amended on February 24, 2017 and December 29, 2018,
and the Implementation for theEIT Law issued by the PRC State Council, became effective as of January 1, 2008. The EIT Law provides
that enterprises established outside of China whose “de facto management bodies” are located in China are considered
“resident enterprises” and are generally subject to the uniform 25% corporate income tax rate as to their worldwide
income (including dividend income received from subsidiaries). Under the Implementation for theEIT Law, a “de facto management
body” is defined as a body that has material and overall management and control of the manufacturing and business operations,
personnel and human resources, finances and treasury, and acquisition and disposition of properties and other assets of an enterprise.
On April 22, 2009, the SAT issued the Circular 82, which was retroactively effective as of January 1, 2008. Under this notice,
an overseas incorporated domestically controlled enterprise will be recognized as a PRC resident enterprise if it satisfies all
of the following conditions: (i) the senior management responsible for daily production/ business operations are primarily located
in the PRC, and the location(s) where such senior management execute their responsibilities are primarily in the PRC; (ii) strategic
financial and personnel decisions are made or approved by organizations or personnel located in the PRC; (iii) major properties,
accounting ledgers, company seals and minutes of board meetings and shareholder meetings, etc., are maintained in the PRC; and
(iv) 50% or more of the board members with voting rights or senior management habitually reside in the PRC. Further, the SAT issued
Bulletin 45, which became effective on September 1, 2011 and was amended on April 17, 2015 and June 28, 2016, to provide further
guidance on the implementation of Circular 82. Bulletin 45 clarified certain issues relating to the determination of PRC tax resident
enterprise status, post-determination administration and the authorities responsible for determining offshore-incorporated PRC
tax resident enterprise status. Bulletin 45 specifies that when provided with a copy of a Chinese tax resident determination certificate
issued by the in-charge tax authorities from an offshore-incorporated PRC tax resident enterprise, the payer should not withhold
10% income tax when paying Chinese-sourced dividends, interest and royalties to the offshore incorporated PRC tax resident enterprise.
However, as Circular 82 and Bulletin 45 only apply to enterprises incorporated under laws of foreign jurisdictions that are controlled
by PRC enterprises or groups of PRC enterprises, it remains unclear how the tax authorities will determine the location of “de
facto management bodies” for overseas incorporated enterprises that are controlled by individual PRC residents or non-PRC
enterprises such as our company. It is not clear whether PRC tax authorities would require (or permit) us to be treated as a PRC
resident enterprise.
Under the EIT Law
and the Implementation for theEIT Law, PRC income tax at the rate of 10% is applicable to dividends payable to investors that
are “non-resident enterprises,” which do not have an establishment or place of business in the PRC, or which have
such establishment or place of business but the relevant income is not effectively connected with the establishment or place of
business, to the extent such dividends have their sources within the PRC. Similarly, any gain realized on the transfer of our
ADSs by such investors is also subject to 10% PRC income tax if such gain is regarded as income derived from sources within the
PRC. For non-PRC individual investors, under PRC Individual Income Law, there could be a PRC income tax at a rate of 20% for such
dividends or gains. If we are considered a PRC “resident enterprise,” it is unclear whether dividends we pay with
respect to our ADSs, or the gain you may realize from the transfer of our ADSs, would be treated as income derived from sources
within the PRC and be subject to PRC tax as stated above. If we are not considered a PRC “resident enterprise,” the
holders of our ADSs that are non-PRC “resident enterprises” could be subject to PRC income tax for gains from transferring
or otherwise disposing their ADSs, since such activities might be recognized as “transferring the equity interests of a
PRC resident enterprise indirectly by disposing of the equity interests of an overseas holding company” under Circular 7
or GATA. However, since Circular 7 specifies that it does not apply if a non-PRC resident enterprise purchases and sells equity
of the same listed foreign enterprise in the open market and obtains the proceeds from indirect transfer of Chinese taxable property,
for most our investors, who either are not enterprises, or are non-resident enterprises but only trade equity in the open market
and gain proceeds, they will not be required to pay tax under Circular 7. It is also unclear whether, if we are considered a PRC
“resident enterprise,” holders of our ADSs might be able to claim the benefit of income tax treaties entered into
between China and other countries.
U.S. Federal Income Taxation
The following is
a general discussion of certain United States federal income tax consequences of the ownership and disposition of the common shares
or ADSs (evidenced by ADRs) by U.S. Holders (as defined below). This discussion applies only to U.S. Holders that hold the common
shares or ADSs as capital assets for U.S. federal income tax purposes.
This discussion
is based on the Internal Revenue Code of 1986, as amended, or the Code, Treasury regulations implemented thereunder, and administrative
and judicial interpretations thereof, all as in effect on the date hereof and all of which are subject to change, possibly with
retroactive effect, or to different interpretation. There can be no assurance that the IRS or a court will not take a contrary
position with respect to any United States federal income tax considerations described below.
This discussion
does not address all of the tax considerations that may be relevant to specific U.S. Holders in light of their particular circumstances
or to U.S. Holders subject to special treatment under U.S. federal income tax law (such as banks, other financial institutions,
insurance companies, tax-exempt entities, retirement plans, regulated investment companies, real estate investment trusts, grantor
trusts, partnerships (or other entities treated as flow-through entities for U.S. federal income tax purposes), dealers or traders
in securities, brokers, United States expatriates and certain former long-term U.S. residents, persons subject to the alternative
minimum tax, persons who have acquired the shares or ADSs as part of a straddle, hedge, conversion transaction or other integrated
investment, persons who generally mark their securities to market for U.S. federal income tax purposes, persons that have a “functional
currency” other than the U.S. dollar, persons who are residents in the PRC for PRC tax purposes or persons that own directly,
indirectly, or constructively 10% or more of our stock by vote or value). If a partnership holds common shares or ADSs, the consequences
to a partner will generally depend upon the status of the partner and upon the activities of the partnership. A partner of a partnership
holding common shares or ADSs should consult its own tax adviser regarding the United States tax consequences of its investment
in the common shares or ADSs through the partnership. This discussion does not address any U.S. state or local or non-U.S. tax
considerations, any United States federal estate, gift or alternative minimum tax considerations, the United States federal Medicare
tax on net investment income.
As used in this
discussion, the term “U.S. Holder” means a beneficial owner of the common shares or ADSs that is, for U.S. federal
income tax purposes, (i) an individual who is a citizen or resident of the United States, (ii) a corporation, or other entity taxable
as a corporation for United States federal income tax purposes, created or organized in or under the laws of the United States
or of any state or political subdivision thereof or therein, including the District of Columbia, (iii) an estate, the income of
which is subject to United States federal income tax regardless of the source thereof, or (iv) a trust with respect to which a
court within the United States is able to exercise primary supervision over its administration and one or more United States persons
have the authority to control all of its substantial decisions, or certain electing trusts that were in existence on August 19,
1996 and were treated as domestic trusts on that date.
In general, for
U.S. federal income tax purposes, a U.S. Holder of an ADS will be treated as the owner of the common shares represented by the
ADSs.
Investors should
consult their tax advisors as to the particular tax considerations applicable to them relating to the ownership and disposition
of the common shares or ADSs, including the applicability of U.S. federal, state and local tax laws or non- U.S. tax laws, any
changes in applicable tax laws and any pending or proposed legislation or regulations.
Dividends
Subject to the discussion
below under “—Passive Foreign Investment Company,” the gross amount of any distribution (without reduction for
any PRC tax withheld) made by us on the common shares or ADSs generally will be treated as a dividend includible in the gross income
of a U.S. Holder as dividend income to the extent of our current or accumulated earnings and profits, as determined under U.S.
federal income tax principles, when received by the U.S. Holder, in the case of common shares, or when received by the Depositary,
in the case of ADSs. To the extent the amount of such distribution exceeds our current and accumulated earnings and profits as
so computed, it will be treated first as a non-taxable return of capital to the extent of such U.S. Holder’s adjusted tax
basis in such common shares or ADSs and, to the extent the amount of such distribution exceeds such adjusted tax basis, will be
treated as capital gain. We do not intend to calculate our earnings and profits under U.S. federal income tax principles. Therefore,
a U.S. Holder should expect that a distribution will generally be treated as a dividend even if that distribution would otherwise
be treated as a non-taxable return of capital or as capital gain under the rules described above. The dividends will not be
eligible for the dividends-received deduction allowed to corporations in respect of dividends received from other U.S. corporations.
Certain dividends
received by non-corporate U.S. Holders generally will be taxed at the preferential rate applicable to qualified dividend income.
These reduced income tax rates are applicable to dividends paid by “qualified foreign corporations” and only with respect
to common shares or ADSs held for a minimum holding period of at least 61 days during a specified 121-day period, and if certain
other conditions are met (including, but not limited to, us not being a PFIC (as discussed below) for either our taxable year in
which the dividend is paid or the preceding taxable year). You should consult your tax advisors regarding the availability of the
preferential rate for dividends paid with respect to common shares or ADSs.
Dividends paid by
us will constitute income from sources outside the United States for U.S. foreign tax credit limitation purposes and will be categorized
as “passive category income” or, in the case of certain U.S. Holders, as “general category income” for
U.S. foreign tax credit purposes.
In the event that
we are deemed to be a PRC resident enterprise under the EIT Law (see discussion under “Item 10. Additional Information
— E. Taxation — People’s Republic of China Taxation”), you may be subject to PRC withholding taxes on dividends
paid to you with respect to the common shares or ADSs. Subject to generally applicable limitations, PRC withholding taxes on dividends,
if any, may be treated as foreign taxes eligible for credit against your U.S. federal income tax liability. However, such foreign
tax credit may be disallowed, if the U.S. Holder has held such shares for less than a specified minimum period during which the
U.S. Holder is not protected from risk of loss, or is obligated to make payments related to the dividends. The rules relating to
the U.S. foreign tax credits are complex and U.S. Holders may be subject to various limitations on the amount of foreign tax credits
that are available. U.S. Holders should consult their own tax advisors regarding the effect of these rules in their particular
circumstances.
Sale or Other Disposition of Ordinary
common shares or ADSs
Subject to the discussion
below under “—Passive Foreign Investment Company,” a U.S. Holder generally will recognize gain or loss for U.S.
federal income tax purposes upon a sale or other disposition of the common shares or ADSs in an amount equal to the difference
between the amount realized from such sale or disposition and the U.S. Holder’s adjusted tax basis in such common shares
or ADSs. Such gain or loss generally will be a capital gain or loss and will be long-term capital gain (taxable at preferential
rates for non-corporate U.S. Holders) or loss if, on the date of sale or disposition, such common shares or ADSs were held by such
U.S. Holder for more than one year. The deductibility of capital losses is subject to significant limitations. Any gain or loss
on the sale or disposition will generally be treated as U.S. source income or loss for U.S. foreign tax credit limitation purposes.
Passive Foreign Investment Company
Special U.S. tax
rules apply to companies that are considered to be PFICs. We will be classified as a PFIC in a particular taxable year if either
(i) 75% or more of our gross income for the taxable year is passive income; or (ii) on average at least 50% of the value of our
assets produce passive income or are held for the production of passive income. Passive income for this purpose generally includes,
among other things, certain dividends, interest, royalties, rents and gains from commodities and securities transactions and from
the sale or exchange of property that gives rise to passive income.
In making this determination,
we will be treated as earning our proportionate share of any income and owning our proportionate share of any assets of any corporation
in which we hold a 25% or greater interest (by value).
Based on our estimated gross income, the average value of our
assets, including goodwill, and the nature of our business, although not free from doubt, we do not believe that we were classified
as a PFIC for U.S. federal income tax purposes for the taxable year ending December 31, 2019. Our status for any taxable year will
depend on our assets and activities in each year, and because this is a factual determination made annually after the end of each
taxable year, there can be no assurance that we will not be considered a PFIC for the current taxable year or any future taxable
year. The market value of our assets may be determined in large part by reference to the market price of the ADSs and our ordinary
shares, which is likely to fluctuate. Furthermore, the composition of our income and assets may also be affected by how, and how
quickly, we use our liquid assets. Under circumstances where our revenue from activities that produce passive income significantly
increase relative to our revenue from activities that produce non-passive income, or where we determine not to deploy significant
amounts of cash for active purposes, our risk of being classified as a PFIC may substantially increase. In addition, because there
are uncertainties in the application of the relevant rules, it is possible that the IRS may challenge our classification of certain
income and assets as non-passive or our valuation of our tangible and intangible assets, each of which may result in our becoming
a PFIC for the current or subsequent table years. We do not intend to make a determination of our or any of our future subsidiaries’
PFIC status in the future. If we were classified as a PFIC for any year during which a U.S. holder held our ADSs or common shares,
we generally would continue to be treated as a PFIC for all succeeding years during which such U.S. holder holds our ADSs or common
shares.
A U.S. Holder may
be able to mitigate some of the adverse U.S. federal income tax consequences described below with respect to owning the common
shares or ADSs if we are classified as a PFIC for any taxable year, provided that such U.S. Holder is eligible to make, and validly
makes a mark-to-market election, described below. In certain circumstances, a U.S. Holder can make a qualified electing fund election,
or QEF election, to mitigate some of the adverse tax consequences described with respect to an ownership interest in a PFIC by
including in income its share of the PFIC’s income on a current basis. However, we do not currently intend to prepare or
provide the information that would enable a U.S. Holder to make a QEF election.
In the event we
are classified as a PFIC, in any year in which you hold the common shares or ADSs, and you do not make the election described in
the following paragraphs, any gain recognized by you on a sale or other disposition (including a pledge) of the common shares or
ADSs would be allocated ratably over your holding period for the common shares or ADSs. The amounts allocated to the taxable year
of the sale or other disposition and to any year before we became a PFIC would be taxed as ordinary income. The amount allocated
to each other taxable year would be subject to tax at the highest rate in effect for individuals or corporations, as appropriate,
for that taxable year, and an interest charge would be imposed. Further, to the extent that any distribution received by you on
your common shares or ADSs were to exceed 125% of the average of the annual distributions on the common shares or ADSs received
during the preceding three years or your holding period, whichever is shorter, that distribution would be subject to taxation in
the same manner as gain on the sale or other disposition of shares, described above. Classification as a PFIC may also have other
adverse tax consequences, including, in the case of individuals, the denial of a step-up in the basis of your common shares or
ADSs at death.
If
we are a PFIC for any taxable year during which you hold the common shares or ADSs, then in lieu of being subject to the special
tax regime and interest charge rules discussed above, you may make an election to include gain on the common shares or ADSs as
ordinary income under a mark-to-market method, provided that such the common shares or ADSs are treated as “regularly traded”
on a “qualified exchange.” In general, the common shares or ADSs will be treated as “regularly traded”
for a given calendar year if more than a de minimis quantity of the common shares or ADSs are traded on a qualified exchange on
at least 15 days during each calendar quarter of such calendar year. Although the U.S. Internal Revenue Service (“IRS”)
has not published any authority identifying specific exchanges that may constitute “qualified exchanges,” Treasury
Regulations provide that a qualified exchange is (a) a U.S. securities exchange that is registered with the SEC, (b) the U.S. market
system established pursuant to section 11A of the Securities and Exchange Act of 1934, or (c) a non-U.S. securities exchange that
is regulated or supervised by a governmental authority of the country in which the market is located, provided that (i) such non-U.S.
exchange has trading volume, listing, financial disclosure, surveillance and other requirements designed to prevent fraudulent
and manipulative acts and practices, to remove impediments to and perfect the mechanism of a free and open, fair and orderly, market,
and to protect investors; and the laws of the country in which such non-United States exchange is located and the rules of such
non-U.S. exchange ensure that such requirements are actually enforced and (ii) the rules of such non-United States exchange
effectively promote active trading of listed shares. No assurance can be given that the common shares or ADSs will meet the requirements
to be treated as “regularly traded” for purposes of the mark-to-market election.
In addition, because
a mark-to-market election cannot be made for any lower-tier PFICs that we may own, you may continue to be subject to the special
tax regime with respect to your indirect interest in any investments held by us that are treated as an equity interest in a PFIC
for U.S. federal income tax purposes, including shares in any future subsidiary of ours that is treated as a PFIC.
If you make this
mark-to-market election, you will be required in any year in which we are a PFIC to include as ordinary income the excess of the
fair market value of your common shares or ADSs at year-end over your basis in those common shares or ADSs. In addition, the excess,
if any, of your basis in the common shares or ADSs over the fair market value of your common shares or ADSs at year-end is deductible
as an ordinary loss in an amount equal to the lesser of (i) the amount of the excess or (ii) the amount of the net mark-to-market
gains that have been included in income in prior years. Any gain recognized upon the sale of the common shares or ADSs will be
taxed as ordinary income in the year of sale. Amounts treated as ordinary income will not be eligible for the preferential tax
rate applicable to qualified dividend income or long-term capital gains. Your adjusted tax basis in the common shares or ADSs will
be increased by the amount of any income inclusion and decreased by the amount of any deductions under the mark-to-market rules.
If you make a mark-to market election, it will be effective for the taxable year for which the election is made and all subsequent
taxable years unless the common shares or ADSs are no longer regularly traded on a qualified exchange or the IRS consents to the
revocation of the election.
The U.S. federal
income tax rules relating to PFICs are complex. You are urged to consult your tax advisors with respect to the purchase, ownership
and disposition of the common shares or ADSs, any elections available with respect to such ADSs and the U.S. Internal Revenue Service
information reporting obligations with respect to the purchase, ownership and disposition of the ADS.
Backup Withholding Tax and Information
Reporting and Disclosure Requirements
Dividend payments
made to U.S. Holders and proceeds paid from the sale or other disposition of their common shares or ADSs may be subject to information
reporting to the Internal Revenue Service and possible U.S. federal backup withholding. Certain exempt recipients (such as corporations)
are not subject to these information reporting requirements. Backup withholding will not apply to a U.S. Holder who furnishes a
correct taxpayer identification number and makes any other required certification, or who is otherwise exempt from backup withholding.
U.S. Holders who are required to establish their exempt status generally must provide IRS Form W-9 (Request for Taxpayer Identification
Number and Certification).
Backup withholding
is not an additional tax. Amounts withheld as backup withholding may be credited against a U.S. Holder’s U.S. federal income
tax liability. A U.S. Holder may obtain a refund of any excess amounts withheld under the backup withholding rules by filing the
appropriate claim for refund with the Internal Revenue Service in a timely manner and furnishing any required information.
Investors should
consult their own tax advisors as to their qualification for an exemption from backup withholding and the procedure for obtaining
this exemption.
Certain U.S. Holders
may be required to report information with respect to such holder’s interest in “specified foreign financial assets”
(as defined in Section 6038D of the Code), including stock of a non-U.S. corporation that is not held in an account maintained
by a U.S. “financial institution,” if the aggregate value of all such assets exceeds certain thresholds. Persons who
are required to report specified foreign financial assets and fail to do so may be subject to substantial penalties. U.S. Holders
are urged to consult their own tax advisors regarding the foreign financial asset reporting obligations and their possible application
to the holding of the common shares or ADSs.
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F.
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Dividends and Paying Agents
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Not applicable.
Not applicable.
We are subject to
the periodic reporting and other informational requirements of the Exchange Act. Under the Exchange Act, we are required to file
reports and other information with the SEC. Specifically, we are required to file annually a Form 20-F no later than four months
after the close of each fiscal year, which is December 31. The SEC maintains a web site at www.sec.gov that contains reports, proxy
and information statements, and other information regarding registrants that make electronic filings with the SEC using its EDGAR
system, which can be accessed without charge. As a foreign private issuer, we are exempt from the rules under the Exchange Act
prescribing the furnishing and content of quarterly reports and proxy statements, and officers, directors and principal shareholders
are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In accordance
with Section 203.01 of the NYSE Listed Company Manual, we will post this annual report on our website at www.xyre.com.
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I.
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Subsidiary Information
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Not applicable.
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ITEM 11.
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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Market risk is the
risk of loss related to adverse changes in market prices, including interest rate and foreign exchange rates of financial instruments.
We are exposed to various types of market risks in the normal course of business. We have not in the past used derivatives to manage
our exposure to market interest rate risk or foreign exchange risk. The following discussion and analysis, which involves “forward-looking
statements” that involve risk and uncertainties, summarizes our exposure to different market risks.
Foreign Exchange Risk
We and our subsidiaries
are principally engaged in real estate development and the provision of property management services in the PRC. We started U.S.
business operations, which is mainly residential real estate development, as well as resale, in 2012. The functional currency of
our PRC subsidiaries is the Renminbi, while that of our subsidiaries in the United States is U.S. dollars. Our reporting currency
is the U.S. dollar. We translate the PRC operating results using the average exchange rate for the year and we translate the PRC
financial position at the year-end exchange rate. The foreign currency translation income recognized in our other comprehensive
loss amounted to US$20.0 million for the year ended December 31, 2019.
A significant portion
of our revenues is denominated in RMB. However, we have substantial U.S. dollar denominated obligations, including the obligation
to pay interest and principal on our secured debt and capital commitments to support our United States business operations. Accordingly,
any significant fluctuation between the RMB and the U.S. dollar could expose us to foreign exchange risk. We do not currently hedge
our exchange rate exposure. We evaluate such risk from time to time and may consider engaging in hedging activities in the future
to the extent we deem appropriate. Such hedging arrangements may require us to pledge or transfer cash and other collateral to
secure our obligations under the agreements, and the amount of collateral required may increase as a result of mark-to-market adjustments.
The RMB is not a
freely convertible currency. The PRC government may take actions that could cause future exchange rates to vary significantly from
current or historical exchange rates. The conversion of RMB into foreign currencies, including U.S. dollars, has been based on
rates set by the PBOC. On July 1, 2005, the PRC government changed its previous policy of pegging the value of the RMB to the U.S.
dollar. Under the current policy, the RMB is permitted to fluctuate within a narrow and managed band against a basket of certain
foreign currencies. Since July 21, 2005, this change in policy has resulted in an approximately 15.7% appreciation of the RMB against
the U.S. dollar through December 31, 2019. There remains significant international pressure on the PRC government to adopt an even
more flexible currency policy, which could result in a further and more significant appreciation of the RMB against the U.S. dollar.
Any appreciation of the RMB against the U.S. dollar or any other foreign currencies would make any new RMB-denominated investments
or expenditures more costly to us, to the extent that we need to convert foreign currencies into RMB for such purposes. On August
11, 2015, the PBOC allowed the RMB to depreciate by approximately 2% against the U.S. dollar. It is difficult to predict how long
such depreciation of RMB against the U.S. dollar may last. However, any significant depreciation in the exchange rates of the RMB
against the U.S. dollar could adversely affect the value of any dividends paid by us to our shareholders, which would be funded
by RMB but paid in U.S. dollars. There can be no assurance that any future movements in the exchange rate of the RMB against the
U.S. dollar or other foreign currencies will not adversely affect our results of operations and financial condition (including
our ability to pay dividends). A significant depreciation in the RMB against major foreign currencies may have a material adverse
impact on our results of operations, financial condition and share price because our reporting currency is the U.S. dollar and
our ADSs are expected to be quoted in U.S. dollars, whereas our revenues, costs and expenses are largely denominated in RMB.
Interest Rate Risk
The cost of financing
is sensitive to fluctuations in interest rates. Our bank borrowings bear interest at variable rates, and an increase in interest
rates would increase our costs there under. Our net income is affected by changes in interest rates as a result of the impact such
changes have on interest income from, and interest expense on, short-term deposits and other interest-bearing financial assets
and liabilities. In addition, our sales are also sensitive to fluctuations in interest rates. An increase in interest rates would
adversely affect our prospective purchasers’ ability to obtain financing and depress the overall housing demand. Higher interest
rates, therefore, may adversely affect our revenues, gross profits and net income, and our ability to raise and service debt and
to finance our developments.
In addition, on
July 27, 2017, the United Kingdom Financial Conduct Authority, which regulates London Interbank Offered Rate (“LIBOR”),
announced that it will no longer require banks to submit rates for the calculation of LIBOR to the LIBOR administrator after
2021, and it is anticipated that LIBOR will be phased out and replaced by 2022. While various replacement reference rates
have been proposed, an alternative reference rate to LIBOR has not yet been widely adopted. As such, the replacement
of LIBOR could have an adverse effect on the market for, or value of, LIBOR-linked financial instruments.
Our
indebtedness consists primarily of short-term and long-term bank borrowings, secured debt and onshore corporate bonds. As of
December 31, 2019, we had US$73.4 million of short-term borrowings, with US$53.5 million denominated in RMB, US$19.9 million
denominated in U.S. dollar, which bear interest rates ranging from 3.5% per annum to12% per annum, with a weighted average
interest rate at such date of 8.3%. US$28.5 million of short-term loan bear of floating interest rates, which are based on
137%
of PBOC benchmark rates and Libor benchmark rates in the following years.
US$836.8 million of long-term bank loans, including current portions of long-term bank loans, bear floating interest rates,
which are based on 100.00% to 210.53% of PBOC benchmark rates in the following years. US$140.8 million of long-term debt,
including current portions of long-term debt bear floating interest rates, which are based on Libor benchmark rates in the
following years. The PBOC regulates the interest rates of our Renminbi-denominated borrowings. The PBOC-published benchmark
one-year lending rate in China, which directly affects the property mortgage rates offered by commercial banks in China, as
at December 31, 2017, 2018 and 2019 was 4.35%, 4.35% and 4.35%, respectively. As of December 31, 2019, the principal amount
of our aggregate outstanding variable rate debt, including long-term bank loans, was US$1,006.1 million. A hypothetical 1.00%
increase in annual interest rates would increase our interest cost by approximately US$10.1 million per year based on our
debt level at December 31, 2019. The senior secured notes and other debt, except the above-mentioned US$140.8 million of
floating rate debt, bear fixed interest rates and therefore, interest rate risk is low.
Credit Risk
We provide guarantees
to mortgage lending banks in respect of the mortgage loans provided to the purchasers of our properties in the PRC up until completion
of the registration of the mortgage with the relevant authorities, which generally occurs within six to 12 months after the purchaser
takes possession of the relevant properties. If a purchaser defaults under the loan while our guarantee is in effect and we repay
all debt owed by the purchaser to the mortgagee bank under the loan, the mortgagee bank must assign its rights under the loan and
the mortgage to us and, after the registration of the mortgage, we will have full recourse to the property. In line with what we
believe is industry practice, we do not conduct independent credit checks on our customers but rely on the credit checks conducted
by the mortgagee banks.
As of December 31,
2019, we had outstanding guarantees of mortgages in the principal amount of US$2,617.2 million. If a purchaser defaults on the
payment of its mortgage during the term of the guarantee, the mortgage lending bank may require us to repay the outstanding amount
under the loan plus any accrued interest. In this event, although we are able to retain the customer’s deposit and sell the
property to recover any amounts paid by us to the bank, there can be no assurance that we would be able to sell the property at
a price equal to or greater than the amount we paid on the defaulting purchaser’s outstanding loan amount and any accrued
interest thereon. We paid US$1.8 million to satisfy guarantee obligations related to customer defaults for the year ended December
31, 2019.
During parts of
2011 and 2012 we offered certain homebuyers seller-financing arrangements. All the homebuyers entered into such arrangement were
subject to credit verification procedures. In addition, accounts receivable balances are unsecured, but monitored on an ongoing
basis via our management reporting procedures. We provided longer payment terms, ranging between six months to two years to particular
home buyers after applying strict credit requirements based on our credit policy. In the second half of 2012, execution of seller-financed
contracts dropped significantly. From the fourth quarter of 2012, we stopped offering seller-financed contracts to second home
buyers. Commencing in the second quarter of 2014, the Group again offer seller-financed contracts. As of December 31, 2018 and
2019, there was no concentration of credit risk with respect to receivables and we do not have a significant exposure to any individual
debtor. Since 2013, PRC banks have tightened the distributions of mortgage loans to homebuyers. Therefore, mortgage loans for homebuyers
have been subject to longer processing periods or even denied by the banks. We took the position that the processing periods of
the contracts with underlying mortgage loans exceeding one year cannot be recognized as revenue on an over time basis.
As
of December 31, 2019, our cash and cash equivalents totaled US$808.1 million and restricted cash totaled US$181.5 million, predominately
deposited in accounts maintained with state-owned bank within the PRC. We have not experienced any losses in such accounts and
management believes it is not exposed to any risks on its cash in bank accounts.
Inflation
Inflation has not
had a significant effect on our business during the past three years. According to the National Bureau of Statistics of China,
China’s overall national inflation rate, as represented by the general consumer price index, was approximately 1.6%, 2.1%
and 2.9% in 2017, 2018 and 2019, respectively. Deflation could negatively affect our business as it would be a disincentive for
prospective property buyers to make a purchase. As of the date of this annual report, we have not been materially affected by any
inflation or deflation.
|
ITEM 12.
|
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
|
Our common shares,
in the form of ADSs, each representing two common shares, are listed on the NYSE. JPMorgan Chase Bank, N.A. serves as the depositary
for the ADSs. JPMorgan Chase Bank, N.A.’s principal executive office is located at 4 New York Plaza, Floor 12, New York,
New York, 10004.
The depositary may
charge each person to whom ADSs are issued, including, without limitation, issuances against deposits of shares, issuances in respect
of share distributions, rights and other distributions, issuances pursuant to a stock dividend or stock split declared by us or
issuances pursuant to a merger, exchange of securities or any other transaction or event affecting the ADSs or deposited securities,
and each person surrendering ADSs for withdrawal of deposited securities in any manner permitted by the deposit agreement, US$5.00
for each 100 ADSs (or any portion thereof) issued, delivered, reduced, cancelled or surrendered, as the case may be. ADSs are represented
and evidenced by American depositary receipts, or ADRs.
The depositary may
charge the following the additional amounts to ADR holders:
|
•
|
a fee of US$0.02 or less per ADS (or portion thereof) for any cash distribution made pursuant to
the deposit agreement;
|
|
•
|
a fee of US$1.50 per ADR or ADRs for transfers pursuant to the deposit agreement;
|
|
•
|
an aggregate fee of up to US$0.05 per ADS (or portion thereof) per calendar year for services performed
by the depositary in administering our ADR program;
|
|
•
|
any other charge payable by any of the depositary, any of the depositary’s agents, including,
without limitation, the custodian, or the agents of the depositary’s agents in connection with the servicing of our shares
or other deposited securities;
|
|
•
|
a fee for the distribution of securities (or the sale of securities in connection with a distribution),
such fee being in an amount equal to the fee for the execution and delivery of ADSs which would have been charged as a result of
the deposit of such securities (treating all such securities as if they were shares) but which securities or the net cash proceeds
from the sale thereof are instead distributed by the depositary to those holders entitled thereto;
|
|
•
|
stock transfer or other taxes and other governmental charges;
|
|
•
|
SWIFT, cable, telex and facsimile transmission and delivery charges incurred upon request of an
ADR holder;
|
|
•
|
transfer or registration fees for the registration of transfer of deposited securities on any applicable
register in connection with the deposit or withdrawal of deposited securities;
|
|
•
|
expenses of the depositary in connection with the conversion of foreign currency into U.S. dollars;
and
|
|
•
|
such fees and expenses as are incurred by the depositary (including without limitation expenses
incurred in connection with compliance with foreign exchange control regulations or any law or regulation relating to foreign investment)
in delivery of deposited securities or otherwise in connection with the depositary’s or its custodian’s compliance
with applicable laws, rules or regulations.
|
The fees described
above may be amended from time to time.
The depositary collects
its fees for issuance and cancellation of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of
withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting
those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect
its annual fee for depositary services by deduction from cash distributions, or by directly billing investors, or by charging the
book-entry system accounts of participants acting for them. The depositary may generally refuse to provide services to any holder
until the fees and expenses owing by such holder for those services or otherwise are paid.
ADR holders must
pay any tax or other governmental charge payable by the custodian or the depositary on any ADS or ADR, deposited security or distribution.
If an ADR holder owes any tax or other governmental charge, the depositary may (i) deduct the amount thereof from any cash distributions,
or (ii) sell deposited securities and deduct the amount owing from the net proceeds of such sale. In either case the ADR holder
remains liable for any shortfall. Additionally, if any tax or governmental charge is unpaid, the depositary may also refuse to
effect any registration, registration of transfer, split-up or combination of deposited securities or withdrawal of deposited securities
(except under limited circumstances mandated by securities regulations). If any tax or governmental charge is required to be withheld
on any non-cash distribution, the depositary may sell the distributed property or securities to pay such taxes and distribute any
remaining net proceeds to the ADR holders entitled thereto.
The depositary may
remit to us all or a portion of the depositary fees charged for the reimbursement of certain of the expenses we incur in respect
of the ADS program established pursuant to the deposit agreement upon such terms and conditions as we may agree from time to time.
In the year ended December 31, 2019, the depositary reimbursed US$-19,307 with respect to certain fees and expenses.
The table below
sets forth the types of expenses that the depositary has agreed to reimburse and the amounts reimbursed in 2019:
Category of Expenses
|
|
Amount
Reimbursed in the
Year Ended
December 31, 2019
|
|
|
|
(US$)
|
|
Investor relations marketing
|
|
|
-
|
|
Legal
|
|
|
-
|
|
Total
|
|
|
-
|
|
PART II
|
ITEM 13.
|
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
|
None.
|
ITEM 14.
|
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
|
None.
|
ITEM 15.
|
CONTROLS AND PROCEDURES
|
Evaluation of Disclosure Controls
and Procedures
Our
management, with the participation of our Chief Executive Officer and Chief Financial Officer, has performed an evaluation of
the effectiveness of our disclosure controls and procedures within the meaning of Rule 13a-15(e) of the Exchange Act
as of the end of the period covered by this report. Based on such evaluation, our management has concluded that, as of the end
of the period covered by this annual report, our disclosure controls and procedures were effective to ensure that information
required to be disclosed by our company in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized
and reported within the time period specified in the SEC rules and forms, and (ii) accumulated and communicated to our management,
including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding
required disclosure.
Report of Management on Internal
Control over Financial Reporting
Our management is
responsible for establishing and maintaining adequate internal control over financial reporting, as defined under Rule 13(a)-15(f)
and 15(d)-15(f) of the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures
that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles and that our receipts and expenditures are being
made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the consolidated
financial statements.
Because of its inherent
limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate. Management, under the supervision and with the
participation of our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our internal
control over financial reporting based on the framework in Internal Control-Integrated Framework (2013 Framework) issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control-Integrated
Framework (2013 Framework), our management concluded that, as of December 31, 2019, our internal control over financial reporting
was effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with U.S. GAAP.
The effectiveness
of our internal control over financial reporting as of December 31, 2019 has been audited by Ernst & Young Hua Ming LLP, an
independent registered public accounting firm, as stated in their attestation report thereon which appears herein.
Changes in
Internal Control over Financial Reporting
During the year
ended December 31, 2019, there were no changes in our internal control over financial reporting that occurred during the period
covered by the report for the year ended December 31, 2019 that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
Report
of Independent Registered Public Accounting Firm
To the Shareholders
and the Board of Directors of Xinyuan Real Estate Co., Ltd.
Opinion on Internal
Control over Financial Reporting
We have audited
Xinyuan Real Estate Co., Ltd. and subsidiaries’ internal control over financial reporting as of December 31, 2019, based
on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Xinyuan Real Estate Co., Ltd. and subsidiaries
(the Company) maintained, in all material respects, effective internal control over financial reporting as of December
31, 2019, based on the COSO criteria.
We
also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”),
the consolidated balance sheets as of December 31, 2019 and 2018, the related consolidated statements of comprehensive income,
changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2019, and the
related notes and our report dated April 29, 2020 expressed an unqualified opinion thereon.
Basis for Opinion
The
Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment
of the effectiveness of internal control over financial reporting included in the accompanying Report of Management on Internal
Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial
reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with
respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.
We conducted our
audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists,
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such
other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our
opinion.
Definition and
Limitations of Internal Control over Financial Reporting
A company’s
internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance
with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the
financial statements.
Because of its inherent
limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young Hua Ming LLP
|
|
Beijing, the People’s Republic of China
|
|
April 29, 2020
|
|
PART III
|
ITEM 16A.
|
AUDIT COMMITTEE FINANCIAL EXPERT
|
Our board of directors
has determined that Mr. Thomas Gurnee, the chairman of our audit committee, qualifies as an audit committee financial expert under
applicable SEC rules.
Our board of directors
has adopted a code of business conduct and ethics that pertains to our directors, officers and employees with certain provisions
that specifically apply to our Chief Executive Officer, Chief Financial Officer, Vice Presidents and any other persons who perform
similar functions for us. Our code of business conduct and ethics is available at our website at www.xyre.com.
|
ITEM 16C.
|
PRINCIPAL
ACCOUNTANT FEES AND SERVICES
|
The following
table sets forth the aggregate fees by categories specified below in connection with certain professional services rendered
by Ernst & Young Hua Ming LLP, our independent registered public accounting firm, and its affiliate firms for the periods
indicated:
|
|
2018
|
|
|
2019
|
|
|
|
US$
|
|
|
US$
|
|
Audit fees (1)
|
|
|
1,330,954
|
|
|
|
1,797,961
|
|
Audit-related fees (2)
|
|
|
329,714
|
|
|
|
130,497
|
|
Tax fees (3)
|
|
|
–
|
|
|
|
47,849
|
|
All other fees (4)
|
|
|
–
|
|
|
|
399,466
|
|
|
(1)
|
“Audit fees” represent
the aggregate fees billed in each of the fiscal year for the audit of financial statements of the Company and the limited quarterly
procedures. In 2019, the audit fees billed included the audit of financial statements
of the Company’s subsidiary, Xinyuan Property Management Service (Cayman) Ltd, for its Hong Kong initial public offering
and annual reporting purpose.
|
|
(2)
|
“Audit-related fees”
represents aggregate fees billed in respect of review of interim financial statements of Xinyuan Property Management Service (Cayman)
Ltd, and issue comfort letter for the Company’s financing purposes.
|
|
(3)
|
Tax fees consist of fees incurred for tax consulting services.
|
|
(4)
|
Other fees represents aggregate fees for business advisory and diagnosis services.
|
All audit and non-audit
services provided by our independent auditor must be pre-approved by our audit committee. Our audit committee has adopted a project-by-project
approach in pre-approving proposed services. All requests or applications for services to be provided by our independent auditor
require a detailed description of the services to be rendered and will be presented to our audit committee for pre-approval.
|
ITEM 16D.
|
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
|
None.
|
ITEM 16E.
|
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
|
Effective March
21, 2017, our board of directors approved a new US$40 million share repurchase program through December 2019 (the “2017 Authorization”)
to be effective upon the earlier of completion or expiration of the US$40 million share repurchase program effective December 28,
2015 through December 2017. Effective August 14, 2018, our board of directors approved a new additional US$50 million share repurchase
program through December 2019 (the “2018 Authorization”).
Effective May 20,
2019, our board of directors approved a new additional US$50 million share repurchase program through December 2021 (the “2019
Authorization”). This program will be funded from available working capital. Repurchases under the 2019 Authorization will
be made from time to time through a combination of open market and privately negotiated transactions. The per share price cap will
be determined from time to time in the discretion of management.
The following
table sets forth a summary of our repurchase of our ADSs made from January 1, 2019 to December 31, 2019:
Period(1)
|
|
Total Number of
ADSs Purchased
|
|
|
Average Price
Paid Per ADS
(US$)
|
|
|
Total Number of
ADSs Purchased as
Part of Publicly
Announced Plans or
Programs
|
|
|
Approximate U.S.
Dollar Value of ADSs
that May Yet Be
Purchased Under the
Plans or Programs
|
|
January 1 - January 31
|
|
|
704,957
|
|
|
|
4.52
|
|
|
|
704,957
|
|
|
|
62,886,055
|
|
February 1 - February 28
|
|
|
524,223
|
|
|
|
4.94
|
|
|
|
524,223
|
|
|
|
60,298,364
|
|
March 1 - March 31
|
|
|
940,196
|
|
|
|
4.81
|
|
|
|
940,196
|
|
|
|
55,779,724
|
|
April 1 - April 30
|
|
|
686,461
|
|
|
|
4.80
|
|
|
|
686,461
|
|
|
|
52,487,704
|
|
May 1 - May 31
|
|
|
412,956
|
|
|
|
4.47
|
|
|
|
412,956
|
|
|
|
100,639,748
|
|
June 1 through June 30
|
|
|
259,863
|
|
|
|
4.46
|
|
|
|
259,863
|
|
|
|
99,479,855
|
|
July 1 through July 31
|
|
|
277,769
|
|
|
|
4.28
|
|
|
|
277,769
|
|
|
|
98,290,191
|
|
August 1 through August 31
|
|
|
389,507
|
|
|
|
4.20
|
|
|
|
389,507
|
|
|
|
96,655,342
|
|
September 1 through September 30
|
|
|
362,223
|
|
|
|
4.21
|
|
|
|
362,223
|
|
|
|
95,130,765
|
|
October 1 through October 31
|
|
|
298,741
|
|
|
|
4.10
|
|
|
|
298,741
|
|
|
|
93,906,877
|
|
November 1 through November 30
|
|
|
518,335
|
|
|
|
3.93
|
|
|
|
518,335
|
|
|
|
91,867,917
|
|
December 1 through December 31
|
|
|
482,438
|
|
|
|
3.89
|
|
|
|
482,438
|
|
|
|
50,000,000
|
|
Total
|
|
|
5,857,669
|
|
|
|
4.45
|
|
|
|
5,857,669
|
|
|
|
50,000,000
|
|
|
(1)
|
Our ADS to common share ratio is one ADS for two common shares.
|
Effective January
20, 2020, the board of directors approved a new bond repurchase program of up to US$50 million. The new authorization is valid
through December 31, 2021, and replaces the prior bond repurchase authorization that expired December 31, 2019. Under the program,
bonds will be selected for repurchase at the Company’s discretion, based on price, timing and other considerations. Repurchases
under this program will be made through a combination of open market and privately negotiated transactions.
|
ITEM 16F.
|
CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
|
None.
|
ITEM 16G.
|
CORPORATE GOVERNANCE
|
Our ADSs are listed
on the NYSE and we are therefore subject to corporate governance requirements of the NYSE. We are incorporated in the Cayman Islands
and thus our corporate governance practices are also governed by applicable Cayman Islands law. Under Section 303A of the NYSE
Listed Company Manual, NYSE-listed non-U.S. companies may, in general, follow their home country corporate governance practices
in lieu of some of the NYSE corporate governance requirements.
The NYSE Listed
Company Manual requires that the board of directors of a listed company consist of a majority of independent directors, as defined
by the NYSE from time to time. The corporate governance practice in our home country, the Cayman Islands, does not require a majority
of directors of a corporation to be independent. As of the date of this annual report, the majority of our directors are not independent
directors as defined by the NYSE. Our board is currently composed of ten directors, two of whom are current officers of the Company
or one of its subsidiaries, and three of whom was formerly an executive officer of our Company within the past three years. Under
NYSE rules, all non-management directors are required to meet periodically in executive session, without any members of management
present. The corporate governance practice in our home country does not require such meetings and, accordingly, our non-management
directors do not meet in executive session.
The NYSE Listed
Company Manual requires each issuer to have a nominating and corporate governance committee and a compensation committee composed
entirely of independent directors. In addition, each of those committees must have a written charter setting out, at a minimum,
certain prescribed duties. The corporate governance practice in our home country, the Cayman Islands, does not require the implementation
of a compensation committee, nor a nominating and corporate governance committee, nor does it require any such committees to be
comprised solely of independent directors. We have established a separate compensation committee and a nominating and corporate
governance committee. However, neither of the committees consists solely of independent directors. Each committee has a written
charter which is available on our corporate website. However, the committees have not adopted and implemented all of the duties
prescribed for such committee by the NYSE.
The NYSE Listed
Company Manual requires listed companies to have an audit committee that satisfies the requirements of Section 10A of the Exchange
Act. As a foreign private issuer, we are not required to comply with certain other NYSE rules related to audit committees, including
the requirements to have a minimum of three members and that the members satisfy the additional “independence” standards
of Section 303A.02 of the New York Stock Exchange Listed Company Manual. Our audit committee has, as of the date of this annual
report, three members, each of whom satisfies the “independence” requirements of Rule 10A-3 under the Exchange Act,
and one such member qualifies as an “audit committee financial expert” under applicable SEC rules.
In addition to the
board governance rules described above, the NYSE Listed Company Manual requires shareholder action in connection with certain share
issuances by a listed company. Specifically, shareholder approval is required in connection with an issuance of an amount of equity
securities equal to or greater than 20% of the outstanding voting power or equity interest of the company, subject to limited exceptions.
Shareholder approval is also required for the adoption of or material revision to an equity compensation plan, which is defined
as a plan or other arrangement that provide for the delivery of equity securities of the company to any employee, director or other
service provider as compensation for services. Our home country corporate governance does not require shareholder action in either
situation and, accordingly, such actions may be and are taken on behalf of our company with just board or board committee action.
Not applicable.
|
ITEM 17.
|
FINANCIAL STATEMENTS
|
We have elected
to provide financial statements pursuant to Item 18.
|
ITEM 18.
|
FINANCIAL STATEMENTS
|
The consolidated
financial statements of Xinyuan Real Estate Co., Ltd. are included at the end of this annual report.
Exhibit
Number
|
|
Description of Document
|
1.1
|
|
Amended and Restated Memorandum and Articles of Association of Xinyuan Real Estate Co., Ltd. (incorporated by reference to Exhibit 3.1 to the registrant’s F-1 registration statement (File No. 333-147477), as amended, initially filed with the SEC on November 16, 2007)
|
|
|
|
1.2
|
|
Amendment to Amended and Restated Articles of Association of Xinyuan Real Estate Co., Ltd. (incorporated by reference to Exhibit 99.5 to the registrant’s Form 6-K (File No. 001-33863) filed with the SEC on December 10, 2009)
|
|
|
|
2.1
|
|
Deposit Agreement, dated as of December 11, 2007, among Xinyuan Real Estate Co., Ltd., JPMorgan Chase Bank, N.A., as depositary, and holders of American Depositary Shares (incorporated by reference to Exhibit 2.5 to Amendment No. 1. to the registrant’s annual report (File No. 001-33863), as amended, initially filed with the SEC on September 29, 2009)
|
|
|
|
2.2
|
|
Amendment to Deposit Agreement, including the form of ADR, dated November 9, 2017 (incorporated by reference to Exhibit 99.(a)(2) to the registrant’s F-6EF (File No. 333-221449) filed with the SEC on November 9, 2017)
|
|
|
|
2.3
|
|
Indenture, dated as of December 6, 2013, between Xinyuan Real Estate Co., Ltd., the entities listed on Schedule 1 thereto as Subsidiary Guarantors, and Citicorp International Limited, as Trustee and Shared Security Agreement (incorporated by reference to Exhibit 99.1 to the registrant’s Form 6-K (File No. 001-33863) filed with the SEC on December 9, 2013)
|
|
|
|
2.4
|
|
Indenture Supplement No. 1 dated as of February 13, 2015, among Citicorp International Limited as Trustee, Citicorp International Limited as Shared Security Agent, Xinyuan Real Estate Co., Ltd. and the entities listed in Schedules I thereto as the Subsidiary Guarantors to the Indenture, dated as of May 3, 2013 with respect to the registrant’s 13% June 2019 Senior Secured Notes (incorporated by reference to Exhibit 99.2 to the registrant’s Form 6-K (File No. 001-33863) filed with the SEC on February 13, 2015)
|
|
|
|
2.5
|
|
Indenture Supplement No. 2, dated as of February 3, 2016, among Citicorp International Limited as Trustee, Citicorp International Limited as Shared Security Agent, Xinyuan Real Estate Co., Ltd. and the entities listed in Schedule I as the Subsidiary Guarantors, to the Indenture, dated as of December 6, 2013, with respect to the registrant’s 13% June 2019 Senior Secured Notes (incorporated by reference to Exhibit 99.3 to the registrant’s Form 6-K (File No. 001-33863) filed with the SEC on February 3, 2016)
|
|
|
|
2.6
|
|
Global note representing the 13% June 2019 Senior Secured Notes (US$200,000,000 aggregate principal amount) (incorporated by reference to Exhibit 99.2 to the registrant’s Form 6-K (File No. 00133863) filed with the SEC on December 9, 2013)
|
|
|
|
2.7
|
|
Indenture, dated as of August 30, 2016, between Xinyuan Real Estate Co., Ltd., the entities listed on Schedule I thereto as Subsidiary Guarantors, and Citicorp International Limited, as Trustee and Shared Security Agent (incorporated by reference to Exhibit 99.1 to the registrant’s Form 6-K (File No. 00133863) filed with the SEC on August 30, 2016)
|
|
|
|
2.8
|
|
Global note representing the 8.125% August 2019 Senior Secured Notes (US$300,000,000 aggregate principal amount) (incorporated by reference to Exhibit 99.2 to the registrant’s Form 6-K (File No. 00133863) filed with the SEC on August 30, 2016)
|
Exhibit
Number
|
|
Description of Document
|
2.9
|
|
Indenture, dated as of February 28, 2017, between Xinyuan Real Estate Co., Ltd., the entities listed on Schedule I thereto as Subsidiary Guarantors, and Citicorp International Limited, as Trustee and Shared Security Agent (incorporated by reference to Exhibit 99.1 to the registrant’s Form 6-K (File No. 00133863) filed with the SEC on February 28, 2017)
|
|
|
|
2.10
|
|
Global note representing the 7.75% February 2021 Senior Secured Notes (US$300,000,000 aggregate principal amount) (incorporated by reference to Exhibit 99.2 to the registrant’s Form 6-K (File No. 00133863) filed with the SEC on February 28, 2017)
|
|
|
|
2.11
|
|
Indenture, dated as of November 22, 2017, between Xinyuan Real Estate Co., Ltd., the entities listed on Schedule I thereto as Subsidiary Guarantors, and Citicorp International Limited, as Trustee and Shared Security Agent (incorporated by reference to Exhibit 99.1 to the registrant’s Form 6-K (File No. 001-33863) filed with the SEC on November 22, 2017)
|
|
|
|
2.12
|
|
Global note representing 8.875% Senior Notes due 2020 (US$200,000,000 aggregate principal amount) (incorporated by reference to Exhibit 99.2 to the registrant’s Form 6-K (File No. 001-33863) filed with the SEC on November 22, 2017)
|
|
|
|
2.13
|
|
Global note representing 8.875% Senior Notes due 2020 (US$100,000,000 aggregate principal amount) (incorporated by reference to Exhibit 99.2 to the registrant’s Form 6-K (File No. 001-33863) filed with the SEC on December 4, 2017)
|
|
|
|
2.14
|
|
Indenture, dated as of March 19, 2018, between Xinyuan Real Estate Co., Ltd., the entities listed on Schedule I thereto as Subsidiary Guarantors, and Citicorp International Limited, as Trustee and Shared Security Agent (incorporated by reference to Exhibit 99.1 to the registrant’s Form 6-K (File No. 001-33863) filed with the SEC on March 19, 2018)
|
|
|
|
2.15
|
|
Global note representing 9.875% Senior Notes due 2020 (US$200,000,000 aggregate principal amount) (incorporated by reference to Exhibit 99.2 to the registrant’s Form 6-K (File No. 001-33863) filed with the SEC on March 19, 2018)
|
|
|
|
2.16
|
|
Indenture, dated as of April 15, 2019, between Xinyuan Real Estate Co., Ltd., the entities listed on Schedule I thereto as Subsidiary Guarantors, and Citicorp International Limited, as Trustee and Shared Security Agent (incorporated by reference to Exhibit 99.1 to the registrant’s Form 6-K (File No. 001-33863) filed with the SEC on April 18, 2019
|
|
|
|
2.17
|
|
Global note representing 14.2% Senior Notes due 2021 (US $200,000,000 aggregate principal amount) (incorporated by reference to Exhibit 2.17 to the registrant’s Form 20-F(File No. 001-33863) filed with the SEC on April 29, 2019).
|
|
|
|
2.18
|
|
Global note representing 14.2% Senior Notes due 2021 (US $100,000,000 aggregate principal amount) (incorporated by reference to Exhibit 2.18 to the registrant’s Form 20-F(File No. 001-33863) filed with the SEC on April 29, 2019).
|
|
|
|
2.19*
|
|
Description of Securities
|
|
|
|
4.2
|
|
2007 Long Term Incentive Plan (incorporated by reference to Exhibit 10.2 to the registrant’s F-1 registration statement (File No. 333-147477), as amended, initially filed with the SEC on November 16, 2007)
|
|
|
|
4.3
|
|
2014 Restricted Stock Unit Plan (incorporated by reference to Exhibit 4.3 to the registrant’s Annual Report on Form 20-F (File No. 001-33863), filed with the SEC on April 27, 2015)
|
|
|
|
4.4
|
|
2015 Stock Option Plan (incorporated by reference to Exhibit 10.1 to the registrant’s Form S-8 (File No. 333-205371) filed with the SEC on June 30, 2015)
|
4.5
|
|
English Summary of the Capital Lease Agreement dated as of October 23, 2012, by and among MinshengHongtai (Tianjin) Aviation Leasing Co., Ltd., and Henan Xinyuan Real Estate Co., Ltd. (Original Language: Chinese) (incorporated by reference to Exhibit 4.7 to the registrant’s Annual Report on Form 20-F (File No. 001-33863), filed with the SEC on April 15, 2013)
|
|
|
|
4.6
|
|
English Summary of the Guarantee Agreement dated as of October 23, 2012, by and among MinshengHongtai (Tianjin) Aviation Leasing Co., Ltd., Xinyuan (China) Real Estate, Ltd. and Henan Xinyuan Real Estate Co., Ltd. (Original Language: Chinese) (incorporated by reference to Exhibit 4.8 to the registrant’s Annual Report on Form 20-F for the year ended December 31, 2012 (File No. 00133863), filed with the SEC on April 15, 2013)
|
|
|
|
8.1*
|
|
Subsidiaries of Xinyuan Real Estate Co., Ltd.
|
|
|
|
11.1
|
|
Code of Business Conduct and Ethics of the Registrant (incorporated by reference to Exhibit 99.1 to the registrant’s F-1 registration statement (File No. 333-147477), as amended, initially filed with the SEC on November 16, 2007)
|
|
|
|
12.1*
|
|
CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
|
12.2*
|
|
CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
|
13.1*
|
|
CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
|
13.2*
|
|
CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
|
23.1*
|
|
Consent of Ernst & Young Hua Ming LLP
|
|
|
|
101*
|
|
The following materials from Xinyuan Real Estate Co., Ltd.’s Annual Report on Form 20-F for the year ended December
31, 2019 formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Statement of Operations,
(ii) the Condensed Consolidated Balance Sheet, (iii) the Condensed Consolidated Statement of Stockholders’ Equity, (iv)
the Condensed Consolidated Statement of Cash Flows, and (v) Notes to the Condensed Consolidated Financial Statements.
|
|
|
|
*
|
|
Filed with this Annual Report on Form 20-F
|
SIGNATURES
The
registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized
the undersigned to sign this Annual Report on its behalf.
|
Xinyuan Real Estate Co., Ltd.
|
|
|
|
By:
|
/s/ Yong Zhang
|
|
Name: Yong Zhang
|
|
Title: Chief Executive Officer
|
Date:
April 29, 2020
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting
Firm
To the Shareholders and the Board
of Directors of Xinyuan Real Estate Co., Ltd.
Opinion on the Financial Statements
We have audited the accompanying
consolidated balance sheets of Xinyuan Real Estate Co., Ltd. and subsidiaries (the "Company") as of December 31, 2019
and 2018, the related consolidated statements of comprehensive income, changes in shareholders’ equity and cash flows for
each of the three years in the period ended December 31, 2019, and the related notes (collectively referred to as the "consolidated
financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the
financial position of the Company at December 31, 2019 and 2018, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance
with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the Company's internal
control over financial reporting as of December 31, 2019, based on criteria established in Internal Control-Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated April 29,
2020 expressed an unqualified opinion thereon.
Adoption of New Accounting Standards
As discussed in Note
2 to the consolidated financial statements, the Company changed its method for accounting for leases using the modified retrospective
method in 2019 and changed its method for accounting for revenue using
the modified retrospective method in 2018.
Basis for Opinion
These financial statements are the
responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based
on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance
with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide
a reasonable basis for our opinion.
/s/ Ernst & Young
Hua Ming LLP
We have served as the Company's auditor since 2007.
Beijing, the People's Republic of China
April 29, 2020
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(ALL amounts stated in US$, except for number of
shares data)
|
|
Notes
|
|
December 31,
2018
|
|
|
December 31,
2019
|
|
|
|
|
|
US$
|
|
|
US$
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
674,141,554
|
|
|
|
662,606,063
|
|
Restricted cash
|
|
|
|
|
511,874,925
|
|
|
|
326,980,363
|
|
Short-term investments
|
|
3
|
|
|
8,442,063
|
|
|
|
5,595,625
|
|
Accounts receivable
|
|
|
|
|
64,129,969
|
|
|
|
97,911,510
|
|
Other receivables
|
|
4
|
|
|
166,632,745
|
|
|
|
287,300,176
|
|
Deposits for land use rights
|
|
|
|
|
42,254,342
|
|
|
|
26,375,391
|
|
Other deposits and prepayments
|
|
|
|
|
257,287,874
|
|
|
|
277,463,137
|
|
Advances to suppliers
|
|
|
|
|
46,983,182
|
|
|
|
44,357,799
|
|
Real estate properties development completed
|
|
5
|
|
|
632,359,691
|
|
|
|
458,204,518
|
|
Real estate properties under development (including real estate properties under development of the consolidated variable interest entities ("VIEs") to be used only to settle obligations of the VIEs of US$166,327,833 and nil as of December 31, 2018 and December 31, 2019, respectively)
|
|
5
|
|
|
4,068,716,308
|
|
|
|
3,254,387,749
|
|
Amounts due from related parties
|
|
18
|
|
|
216,184,205
|
|
|
|
200,757,623
|
|
Amounts due from employees
|
|
18
|
|
|
1,694,416
|
|
|
|
2,350,852
|
|
Other current assets
|
|
|
|
|
520,391
|
|
|
|
772,303
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
|
|
6,691,221,665
|
|
|
|
5,645,063,109
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted cash, non-current
|
|
|
|
|
—
|
|
|
|
112,998,481
|
|
Real estate properties held for lease, net
|
|
6
|
|
|
302,764,217
|
|
|
|
515,868,908
|
|
Deposits for land use rights and properties
|
|
|
|
|
21,855,694
|
|
|
|
32,969,258
|
|
Property and equipment, net
|
|
7
|
|
|
38,114,483
|
|
|
|
43,004,379
|
|
Long-term investment
|
|
8
|
|
|
564,340,219
|
|
|
|
613,619,925
|
|
Deferred tax assets
|
|
15
|
|
|
230,452,674
|
|
|
|
260,153,439
|
|
Amounts due from related parties
|
|
18
|
|
|
26,122,186
|
|
|
|
82,687,026
|
|
Contract assets
|
|
|
|
|
21,779,221
|
|
|
|
23,093,235
|
|
Operating lease right-of-use assets
|
|
13
|
|
|
—
|
|
|
|
11,801,491
|
|
Other assets
|
|
|
|
|
137,062,313
|
|
|
|
80,405,182
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
|
|
|
8,033,712,672
|
|
|
|
7,421,664,433
|
|
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(ALL amounts stated in US$, except for number of
shares data)
|
|
Notes
|
|
December 31,
2018
|
|
|
December 31,
2019
|
|
|
|
|
|
US$
|
|
|
US$
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and notes payable (including accounts payable and notes payable of the VIEs without recourse to the primary beneficiary of US$2,489,669 and US$431,883 as of December 31, 2018 and December 31, 2019, respectively)
|
|
|
|
|
790,631,410
|
|
|
|
1,166,659,841
|
|
Short-term bank loans and other debt
|
|
10
|
|
|
43,711,388
|
|
|
|
73,419,108
|
|
Customer deposits
|
|
14
|
|
|
1,921,851,255
|
|
|
|
1,106,098,647
|
|
Income tax payable
|
|
|
|
|
213,272,832
|
|
|
|
298,227,606
|
|
Other payables and accrued liabilities (including other payables and accrued liabilities of the VIEs without recourse to the primary beneficiary of US$3,767,049 and US$854,814 as of December 31, 2018 and December 31, 2019, respectively)
|
|
17
|
|
|
341,107,500
|
|
|
|
323,163,994
|
|
Payroll and welfare payable (including payroll and welfare payable of the VIEs without recourse to the primary beneficiary of US$2,263,756 and US$772,009 as of December 31, 2018 and December 31, 2019, respectively)
|
|
|
|
|
33,752,390
|
|
|
|
24,223,625
|
|
Current portion of long-term bank loans and other debt
|
|
11, 12
|
|
|
1,647,918,456
|
|
|
|
1,418,955,459
|
|
Lease liability, current portion
|
|
13
|
|
|
6,562,425
|
|
|
|
11,283,724
|
|
Mandatorily redeemable non-controlling interests
|
|
18
|
|
|
22,558,686
|
|
|
|
8,857,212
|
|
Amounts due to related parties
|
|
18
|
|
|
48,502,441
|
|
|
|
53,682,296
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
|
|
5,069,868,783
|
|
|
|
4,484,571,512
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term bank loans
|
|
11
|
|
|
720,038,940
|
|
|
|
686,064,696
|
|
Deferred tax liabilities
|
|
15
|
|
|
370,508,807
|
|
|
|
338,592,787
|
|
Unrecognized tax benefits
|
|
15
|
|
|
45,939,234
|
|
|
|
73,605,084
|
|
Other long-term debt
|
|
12
|
|
|
1,040,455,200
|
|
|
|
1,036,690,627
|
|
Lease liability
|
|
13
|
|
|
10,014,791
|
|
|
|
10,187,705
|
|
Amounts due to related parties
|
|
18
|
|
|
31,241,768
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
|
|
7,288,067,523
|
|
|
|
6,629,712,411
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders' equity
|
|
|
|
|
|
|
|
|
|
|
Common shares, US$0.0001 par value:
|
|
|
|
|
|
|
|
|
|
|
Authorized-500,000,000 shares; shares issued and outstanding- 107,875,468 shares as of December 31, 2019 (December 31, 2018: 119,805,636 shares)
|
|
19
|
|
|
16,399
|
|
|
|
16,410
|
|
Treasury shares
|
|
19
|
|
|
(87,639,088
|
)
|
|
|
(113,719,964
|
)
|
Additional paid-in capital
|
|
|
|
|
532,117,479
|
|
|
|
543,290,577
|
|
Statutory reserves
|
|
|
|
|
166,495,744
|
|
|
|
175,008,459
|
|
Retained earnings
|
|
|
|
|
99,502,126
|
|
|
|
135,873,163
|
|
Accumulated other comprehensive loss
|
|
|
|
|
(30,122,179
|
)
|
|
|
(50,167,006
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total Xinyuan Real Estate Co., Ltd. shareholders' equity
|
|
|
|
|
680,370,481
|
|
|
|
690,301,639
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-controlling interest
|
|
24
|
|
|
65,274,668
|
|
|
|
101,650,383
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
|
|
745,645,149
|
|
|
|
791,952,022
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
|
|
|
8,033,712,672
|
|
|
|
7,421,664,433
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the years ended December 31, 2017, 2018, 2019
(ALL amounts stated in US$, except for number of
shares data)
|
|
|
|
Year ended December 31
|
|
|
|
Notes
|
|
2017
|
|
|
2018
|
|
|
2019
|
|
|
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
Real estate sales
|
|
|
|
|
1,924,560,806
|
|
|
|
2,139,370,792
|
|
|
|
2,387,031,568
|
|
Real estate management services income
|
|
|
|
|
41,738,319
|
|
|
|
63,447,420
|
|
|
|
67,488,169
|
|
Real estate lease income
|
|
|
|
|
8,732,799
|
|
|
|
9,584,972
|
|
|
|
16,128,771
|
|
Other revenue
|
|
|
|
|
1,875,307
|
|
|
|
5,148,101
|
|
|
|
11,984,304
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
|
|
1,976,907,231
|
|
|
|
2,217,551,285
|
|
|
|
2,482,632,812
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs of revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of real estate sales
|
|
|
|
|
(1,474,067,213
|
)
|
|
|
(1,543,974,061
|
)
|
|
|
(1,851,819,293
|
)
|
Cost of real estate management services income
|
|
|
|
|
(31,646,448
|
)
|
|
|
(44,619,783
|
)
|
|
|
(40,889,231
|
)
|
Cost of real estate lease income
|
|
|
|
|
(11,006,122
|
)
|
|
|
(9,348,616
|
)
|
|
|
(12,757,251
|
)
|
Other costs
|
|
|
|
|
(559,235
|
)
|
|
|
(4,130,523
|
)
|
|
|
(16,857,416
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs of revenue
|
|
|
|
|
(1,517,279,018
|
)
|
|
|
(1,602,072,983
|
)
|
|
|
(1,922,323,191
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
|
459,628,213
|
|
|
|
615,478,302
|
|
|
|
560,309,621
|
|
Selling and distribution expenses
|
|
|
|
|
(75,723,717
|
)
|
|
|
(83,591,651
|
)
|
|
|
(86,760,620
|
)
|
General and administrative expenses
|
|
|
|
|
(136,844,741
|
)
|
|
|
(156,456,170
|
)
|
|
|
(163,686,999
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
|
|
247,059,755
|
|
|
|
375,430,481
|
|
|
|
309,862,002
|
|
Interest income
|
|
|
|
|
16,859,086
|
|
|
|
31,225,694
|
|
|
|
51,493,595
|
|
Interest expense
|
|
|
|
|
(66,153,440
|
)
|
|
|
(99,245,696
|
)
|
|
|
(113,775,360
|
)
|
Net loss on debt extinguishment
|
|
12
|
|
|
(15,879,702
|
)
|
|
|
(21,443,949
|
)
|
|
|
(8,580,510
|
)
|
Gain/ (loss) on short-term investments
|
|
3
|
|
|
9,969,966
|
|
|
|
(2,256,890
|
)
|
|
|
1,451,200
|
|
Share of loss of equity investees
|
|
8
|
|
|
(1,710,070
|
)
|
|
|
(9,374,451
|
)
|
|
|
(5,416,471
|
)
|
Exchange gain/ (loss)
|
|
|
|
|
756,926
|
|
|
|
(25,677,654
|
)
|
|
|
(7,376,009
|
)
|
Other income
|
|
|
|
|
2,326,010
|
|
|
|
1,741,732
|
|
|
|
5,848,727
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations before income taxes
|
|
|
|
|
193,228,531
|
|
|
|
250,399,267
|
|
|
|
233,507,174
|
|
Income taxes
|
|
15
|
|
|
(113,117,126
|
)
|
|
|
(144,447,247
|
)
|
|
|
(150,478,372
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
80,111,405
|
|
|
|
105,952,020
|
|
|
|
83,028,802
|
|
Net income attributable to non-controlling interest
|
|
|
|
|
(16,483,854
|
)
|
|
|
(32,917,471
|
)
|
|
|
(14,684,275
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Xinyuan Real Estate Co., Ltd. shareholders
|
|
|
|
|
63,627,551
|
|
|
|
73,034,549
|
|
|
|
68,344,527
|
|
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the years ended December 31, 2017, 2018, 2019
(ALL amounts stated in US$, except for number of
shares data)
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
20
|
|
|
0.49
|
|
|
|
0.57
|
|
|
|
0.60
|
|
Diluted
|
|
20
|
|
|
0.48
|
|
|
|
0.57
|
|
|
|
0.60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
20
|
|
|
128,704,610
|
|
|
|
127,129,478
|
|
|
|
113,482,239
|
|
Diluted
|
|
20
|
|
|
131,605,869
|
|
|
|
129,140,830
|
|
|
|
114,100,896
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income/(loss), net of tax of nil
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
|
|
66,062,603
|
|
|
|
(59,759,616
|
)
|
|
|
(21,079,940
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
146,174,008
|
|
|
|
46,192,404
|
|
|
|
61,948,862
|
|
Comprehensive income attributable to non-controlling interest
|
|
|
|
|
(18,637,833
|
)
|
|
|
(32,505,770
|
)
|
|
|
(13,649,162
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income attributable to Xinyuan Real Estate Co., Ltd. shareholders
|
|
|
|
|
127,536,175
|
|
|
|
13,686,634
|
|
|
|
48,299,700
|
|
The accompanying notes are an integral part of these
consolidated financial statements
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 2017, 2018, 2019
(ALL amounts stated in US$, except for number of
shares data)
|
|
Year ended December 31
|
|
|
|
2017
|
|
|
2018
|
|
|
2019
|
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
80,111,405
|
|
|
|
105,952,020
|
|
|
|
83,028,802
|
|
Adjustments to reconcile net income to net cash (used in)/provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
13,727,526
|
|
|
|
15,132,875
|
|
|
|
17,584,443
|
|
Stock-based compensation expenses
|
|
|
4,894,478
|
|
|
|
3,382,628
|
|
|
|
5,621,588
|
|
Deferred tax benefit
|
|
|
(35,587,912
|
)
|
|
|
(60,602,166
|
)
|
|
|
(54,775,461
|
)
|
Amortization of deferred charges
|
|
|
6,049,202
|
|
|
|
12,182,821
|
|
|
|
7,725,283
|
|
Share of loss of equity investees
|
|
|
1,710,070
|
|
|
|
9,374,451
|
|
|
|
5,416,471
|
|
Exchange (gain)/loss
|
|
|
(756,926
|
)
|
|
|
25,677,654
|
|
|
|
7,376,009
|
|
Changes in unrecognized tax benefit
|
|
|
10,737,387
|
|
|
|
14,707,858
|
|
|
|
27,665,850
|
|
Loss on extinguishment of debt (Note 12)
|
|
|
15,879,702
|
|
|
|
21,443,949
|
|
|
|
8,580,510
|
|
(Gain)/loss on short-term investments
|
|
|
(9,969,966
|
)
|
|
|
2,256,890
|
|
|
|
(1,451,200
|
)
|
Proceeds from disposal of short-term investments
|
|
|
178,849,628
|
|
|
|
77,788,586
|
|
|
|
12,897,025
|
|
Purchase of short-term investments
|
|
|
(186,062,974
|
)
|
|
|
(26,673,525
|
)
|
|
|
(2,955,227
|
)
|
Gain from re-measurement of previously held interest upon acquisition (Note 9)
|
|
|
—
|
|
|
|
(4,384,563
|
)
|
|
|
—
|
|
Allowance for doubtful accounts
|
|
|
7,067,288
|
|
|
|
3,016,234
|
|
|
|
982,936
|
|
Others
|
|
|
1,327,529
|
|
|
|
1,985,331
|
|
|
|
1,661,626
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(63,691,438
|
)
|
|
|
36,940,910
|
|
|
|
(37,591,293
|
)
|
Real estate properties development completed
|
|
|
(355,551,919
|
)
|
|
|
232,507,523
|
|
|
|
(61,364,418
|
)
|
Real estate properties under development
|
|
|
151,787,433
|
|
|
|
(67,338,946
|
)
|
|
|
914,886,994
|
|
Contract assets
|
|
|
—
|
|
|
|
(6,420,339
|
)
|
|
|
(1,684,741
|
)
|
Real estate properties held for lease
|
|
|
(111,952,749
|
)
|
|
|
(47,051,796
|
)
|
|
|
(151,516,852
|
)
|
Advances to suppliers
|
|
|
(7,335,343
|
)
|
|
|
(8,205,641
|
)
|
|
|
1,455,322
|
|
Other receivables
|
|
|
(47,195,272
|
)
|
|
|
(118,383,454
|
)
|
|
|
(81,286,710
|
)
|
Deposits for land use rights
|
|
|
(180,359,751
|
)
|
|
|
(452,147,524
|
)
|
|
|
3,400,084
|
|
Other deposits and prepayments
|
|
|
275,227,746
|
|
|
|
(13,203,444
|
)
|
|
|
(23,464,588
|
)
|
Other current assets
|
|
|
(2,783,559
|
)
|
|
|
4,174,280
|
|
|
|
(606,623
|
)
|
Amounts due from related parties
|
|
|
(128,319,422
|
)
|
|
|
(104,487,109
|
)
|
|
|
(118,854,682
|
)
|
Amounts due from employees
|
|
|
(1,465,840
|
)
|
|
|
389,697
|
|
|
|
(318,601
|
)
|
Other assets
|
|
|
(16,415,381
|
)
|
|
|
(94,969,524
|
)
|
|
|
3,414,909
|
|
Accounts payable
|
|
|
131,546,280
|
|
|
|
127,227,761
|
|
|
|
392,316,329
|
|
Customer deposits
|
|
|
269,509,197
|
|
|
|
264,194,597
|
|
|
|
(747,887,702
|
)
|
Income tax payable
|
|
|
40,872,077
|
|
|
|
88,808,505
|
|
|
|
89,454,632
|
|
Other payables and accrued liabilities
|
|
|
91,455,504
|
|
|
|
(73,276,156
|
)
|
|
|
(18,090,325
|
)
|
Payroll and welfare payable
|
|
|
6,408,972
|
|
|
|
7,097,694
|
|
|
|
(9,363,632
|
)
|
Net cash (used in) /provided by operating activities
|
|
|
139,712,972
|
|
|
|
(22,901,923
|
)
|
|
|
272,256,758
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 2017, 2018, 2019
(ALL amounts stated in US$, except for number of
shares data)
|
|
Year ended December 31
|
|
|
|
2017
|
|
|
2018
|
|
|
2019
|
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Disposal of properties held for lease and property and equipment
|
|
|
425,850
|
|
|
|
330,773
|
|
|
|
1,111,556
|
|
Purchase of property and equipment
|
|
|
(5,565,513
|
)
|
|
|
(9,132,946
|
)
|
|
|
(5,510,126
|
)
|
Acquisition of subsidiaries, net of cash acquired (Note 9)
|
|
|
—
|
|
|
|
11,761,992
|
|
|
|
827,011
|
|
Acquisition of
long-term investment
|
|
|
(822,029,106
|
)
|
|
|
(127,031,797
|
)
|
|
|
(50,546,390
|
)
|
Return of capital
|
|
|
—
|
|
|
|
158,634,902
|
|
|
|
11,087,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in)/provided by investing activities
|
|
|
(827,168,769
|
)
|
|
|
34,562,924
|
|
|
|
(43,030,099
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from exercise of stock options
|
|
|
6,111,912
|
|
|
|
1,390,666
|
|
|
|
166,480
|
|
Repurchase of shares for Restricted Stock Unit ("RSU") plan
|
|
|
—
|
|
|
|
(7,768,139
|
)
|
|
|
(2,920,216
|
)
|
Purchase of treasury shares (Note 19)
|
|
|
(14,058,280
|
)
|
|
|
(19,846,720
|
)
|
|
|
(26,080,876
|
)
|
Dividends to shareholders
|
|
|
(26,090,734
|
)
|
|
|
(25,739,147
|
)
|
|
|
(19,647,356
|
)
|
Amounts due to related parties
|
|
|
82,725,874
|
|
|
|
(79,846,860
|
)
|
|
|
(25,024,684
|
)
|
Repayments of short-term bank loans and current portion of long-term bank loans
|
|
|
(51,330,241
|
)
|
|
|
(201,583,103
|
)
|
|
|
(388,922,839
|
)
|
Proceeds from short-term bank loans and current portion of long-term bank loans
|
|
|
256,681,062
|
|
|
|
310,137,935
|
|
|
|
84,837,579
|
|
Repayment of long-term bank loans
|
|
|
(14,780,892
|
)
|
|
|
(65,519,223
|
)
|
|
|
(9,156,553
|
)
|
Proceeds from long-term bank loans
|
|
|
10,659,297
|
|
|
|
337,961,266
|
|
|
|
255,750,791
|
|
Repayment of other short-term debt
|
|
|
(516,320,358
|
)
|
|
|
(943,033,901
|
)
|
|
|
(1,216,629,289
|
)
|
Proceeds from other short-term debt
|
|
|
884,488,867
|
|
|
|
407,755,830
|
|
|
|
125,131,566
|
|
Repayment of other long-term debt
|
|
|
(236,322,138
|
)
|
|
|
(218,895,920
|
)
|
|
|
(233,164,117
|
)
|
Proceeds from other long-term debt
|
|
|
788,220,956
|
|
|
|
339,551,378
|
|
|
|
1,170,084,599
|
|
Payment of financing cost
|
|
|
(36,254,595
|
)
|
|
|
(16,574,059
|
)
|
|
|
(4,304,339
|
)
|
Payment of principal from finance lease
|
|
|
(4,196,345
|
)
|
|
|
(7,521,441
|
)
|
|
|
(6,135,547
|
)
|
Repayment of mandatorily redeemable non-controlling interests
|
|
|
(12,954,007
|
)
|
|
|
(2,447,140
|
)
|
|
|
(15,394,847
|
)
|
Proceeds from mandatorily redeemable non-controlling interests
|
|
|
14,210,916
|
|
|
|
8,720,772
|
|
|
|
1,905,049
|
|
Contributions
from (distributions to) non-controlling interests, net
|
|
|
23,687,327
|
|
|
|
(6,323,476
|
)
|
|
|
31,031,810
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by/(used in) financing activities
|
|
|
1,154,478,621
|
|
|
|
(189,581,282
|
)
|
|
|
(278,472,789
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE/(DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH
|
|
|
467,022,824
|
|
|
|
(177,920,281
|
)
|
|
|
(49,246,130
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash
|
|
|
87,460,916
|
|
|
|
(97,290,417
|
)
|
|
|
(34,185,442
|
)
|
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 2017, 2018, 2019
(ALL amounts stated in US$, except for number of
shares data)
Cash, cash equivalents and restricted cash, at beginning of year
|
|
|
906,743,437
|
|
|
|
1,461,227,177
|
|
|
|
1,186,016,479
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, AT END OF YEAR
|
|
|
1,461,227,177
|
|
|
|
1,186,016,479
|
|
|
|
1,102,584,907
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTARY INFORMATION ON CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
894,551,480
|
|
|
|
674,141,554
|
|
|
|
662,606,063
|
|
Restricted cash
|
|
|
566,675,697
|
|
|
|
511,874,925
|
|
|
|
439,978,844
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incomes taxes paid
|
|
|
112,460,711
|
|
|
|
147,809,372
|
|
|
|
130,853,782
|
|
Interest paid
|
|
|
223,541,763
|
|
|
|
284,624,926
|
|
|
|
293,543,976
|
|
NON-CASH ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-controlling interest arising from asset acquisitions
|
|
|
5,193,097
|
|
|
|
—
|
|
|
|
—
|
|
Purchase consideration payables
|
|
|
70,460,343
|
|
|
|
75,565,148
|
|
|
|
—
|
|
Debt extinguishment costs included in other payables and accrued liabilities
|
|
|
—
|
|
|
|
13,761,966
|
|
|
|
5,612,697
|
|
Settlement of due from related parties as a result of business combination
|
|
|
—
|
|
|
|
—
|
|
|
|
48,761,943
|
|
Initial recognition of leases
|
|
|
|
|
|
|
—
|
|
|
|
11,278,234
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’
EQUITY
For the years ended December 31, 2017, 2018, 2019
(ALL amounts stated in US$, except for number of
shares data)
|
|
Number
of Shares
|
|
Common
Shares
|
|
Treasury
Shares
|
|
Additional
Paid-in
Capital
|
|
Statutory
Reserves
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
Income / (Loss)
|
|
Total Xinyuan Real
Estate Co., Ltd.
shareholders'
equity
|
|
Non-controlling
Interest
(Note 24)
|
|
Total
|
|
|
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
BALANCE AT DECEMBER 31, 2016
|
|
131,426,741
|
|
|
16,051
|
|
|
(53,734,088
|
)
|
|
538,414,246
|
|
|
95,973,296
|
|
|
354,273,848
|
|
|
(34,682,888
|
)
|
|
900,260,465
|
|
|
15,891,713
|
|
|
916,152,178
|
|
Capital injection from non-controlling interests
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
—
|
|
|
—
|
|
|
29,911,731
|
|
|
29,911,731
|
|
Exercise of share options
|
|
2,631,928
|
|
|
263
|
|
|
—
|
|
|
4,255,657
|
|
|
—
|
|
|
|
|
|
—
|
|
|
4,255,920
|
|
|
—
|
|
|
4,255,920
|
|
Treasury share repurchases
|
|
(5,481,846
|
)
|
|
|
|
|
(14,058,280
|
)
|
|
—
|
|
|
—
|
|
|
|
|
|
—
|
|
|
(14,058,280
|
)
|
|
—
|
|
|
(14,058,280
|
)
|
Shares repurchased under RSU plan
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,485,952
|
)
|
|
—
|
|
|
|
|
|
—
|
|
|
(3,485,952
|
)
|
|
—
|
|
|
(3,485,952
|
)
|
Foreign currency translation
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
63,908,624
|
|
|
63,908,624
|
|
|
2,153,979
|
|
|
66,062,603
|
|
Stock-based compensation expenses
|
|
1,001,853
|
|
|
—
|
|
|
—
|
|
|
4,154,255
|
|
|
—
|
|
|
|
|
|
—
|
|
|
4,154,255
|
|
|
—
|
|
|
4,154,255
|
|
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
63,627,551
|
|
|
—
|
|
|
63,627,551
|
|
|
16,483,854
|
|
|
80,111,405
|
|
Appropriation to statutory reserves
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9,686,973
|
|
|
(9,686,973
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Dividends to shareholders
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(26,090,734
|
)
|
|
—
|
|
|
(26,090,734
|
)
|
|
—
|
|
|
(26,090,734
|
)
|
BALANCE AT DECEMBER 31, 2017
|
|
129,578,676
|
|
|
16,314
|
|
|
(67,792,368
|
)
|
|
543,338,206
|
|
|
105,660,269
|
|
|
382,123,692
|
|
|
29,225,736
|
|
|
992,571,849
|
|
|
64,441,277
|
|
|
1,057,013,126
|
|
Adjustment to opening balance of equity
(2(h))
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(269,081,493
|
)
|
|
(9,132,084
|
)
|
|
(278,213,577
|
)
|
|
(37,019,325
|
)
|
|
(315,232,902
|
)
|
Capital injection from non-controlling interests
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
—
|
|
|
—
|
|
|
36,698,455
|
|
|
36,698,455
|
|
Acquisition of non-controlling interests
|
|
|
|
|
|
|
|
|
|
|
(12,056,879
|
)
|
|
|
|
|
|
|
|
|
|
|
(12,056,879
|
)
|
|
4,169,504
|
|
|
(7,887,375
|
)
|
Exercise of share options
|
|
846,588
|
|
|
85
|
|
|
—
|
|
|
1,390,581
|
|
|
—
|
|
|
|
|
|
—
|
|
|
1,390,666
|
|
|
—
|
|
|
1,390,666
|
|
Treasury share repurchases (Note 19)
|
|
(8,984,626
|
)
|
|
|
|
|
(19,846,720
|
)
|
|
—
|
|
|
—
|
|
|
|
|
|
—
|
|
|
(19,846,720
|
)
|
|
—
|
|
|
(19,846,720
|
)
|
Shares repurchased under RSU plan
|
|
(3,089,050
|
)
|
|
—
|
|
|
—
|
|
|
(3,937,057
|
)
|
|
—
|
|
|
|
|
|
—
|
|
|
(3,937,057
|
)
|
|
—
|
|
|
(3,937,057
|
)
|
Foreign currency translation
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
(50,215,831
|
)
|
|
(50,215,831
|
)
|
|
(411,701
|
)
|
|
(50,627,532
|
)
|
Stock-based compensation expenses
|
|
1,454,048
|
|
|
—
|
|
|
—
|
|
|
3,382,628
|
|
|
—
|
|
|
|
|
|
—
|
|
|
3,382,628
|
|
|
—
|
|
|
3,382,628
|
|
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
73,034,549
|
|
|
|
|
|
73,034,549
|
|
|
32,917,471
|
|
|
105,952,020
|
|
Appropriation to statutory reserves
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
60,835,475
|
|
|
(60,835,475
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Dividends to shareholders
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(25,739,147
|
)
|
|
—
|
|
|
(25,739,147
|
)
|
|
—
|
|
|
(25,739,147
|
)
|
Dividends to non-controlling
interests
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
(35,521,013
|
)
|
|
(35,521,013
|
)
|
BALANCE AT DECEMBER 31, 2018
|
|
119,805,636
|
|
|
16,399
|
|
|
(87,639,088
|
)
|
|
532,117,479
|
|
|
166,495,744
|
|
|
99,502,126
|
|
|
(30,122,179
|
)
|
|
680,370,481
|
|
|
65,274,668
|
|
|
745,645,149
|
|
Capital injection from non-controlling interests(note(a))
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8,305,257
|
|
|
—
|
|
|
|
|
|
—
|
|
|
8,305,257
|
|
|
24,054,448
|
|
|
32,359,705
|
|
Acquisition of non-controlling interests
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
—
|
|
|
|
|
|
—
|
|
|
—
|
|
|
(317,406
|
)
|
|
(317,406
|
)
|
Exercise of share options
|
|
108,000
|
|
|
11
|
|
|
—
|
|
|
166,469
|
|
|
—
|
|
|
|
|
|
—
|
|
|
166,480
|
|
|
—
|
|
|
166,480
|
|
Treasury share repurchases (Note 19)
|
|
(11,715,338
|
)
|
|
—
|
|
|
(26,080,876
|
)
|
|
—
|
|
|
—
|
|
|
|
|
|
—
|
|
|
(26,080,876
|
)
|
|
—
|
|
|
(26,080,876
|
)
|
Shares repurchased under RSU plan
|
|
(1,438,076
|
)
|
|
—
|
|
|
—
|
|
|
(2,920,216
|
)
|
|
—
|
|
|
|
|
|
—
|
|
|
(2,920,216
|
)
|
|
—
|
|
|
(2,920,216
|
)
|
Foreign currency translation
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
(20,044,827
|
)
|
|
(20,044,827
|
)
|
|
(1,035,113
|
)
|
|
(21,079,940
|
)
|
Stock-based compensation expenses
|
|
1,115,246
|
|
|
—
|
|
|
—
|
|
|
5,621,588
|
|
|
—
|
|
|
|
|
|
—
|
|
|
5,621,588
|
|
|
—
|
|
|
5,621,588
|
|
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
68,344,527
|
|
|
—
|
|
|
68,344,527
|
|
|
14,684,275
|
|
|
83,028,802
|
|
Appropriation to statutory reserves
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8,512,715
|
|
|
(8,512,715
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Dividends to shareholders
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(23,460,775
|
)
|
|
—
|
|
|
(23,460,775
|
)
|
|
—
|
|
|
(23,460,775
|
)
|
Dividends to non-controlling
interests
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,010,489
|
)
|
|
(1,010,489
|
)
|
BALANCE AT DECEMBER 31, 2019
|
|
107,875,468
|
|
|
16,410
|
|
|
(113,719,964
|
)
|
|
543,290,577
|
|
|
175,008,459
|
|
|
135,873,163
|
|
|
(50,167,006
|
)
|
|
690,301,639
|
|
|
101,650,383
|
|
|
791,952,022
|
|
note(a) arose from initial public offering of Xinyuan
Property Management Service (Cayman) Ltd., a subsidiary of the company.
The accompanying notes are an integral part of these
consolidated financial statements.
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of shares data)
|
1.
|
Background information of business and organization
|
Xinyuan Real Estate Co., Ltd. (the "Company")
and its subsidiaries (collectively the "Group") are principally engaged in residential real estate development and the
provision of property management services. The Group's operations are conducted mainly in the People's Republic of China ("PRC").
In 2012, the Group expanded its business into the U.S. residential real estate market.
As of December 31, 2019, principal subsidiaries of
the Company and its consolidated variable interest entities included the following entities:
Company Name
|
|
Registered Place
and Date of
Incorporation
|
|
Registered
Capital
|
|
|
Percentage of
Equity
Attributable
to the Group
|
|
|
Principal
Activities
|
Subsidiary companies:
|
|
|
|
|
|
|
|
|
|
|
|
Xinyuan International Property Investment Co., Ltd.
|
|
Cayman Islands
October 6, 2011
|
|
US$
|
500,000
|
|
|
100
|
%
|
|
Investment holding company
|
|
|
|
|
|
|
|
|
|
|
|
|
Xinyuan International (HK) Property Investment Co., Ltd.
|
|
Hong Kong
October 26, 2011
|
|
HK$
|
3,000,000
|
|
|
100
|
%
|
|
Investment holding company
|
|
|
|
|
|
|
|
|
|
|
|
|
XIN Development Group International Inc.
|
|
United States
November 10, 2011
|
|
US$
|
-
|
|
|
100
|
%
|
|
Investment holding company
|
|
|
|
|
|
|
|
|
|
|
|
|
Xinyuan Real Estate, Ltd.
|
|
Cayman Islands
January 27, 2006
|
|
US$
|
50,000,000
|
|
|
100
|
%
|
|
Investment holding company
|
|
|
|
|
|
|
|
|
|
|
|
|
XIN Development Management East, LLC
|
|
United States
August 28, 2012
|
|
US$
|
1,000
|
|
|
100
|
%
|
|
Property management services
|
|
|
|
|
|
|
|
|
|
|
|
|
XIN NY Holding, LLC
|
|
United States
August 29, 2012
|
|
US$
|
1,000
|
|
|
100
|
%
|
|
Investment holding company
|
|
|
|
|
|
|
|
|
|
|
|
|
421 Kent Development, LLC
|
|
United States
August 29, 2012
|
|
US$
|
1,000
|
|
|
100
|
%
|
|
Real estate development
|
|
|
|
|
|
|
|
|
|
|
|
|
Xinyuan Sailing Co., Ltd.
|
|
Hong Kong
June 21, 2013
|
|
HK$
|
3,000,000
|
|
|
100
|
%
|
|
Investment holding company
|
|
|
|
|
|
|
|
|
|
|
|
|
AWAN Plasma Sdn Bhd
|
|
Malaysia
April 16, 2007
|
|
MYR
|
33,577,000
|
|
|
100
|
%
|
|
Real estate development
|
|
|
|
|
|
|
|
|
|
|
|
|
XIN Eco Marine Group Properties Sdn Bhd
|
|
Malaysia
July 9, 2014
|
|
MYR
|
33,217,000
|
|
|
100
|
%
|
|
Investment holding company
|
|
|
|
|
|
|
|
|
|
|
|
|
Zhengzhou Jiasheng Real Estate Co., Ltd.
|
|
PRC
December 2, 2013
|
|
US$
|
60,000,000
|
|
|
100
|
%
|
|
Real estate development
|
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of shares data)
Company Name
|
|
Registered Place
and Date of
Incorporation
|
|
Registered
Capital
|
|
|
Percentage of
Equity
Attributable
to the Group
|
|
|
Principal
Activities
|
Subsidiary companies:
|
|
|
|
|
|
|
|
|
|
|
|
Xinyuan (China) Real Estate, Ltd. ("Xinyuan China")
|
|
PRC
April 10, 2006
|
|
US$
|
307,000,000
|
|
|
100
|
%
|
|
Investment holding company
|
|
|
|
|
|
|
|
|
|
|
|
|
Henan Xinyuan Real Estate Co., Ltd. ("Henan Xinyuan")
|
|
PRC
May 19, 1997
|
|
RMB
|
200,000,000
|
|
|
100
|
%
|
|
Real estate development
|
|
|
|
|
|
|
|
|
|
|
|
|
Qingdao Xinyuan Xiangrui Real Estate Co., Ltd.
|
|
PRC
February 9, 2006
|
|
RMB
|
10,000,000
|
|
|
100
|
%
|
|
Real estate development
|
|
|
|
|
|
|
|
|
|
|
|
|
Shandong Xinyuan Real Estate Co., Ltd.
|
|
PRC
June 2, 2006
|
|
RMB
|
300,000,000
|
|
|
100
|
%
|
|
Real estate development
|
|
|
|
|
|
|
|
|
|
|
|
|
Xinyuan Property Management Service
(Cayman) Ltd.
|
|
Cayman Islands
December 13, 2018
|
|
HKD
|
50,000
|
|
|
67.5
|
%
|
|
Investment holding company
|
|
|
|
|
|
|
|
|
|
|
|
|
Xinyuan
Property Management Service (BVI) Ltd
|
|
British Virgin Islands
January 2, 2019
|
|
USD
|
-
|
|
|
67.5
|
%
|
|
Investment holding company
|
|
|
|
|
|
|
|
|
|
|
|
|
Xinyuan Property Management Service (HK) Limited
|
|
HK
January 8, 2019
|
|
HKD
|
1
|
|
|
67.5
|
%
|
|
Investment holding company
|
|
|
|
|
|
|
|
|
|
|
|
|
Xinyuan Science and Technology Service Group Co., Ltd.
|
|
PRC
December 28, 1998
|
|
RMB
|
50,000,000
|
|
|
67.5
|
%
|
|
Property management services
|
|
|
|
|
|
|
|
|
|
|
|
|
Mingyuan Landscape Engineering Co., Ltd.
|
|
PRC
February 17, 2004
|
|
RMB
|
50,000,000
|
|
|
100
|
%
|
|
Landscaping engineering and management
|
|
|
|
|
|
|
|
|
|
|
|
|
Henan Xinyuan Wanzhuo Real Estate Co., Ltd.
|
|
PRC
December 29, 2011
|
|
RMB
|
20,000,000
|
|
|
100
|
%
|
|
Real estate development
|
|
|
|
|
|
|
|
|
|
|
|
|
Suzhou Xinyuan Real Estate Development Co., Ltd.
|
|
PRC
November 24, 2006
|
|
RMB
|
200,000,000
|
|
|
100
|
%
|
|
Real estate development
|
|
|
|
|
|
|
|
|
|
|
|
|
Anhui Xinyuan Real Estate Co., Ltd.
|
|
PRC
December 7, 2006
|
|
RMB
|
50,000,000
|
|
|
100
|
%
|
|
Real estate development
|
|
|
|
|
|
|
|
|
|
|
|
|
Kunshan Xinyuan Real Estate Co., Ltd.
|
|
PRC
January 31, 2008
|
|
RMB
|
200,000,000
|
|
|
100
|
%
|
|
Real estate development
|
|
|
|
|
|
|
|
|
|
|
|
|
Xinyuan Real Estate (Chengdu) Co., Ltd.
|
|
PRC
June 12, 2007
|
|
RMB
|
220,000,000
|
|
|
100
|
%
|
|
Real estate development
|
|
|
|
|
|
|
|
|
|
|
|
|
Xuzhou Xinyuan Real Estate Co., Ltd.
|
|
PRC
November 9, 2009
|
|
RMB
|
200,000,000
|
|
|
100
|
%
|
|
Real estate development
|
|
|
|
|
|
|
|
|
|
|
|
|
Henan Xinyuan Jiye Real Estate Co., Ltd.
|
|
PRC
November 15, 2009
|
|
RMB
|
50,000,000
|
|
|
100
|
%
|
|
Real estate development
|
|
|
|
|
|
|
|
|
|
|
|
|
Beijing Xinyuan Wanzhong Real Estate Co., Ltd. ("Beijing Wanzhong")
|
|
PRC
March 4, 2008
|
|
RMB
|
900,000,000
|
|
|
100
|
%
|
|
Real estate development
|
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of shares data)
Company Name
|
|
Registered Place
and Date of
Incorporation
|
|
Registered
Capital
|
|
|
Percentage of
Equity
Attributable
to the Group
|
|
|
Principal
Activities
|
Xinyuan Renju (Beijing) Asset Management Co., Ltd.
|
|
PRC
January 16, 2009
|
|
RMB
|
30,000,000
|
|
|
100
|
%
|
|
Management consulting service
|
|
|
|
|
|
|
|
|
|
|
|
|
Beijing Xinyuan Priority Real Estate Consulting Co., Ltd.
|
|
PRC
March 8, 2012
|
|
RMB
|
30,000,000
|
|
|
100
|
%
|
|
Real estate consulting services
|
|
|
|
|
|
|
|
|
|
|
|
|
Henan Xinyuan Priority Commercial Management Co., Ltd.
|
|
PRC
August 10, 2012
|
|
RMB
|
2,000,000
|
|
|
100
|
%
|
|
Leasing management services
|
|
|
|
|
|
|
|
|
|
|
|
|
Suzhou Xinyuan Wanzhuo Real Estate
Co., Ltd. ("Suzhou Wanzhuo") (Note 18(a))
|
|
PRC
September 20, 2012
|
|
RMB
|
200,000,000
|
|
|
20
|
%
|
|
Real estate development
|
|
|
|
|
|
|
|
|
|
|
|
|
Jiangsu Jiajing Real Estate Co., Ltd.
|
|
PRC
March 28, 2005
|
|
RMB
|
150,000,000
|
|
|
100
|
%
|
|
Real estate development
|
|
|
|
|
|
|
|
|
|
|
|
|
Xingyang Xinyuan Real Estate Co., Ltd.
|
|
PRC
July 25, 2013
|
|
RMB
|
200,000,000
|
|
|
100
|
%
|
|
Real estate development
|
|
|
|
|
|
|
|
|
|
|
|
|
Jinan Xinyuan Wanzhuo Real Estate Co., Ltd.
|
|
PRC
December 4, 2013
|
|
RMB
|
300,000,000
|
|
|
100
|
%
|
|
Real estate development
|
|
|
|
|
|
|
|
|
|
|
|
|
Sanya Beida Science and Technology Park Industrial Development Co., Ltd.
|
|
PRC
January 10, 2014
|
|
RMB
|
200,000,000
|
|
|
100
|
%
|
|
Real estate development
|
|
|
|
|
|
|
|
|
|
|
|
|
Chengdu Xinyuan Wanzhuo Real Estate Co., Ltd.
|
|
PRC
February 21, 2014
|
|
RMB
|
50,000,000
|
|
|
100
|
%
|
|
Real estate development
|
|
|
|
|
|
|
|
|
|
|
|
|
Tianjin Xinyuan Real Estate Co., Ltd.
|
|
PRC
September 17, 2014
|
|
RMB
|
100,000,000
|
|
|
100
|
%
|
|
Real estate development
|
|
|
|
|
|
|
|
|
|
|
|
|
Xi'an Yinghuai Square Commerce Management Co., Ltd.
|
|
PRC
November 25, 2014
|
|
RMB
|
3,000,000
|
|
|
100
|
%
|
|
Retail store
|
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of shares data)
Company Name
|
|
Registered Place
and Date of
Incorporation
|
|
Registered
Capital
|
|
|
Percentage of
Equity
Attributable
to the Group
|
|
|
Principal
Activities
|
Subsidiary companies:
|
|
|
|
|
|
|
|
|
|
|
|
Changsha Xinyuan Wanzhuo Real Estate Co., Ltd.
|
|
PRC
April 3, 2014
|
|
RMB
|
100,000,000
|
|
|
100
|
%
|
|
Real estate development
|
|
|
|
|
|
|
|
|
|
|
|
|
Shanghai Junxin Real Estate Co., Ltd.
|
|
PRC
January 16, 2014
|
|
RMB
|
5,000,000
|
|
|
100
|
%
|
|
Real estate development
|
|
|
|
|
|
|
|
|
|
|
|
|
Beijing Yinghuai Commerce and Trade Co., Ltd.
|
|
PRC
January 5, 2015
|
|
RMB
|
30,000,000
|
|
|
100
|
%
|
|
Retail store
|
|
|
|
|
|
|
|
|
|
|
|
|
Beijing Xinhe Investment Development Co., Ltd.
|
|
PRC
May 5, 2015
|
|
RMB
|
5,000,000
|
|
|
100
|
%
|
|
Investment holding company
|
|
|
|
|
|
|
|
|
|
|
|
|
Henan Yinghuai Commerce and Trade Co., Ltd.
|
|
PRC
March 23, 2015
|
|
RMB
|
10,000,000
|
|
|
100
|
%
|
|
Retail store
|
|
|
|
|
|
|
|
|
|
|
|
|
Henan Xinyuan Guangsheng Real Estate Co., Ltd.
|
|
PRC
July 27, 2015
|
|
RMB
|
200,000,000
|
|
|
100
|
%
|
|
Real estate development
|
|
|
|
|
|
|
|
|
|
|
|
|
Shanghai Hexinli Property Management Center. (Limited partnership)
|
|
PRC
July 28, 2015
|
|
RMB
|
10,640,000
|
|
|
100
|
%
|
|
Property management services
|
|
|
|
|
|
|
|
|
|
|
|
|
Shandong Xinyuan Renju Real Estate Co., Ltd.
|
|
PRC
November 19, 2011
|
|
RMB
|
50,000,000
|
|
|
100
|
%
|
|
Real estate development
|
|
|
|
|
|
|
|
|
|
|
|
|
Shaanxi Zhongmao Economy Development Co., Ltd.
|
|
PRC
June 22, 1998
|
|
RMB
|
22,500,000
|
|
|
65.98
|
%
|
|
Real estate development
|
|
|
|
|
|
|
|
|
|
|
|
|
421 Kent Holding Co, Ltd.
|
|
United States
May 2, 2014
|
|
US$
|
1,000
|
|
|
100
|
%
|
|
Investment holding company
|
|
|
|
|
|
|
|
|
|
|
|
|
Hudson 888 Owner LLC
|
|
United States
October 22, 2015
|
|
US$
|
1,000
|
|
|
100
|
%
|
|
Real estate development
|
|
|
|
|
|
|
|
|
|
|
|
|
XIN Manhattan Holding LLC
|
|
United States
December 9, 2015
|
|
US$
|
1,000
|
|
|
100
|
%
|
|
Investment holding company
|
|
|
|
|
|
|
|
|
|
|
|
|
Hudson 888 Holding LLC
|
|
United States
December 9, 2015
|
|
US$
|
1,000
|
|
|
100
|
%
|
|
Investment holding company
|
Shenzhen Xinchuang Investment Consulting Co., Ltd.
|
|
PRC
January 20, 2016
|
|
RMB
|
10,000,000
|
|
|
100
|
%
|
|
Investment
|
|
|
|
|
|
|
|
|
|
|
|
|
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of shares data)
Company Name
|
|
Registered Place
and Date of
Incorporation
|
|
Registered
Capital
|
|
|
Percentage of
Equity
Attributable
to the Group
|
|
|
Principal
Activities
|
Subsidiary companies:
|
|
|
|
|
|
|
|
|
|
|
|
Henan Xinyuan Quansheng Real Estate Co., Ltd.
|
|
PRC
January 14, 2015
|
|
RMB
|
40,000,000
|
|
|
100
|
%
|
|
Real estate development
|
|
|
|
|
|
|
|
|
|
|
|
|
Zhengzhou Shengdao Real Estate Co., Ltd.
|
|
PRC
October 14, 2013
|
|
RMB
|
20,000,000
|
|
|
100
|
%
|
|
Real estate development
|
|
|
|
|
|
|
|
|
|
|
|
|
Henan Xinyuan Shunsheng Real Estate Co., Ltd.
|
|
PRC
January 13, 2016
|
|
RMB
|
30,000,000
|
|
|
100
|
%
|
|
Real estate development
|
|
|
|
|
|
|
|
|
|
|
|
|
Hunan Erli Real Estate Co., Ltd.
|
|
PRC
January 4, 2008
|
|
RMB
|
50,000,000
|
|
|
100
|
%
|
|
Real estate development
|
|
|
|
|
|
|
|
|
|
|
|
|
XIN Queens Holding LLC
|
|
United States
July 6, 2016
|
|
US$
|
1,000
|
|
|
100
|
%
|
|
Investment holding company
|
|
|
|
|
|
|
|
|
|
|
|
|
Queens Theatre Holdco LLC
|
|
United States
July 6, 2016
|
|
US$
|
1,000
|
|
|
100
|
%
|
|
Investment holding company
|
|
|
|
|
|
|
|
|
|
|
|
|
Queens Theatre Owner LLC
|
|
United States
July 6, 2016
|
|
US$
|
1,000
|
|
|
100
|
%
|
|
Real estate development
|
|
|
|
|
|
|
|
|
|
|
|
|
Zhengzhou Xinnan Real Estate Co., Ltd.
|
|
PRC
January 21, 2016
|
|
RMB
|
50,000,000
|
|
|
100
|
%
|
|
Real estate development
|
|
|
|
|
|
|
|
|
|
|
|
|
Xinyan Investment Management Co., Limited.
|
|
PRC
April 8, 2016
|
|
RMB
|
100,000,000
|
|
|
90
|
%
|
|
Investment
|
|
|
|
|
|
|
|
|
|
|
|
|
Hunan Xintian Real Estate Co., Ltd.
|
|
PRC
September 28, 2009
|
|
RMB
|
20,000,000
|
|
|
100
|
%
|
|
Real estate development
|
|
|
|
|
|
|
|
|
|
|
|
|
Zhengzhou Hangmei Technology Development Co., Ltd.
|
|
PRC
November 25, 2014
|
|
RMB
|
50,000,000
|
|
|
51
|
%
|
|
Real estate development
|
|
|
|
|
|
|
|
|
|
|
|
|
Zhengzhou Hangmei Zhengxing
Technology Co., Ltd. (4)
|
|
PRC
March 28, 2016
|
|
RMB
|
50,000,000
|
|
|
30
|
%
|
|
Real estate consulting services
|
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of shares data)
Company Name
|
|
Registered Place
and Date of
Incorporation
|
|
Registered
Capital
|
|
|
Percentage of
Equity
Attributable
to the Group
|
|
|
Principal
Activities
|
Subsidiary companies:
|
|
|
|
|
|
|
|
|
|
|
|
Xi'an Dingrun Real Estate Co., Ltd.
|
|
PRC
June 1, 2011
|
|
RMB
|
20,000,000
|
|
|
100
|
%
|
|
Real estate development
|
|
|
|
|
|
|
|
|
|
|
|
|
Zhengzhou Kangshengboda Real Estate Co., Ltd.
|
|
PRC
July 29, 2016
|
|
RMB
|
50,000,000
|
|
|
100
|
%
|
|
Real estate development
|
|
|
|
|
|
|
|
|
|
|
|
|
Xinjiang Xinyuan Renju Equity Investment., Ltd.
|
|
PRC
February 24, 2017
|
|
RMB
|
10,000,000
|
|
|
100
|
%
|
|
Real estate consulting services
|
|
|
|
|
|
|
|
|
|
|
|
|
Zhuhai Prince Real Estate Co., Ltd.
|
|
PRC
September 13, 1990
|
|
RMB
|
307,000,000
|
|
|
100
|
%
|
|
Real estate development
|
|
|
|
|
|
|
|
|
|
|
|
|
Henan Renxin Real Estate Co., Ltd. ("Henan Renxin")
|
|
PRC
July 11, 2008
|
|
RMB
|
200,000,000
|
|
|
51
|
%
|
|
Real estate development
|
|
|
|
|
|
|
|
|
|
|
|
|
Xinchuang Technology Co., Ltd. ("Xinchuang Technology
")
|
|
PRC
May 2, 2017
|
|
RMB
|
100,000,000
|
|
|
100
|
%
|
|
Management consulting services
|
|
|
|
|
|
|
|
|
|
|
|
|
Hangzhou Huiyuan Investment Management Partnership Enterprise. (Limited partnership)
|
|
PRC
May 23, 2017
|
|
RMB
|
5,000,000
|
|
|
100
|
%
|
|
Investment holding company
|
|
|
|
|
|
|
|
|
|
|
|
|
Guangdong Xinyuan Real Estate Co., Ltd.
|
|
PRC
October 18, 2017
|
|
RMB
|
100,000,000
|
|
|
100
|
%
|
|
Real estate development
|
|
|
|
|
|
|
|
|
|
|
|
|
Taicang Pengchi Real Estate Co.,
Limited. ("Taicang Pengchi") (Note 18(a))
|
|
PRC
June 16, 2017
|
|
RMB
|
200,000,000
|
|
|
17
|
%
|
|
Real estate development
|
|
|
|
|
|
|
|
|
|
|
|
|
Khorgos XinYan Enterprise Management Consulting Co., Ltd.
|
|
PRC
December 4, 2017
|
|
RMB
|
5,000,000
|
|
|
100
|
%
|
|
Management consulting services
|
|
|
|
|
|
|
|
|
|
|
|
|
Hunan Huaiwei Business Management
Co., Ltd. (1)
|
|
PRC
September 13, 2017
|
|
RMB
|
2,000,000
|
|
|
51
|
%
|
|
Retail store
|
|
|
|
|
|
|
|
|
|
|
|
|
Jinan Xinyuan Quansheng Real Estate Co., Ltd.
|
|
The PRC
May 25, 2018
|
|
RMB
|
50,000,000
|
|
|
100
|
%
|
|
Real estate development
|
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of shares data)
Company Name
|
|
Registered Place
and Date of
Incorporation
|
|
Registered
Capital
|
|
|
Percentage of
Equity
Attributable
to the Group
|
|
|
Principal
Activities
|
Subsidiary companies:
|
|
|
|
|
|
|
|
|
|
|
|
Xi’an Jinbian Shunsheng Real Estate Co., Ltd. (2)
|
|
The PRC
December 6, 2017
|
|
RMB
|
20,000,000
|
|
|
70
|
%
|
|
Real estate development
|
|
|
|
|
|
|
|
|
|
|
|
|
Suzhou Yuxi Real Estate Co., Limited.
|
|
The PRC
March 5, 2018
|
|
RMB
|
100,000,000
|
|
|
20
|
%
|
|
Real estate development
|
|
|
|
|
|
|
|
|
|
|
|
|
Xinchuang Sailing (Dalian) Healthy Technology Industrial Investment Co., Ltd.
|
|
The PRC
June 5, 2018
|
|
RMB
|
600,000,000
|
|
|
100
|
%
|
|
Real estate development
|
|
|
|
|
|
|
|
|
|
|
|
|
Dalian Xinyi Renju Real Estate Co., Ltd.
|
|
The PRC
June 26, 2018
|
|
RMB
|
100,000,000
|
|
|
100
|
%
|
|
Real estate development
|
|
|
|
|
|
|
|
|
|
|
|
|
Jiangxi Xinkai Renju Management Consulting Service., Ltd.
|
|
The PRC
August 28, 2018
|
|
RMB
|
10,000,000
|
|
|
100
|
%
|
|
Real estate consulting services
|
|
|
|
|
|
|
|
|
|
|
|
|
Beijing Xinyuan Huicheng Technology Development Co., Ltd.
|
|
The PRC
January 26, 2018
|
|
RMB
|
100,000,000
|
|
|
100
|
%
|
|
Technical services
|
|
|
|
|
|
|
|
|
|
|
|
|
Suzhou Yefang Real Estate Co.,
Limited. ("Suzhou Yefang") (Note 18(b))
|
|
The PRC
April 14, 2017
|
|
RMB
|
100,000,000
|
|
|
20
|
%
|
|
Real estate development
|
|
|
|
|
|
|
|
|
|
|
|
|
Chengdu Xinyuan Renju Enterprise Management Co., Ltd. ("Chengdu Renju")
|
|
The PRC
October 26, 2017
|
|
RMB
|
50,000,000
|
|
|
100
|
%
|
|
Real estate development
|
|
|
|
|
|
|
|
|
|
|
|
|
Chengdu Guohongteng Real Estate Co., Ltd.
|
|
The PRC
July 16, 2010
|
|
RMB
|
1,673,179,200
|
|
|
100
|
%
|
|
Real estate development
|
|
|
|
|
|
|
|
|
|
|
|
|
Qingdao Keda Real Estate Co., Ltd. ("Qingdao Keda")
|
|
The PRC
September 20, 2010
|
|
RMB
|
50,000,000
|
|
|
100
|
%
|
|
Real estate development
|
|
|
|
|
|
|
|
|
|
|
|
|
Wuhan Yinghexin Real Estate Co., Ltd. ("Wuhan Yinghexin")
|
|
The PRC
January 15, 2014
|
|
RMB
|
100,000,000
|
|
|
100
|
%
|
|
Real estate development
|
|
|
|
|
|
|
|
|
|
|
|
|
Henan Xinyuan Property Management Co., Ltd.
|
|
The PRC
December 1, 2016
|
|
RMB
|
10,000,000
|
|
|
100
|
%
|
|
Property management services
|
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of shares data)
Company Name
|
|
Registered Place
and Date of
Incorporation
|
|
Registered
Capital
|
|
|
Percentage of
Equity
Attributable
to the Group
|
|
|
Principal
Activities
|
Subsidiary companies:
|
|
|
|
|
|
|
|
|
|
|
|
Wuhu Xinyansuifeng NO.1 Investment Center (Limited partnership)
|
|
The PRC
November 22, 2017
|
|
RMB
|
1,501,000,000
|
|
|
100
|
%
|
|
Investment holding company
|
|
|
|
|
|
|
|
|
|
|
|
|
Zhuhai Xinyuan Real Estate Co., Ltd.
|
|
The PRC
December 31, 2018
|
|
RMB
|
100,000,000
|
|
|
100
|
%
|
|
Real estate development
|
|
|
|
|
|
|
|
|
|
|
|
|
Jinan Renju Building Material Co., Ltd.
|
|
The PRC
January 2, 2019
|
|
RMB
|
50,000,000
|
|
|
100
|
%
|
|
Sales of construction material
|
|
|
|
|
|
|
|
|
|
|
|
|
Dalian Xinyi Yaju Real Estate Co., Ltd.
|
|
The PRC
January 16, 2019
|
|
RMB
|
100,000,000
|
|
|
100
|
%
|
|
Real estate development
|
|
|
|
|
|
|
|
|
|
|
|
|
Guangdong Xinchuang Kechuang Zhigu Development Co., Ltd.
|
|
The PRC
February 27,2019
|
|
RMB
|
100,000,000
|
|
|
100
|
%
|
|
Real estate development
|
|
|
|
|
|
|
|
|
|
|
|
|
Jiangxi Xinyuan Heju Enterprise Management Consulting Service Co., Ltd.
|
|
The PRC
Apirl 2,2019
|
|
RMB
|
10,000,000
|
|
|
100
|
%
|
|
Management consulting services
|
|
|
|
|
|
|
|
|
|
|
|
|
Beijing I-Journey Science and Technology Development Co.,Ltd.("I-Journey") (3)
|
|
The PRC
October 20,2015
|
|
RMB
|
40,000,000
|
|
|
93
|
%
|
|
Development and sales of robots
|
|
|
|
|
|
|
|
|
|
|
|
|
Beijing Ruizhuo Xichuang Technology Development Co., Ltd.("Xichuang") (3)
|
|
The PRC
July 16,2015
|
|
RMB
|
30,000,000
|
|
|
93
|
%
|
|
Real estate brokerage
|
|
|
|
|
|
|
|
|
|
|
|
|
Beijing Ruizhuo Xitou Development
Co., Ltd. ("Xitou") (3)
|
|
The PRC
July 16,2015
|
|
RMB
|
30,000,000
|
|
|
85
|
%
|
|
Internet platform for real estate property financing
|
|
|
|
|
|
|
|
|
|
|
|
|
Beijing Future Xinzhihui Technology
Development Center (Limited Partnership) ("Xinzhihui") (3)
|
|
The PRC
December 16,2016
|
|
RMB
|
30,000,000
|
|
|
90.67
|
%
|
|
Investment holding company
|
|
|
|
|
|
|
|
|
|
|
|
|
Beijing Future Xinhujin Technology Development Center (Limited Partnership) ("Xinhujin") (3)
|
|
The PRC
December 30,2016
|
|
RMB
|
20,000,000
|
|
|
89.5
|
%
|
|
Investment holding company
|
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of shares data)
Company Name
|
|
Registered Place
and Date of
Incorporation
|
|
Registered
Capital
|
|
|
Percentage of
Equity
Attributable
to the Group
|
|
|
Principal
Activities
|
Beijing Future Xinruifeng Technology Development Center (Limited Partnership) ("Xinruifeng ") (3)
|
|
The PRC
February 23,2017
|
|
RMB
|
20,000,000
|
|
|
77.5
|
%
|
|
Investment holding company
|
|
|
|
|
|
|
|
|
|
|
|
|
Beijing Ruihao Rongtong Real Estate Co., Ltd. ("Ruihao Rongtong")
|
|
PRC
June 15, 2006
|
|
RMB
|
250,000,000
|
|
|
100
|
%
|
|
Real estate development
|
|
|
|
|
|
|
|
|
|
|
|
|
VIE:
|
|
|
|
|
|
|
|
|
|
|
|
Beijing Yuzhouyun Technology
Development Center (Limited partnership)) and its subsidiary ("Yuzhouyun") (Note 2(a)
|
|
The PRC
March 2, 2018
|
|
RMB
|
18,388,300
|
|
|
51
|
%
|
|
Technical services
|
|
(1)
|
Liquidated on December 10, 2019.
|
|
(2)
|
Liquidated on June 10, 2019.
|
|
(3)
|
Acquired on November 30, 2019.
|
|
(4)
|
Controlled by Zhengzhou Hangmei Technology Development
Co., Ltd. which is a 51% owned subsidiary of the Group.
|
|
2.
|
Summary of significant accounting policies
|
(a)
|
The Company and basis of presentation and consolidation
|
The Group is principally engaged in residential real
estate development and the provision of property management services. The Group's operations are conducted mainly in the PRC. In
2012, the Group expanded its business into the U.S. residential real estate market. The accompanying consolidated financial statements
have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP"). The consolidated financial
statements include the financial statements of the Company, its subsidiaries, VIEs, and the subsidiaries of VIEs. All inter-company
transactions and balances between the Company and its subsidiaries have been eliminated upon consolidation.
Subsidiaries are consolidated from the date on which
control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group.
Where there is a loss of control of a subsidiary, the consolidated financial statements include the results for the part of the
reporting year during which the Group has control.
Ruihao Rongtong
Ruihao Rongtong, with registered capital of US$37.6
million (RMB250.0 million), was invested in by the Company on May 6, 2015, for the purpose of undertaking a residential property
development project in Beijing. On March 1, 2016, June 28, 2016 and September 18, 2016, an unrelated trustee company, Ping An trust
Co., Ltd. ("Ping An trust") purchased 20%, 5% and 10% of the Company's equity interest in Ruihao Rongtong, respectively,
and loaned US$124.3 million (RMB862.5 million) in aggregate to the Group. On February 28, 2017, the Company repurchased the 35%
equity interest of Ruihao Rongtong from Ping An trust. On May 23, 2017, Ping An trust subsequently repurchased back 35% of the
Company's equity interest in Ruihao Rongtong, and loaned US$246.8 million (RMB1.61 billion) in aggregate to the Group . As of December
31, 2018, Ruihao Rongtong had one project under construction. Pursuant to the share purchase agreement, the 35% of non-controlling
equity interest of Ruihao Rongtong was to be repurchased by the Company in cash at the earlier of the second anniversary date,
or the date the Company elected to repurchase the 35% equity interest of Ruihao Rongtong. Therefore, the non-controlling interest
is mandatorily redeemable and is accounted for as liability in accordance with ASC 480, Distinguishing Liabilities from Equity.
In addition, since the Company planned to repurchase the 35% equity interest of Ruihao Rongtong within the next 12 months, the
liability is classified as current liability as of December 31, 2018. On June 21, 2019, the Company repurchased the 35% equity
interest of Ruihao Rongtao from Ping An trust and Ruihao Rongtong ceased to be variable interest entity(“VIE”).
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of shares data)
In accordance with ASC 810, Consolidation, Ruihao
Rongtong as of December 31, 2018 is a variable interest entity as it was not established with sufficient equity at risk to finance
its activities without additional subordinated financial support. As of December 31,2018, the Company is considered as the primary
beneficiary of Ruihao Rongtong, as it has the power to direct the activities of Ruihao Rongtong that most significantly impact
their economic performance and has the obligation to absorb the losses and the right to receive benefits from Ruihao Rongtong through
its voting interest underlying its 65% equity interest in accordance with PRC Law and the articles of association of Ruihao Rongtong.
Based on the above, Ruihao Rongtong was consolidated by the Company.
The carrying amounts and classifications of the assets
and liabilities of the VIE are as follows:
|
|
December 31,
2018
|
|
|
|
US$
|
|
Current assets
|
|
|
174,366,164
|
|
Non-current assets
|
|
|
247,753
|
|
Total assets
|
|
|
174,613,917
|
|
|
|
|
|
|
Current liabilities
|
|
|
151,609,433
|
|
Non-current liabilities
|
|
|
—
|
|
|
|
|
|
|
Total liabilities
|
|
|
151,609,433
|
|
The financial performance and cash flows of the VIE
are as follows:
|
|
Year ended
December 31,
2018
|
|
|
|
US$
|
|
Revenue
|
|
|
—
|
|
Cost of revenue
|
|
|
—
|
|
Net loss
|
|
|
(4,786,363
|
)
|
Net cash used in operating activities
|
|
|
(8,804,491
|
)
|
Net cash used in investing activities
|
|
|
—
|
|
Net cash provided by financing activities
|
|
|
8,949,715
|
|
As of December 31, 2018, the current
liabilities of the Ruihao Rongtong included amounts due to subsidiaries of the Group amounting to US$145,728,000, which were eliminated
upon consolidation by the Company.
As of December 31, 2018, the land use rights
included in real estate properties under development of Ruihao Rongtong of US$166,327,833 were pledged as collateral for bank
loans and other debt and the creditors have no recourse to the general credit of the primary beneficiary.
Nil revenue contributed by Ruihao
Rongtong to the Company’s consolidated revenues for the years ended December 31, 2018.
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of shares data)
Yuzhouyun
On March 2, 2018, the Group signed a partnership agreement
with certain senior management members to form Yuzhouyun. According to the partnership agreement, the design and purpose of Yuzhouyun's
activities are to provide technical services to the Group. The Group acts as a limited partner and the senior management members
are general partners. Substantially all significant activities require the approval from the senior management members. The Group
and senior management members agreed to share profits at the proportion of 51% and 49%, respectively. The Group, as the limited
partner, is the only party with the equity at risk to absorb losses of Yuzhouyun. Yuzhouyun's principal activities are also to
provide technical service to the Group, which indicates that Yuzhouyun's activities are conducted on behalf of the Group. Therefore,
under ASC 810, Consolidation, Yuzhouyun is a variable interest entity. In addition, as the senior management members are the Group's
employees, which represent a principal-agency relationship, therefore, the Group is concluded to be "most closely associated"
with Yuzhouyun. Based on the above, the Group is the primary beneficiary because it has the power to direct the activities of Yuzhouyun
that most significantly impact their economic performance and has the obligation to absorb the losses and the right to receive
benefits from Yuzhouyun.
The carrying amounts and classifications of the assets
and liabilities of Yuzhouyun are as follows:
|
|
December 31,
2018
|
|
|
December 31,
2019
|
|
|
|
US$
|
|
|
US$
|
|
Current assets
|
|
|
5,775,479
|
|
|
|
2,214,155
|
|
Non-current assets
|
|
|
3,557,562
|
|
|
|
4,244,195
|
|
Total assets
|
|
|
9,333,041
|
|
|
|
6,458,350
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
11,808,683
|
|
|
|
13,967,333
|
|
Non-current liabilities
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
11,808,683
|
|
|
|
13,967,333
|
|
The financial performance and cash flows of Yuzhouyun
are as follows:
|
|
Year ended
December 31,
2018
|
|
|
Year ended
December 31,
2019
|
|
|
|
US$
|
|
|
US$
|
|
Revenue
|
|
|
7,991,038
|
|
|
|
12,555,974
|
|
Cost of revenue
|
|
|
(1,559,129
|
)
|
|
|
(3,682,899
|
)
|
Net loss
|
|
|
(1,929,266
|
)
|
|
|
(1,796,997
|
)
|
Net cash provided by operating activities
|
|
|
519,050
|
|
|
|
368,379
|
|
Net cash used in investing activities
|
|
|
(255,509
|
)
|
|
|
(1,885
|
)
|
Net cash used in financing activities
|
|
|
—
|
|
|
|
(52,503
|
)
|
As of December 31, 2018 and December 31, 2019, the
current liabilities of Yuzhouyun included amounts due to subsidiaries of the Group amounting to US$9,169,167 and US$10,867,898,
which were eliminated upon consolidation by the Company.
During the year ended December 31, 2018 and December 31, 2019, the revenue of Yuzhouyun included amounts that come from the
Group amounting to US$7,399,000 and US$9,997,544, which were eliminated upon consolidation by the Company.
Yuzhouyun contributed
US$591,628 and US$2,558,430 of the Company's consolidated revenues for the year ended December 31, 2018 and December 31,
2019, respectively.
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of shares data)
The preparation of financial statements in
conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying notes, and disclosure of contingent liabilities at the date of the
consolidated financial statements. Estimates are used for, but not limited to, the selection of the useful lives of property
and equipment and finance lease, allowance for doubtful amount associated with accounts receivables, other receivables,
contract assets and advances to suppliers, fair values of the purchase price allocation with respect to business
combinations, progress towards the completion of the performance obligation, accounting for the share-based compensation,
accounting for deferred income taxes, impairment of real estate properties under development, real estate properties held for
lease and long-term investments, provision necessary for contingent liabilities and estimating the incremental borrowing rate
for operating lease liabilities. Management analyzed the forecasted cash flows for the twelve months from April 29, 2020,
which indicates that the Group will have sufficient liquidity from cash flows generated by operations and existing credit
facilities and therefore, there will be sufficient financial resources to settle borrowings and payables that will be due
through end of April 2021. Management believes that the estimates utilized in preparing its consolidated financial
statements are reasonable and prudent. Actual results could differ from these estimates.
(c)
|
Fair value of financial instruments
|
Financial instruments include cash and cash
equivalents, restricted cash, short-term investments, accounts receivable, other deposits and prepayments, due from
employees, due from related parties, other receivables, long-term investments, accounts payable, customer deposits, other
payables and accrued liabilities, short-term bank borrowings, long-term borrowings and due to related parties. The carrying
amounts of the aforementioned financial instruments, except for short-term investments that measurement alternative was
elected, long term investments and long term borrowings, approximate their fair value due to the short term maturities of
these instruments. The carrying amounts of the long-term borrowings approximate their fair values because the stated interest
rates approximate rates currently offered by financial institutions for similar debt instruments of comparable credit risk
and maturities. Long-term investment has no quoted market prices and it is not practicable to estimate their fair value
without incurring excessive costs. The Group reviews the investments for impairment whenever events or changes in
circumstances indicate that the carrying amount may no longer be recoverable.
For long-term investments other than those accounted
for under the equity method or those that result in consolidation of the investee, the Company measures equity investments at fair
value and recognizes any changes in fair value in net income. However, for equity investments that do not have readily determinable
fair values and do not qualify for the existing practical expedient in ASC 820 to estimate fair value using the net asset value
per share (or its equivalent) of the investment, the Company chose to measure those investments at cost, less any impairment, plus
or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the
same issuer. At each reporting date, the Company is required to make a qualitative assessment as to whether equity investments
without a readily determinable fair value for which the measurement alternative is elected is impaired. In the event that a qualitative
assessment indicates that the investment is impaired and the fair value of the investment is less than the carrying value, the
carrying value is written down to its fair value. A variety of factors are considered when determining if a decline in fair value
is below carrying value, including, among others, the financial condition and prospects of the investee.
Accounting guidance defines fair value as the price
that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded
at fair value, the Company considers the principal or most advantageous market in which it would transact and it considers assumptions
that market participants would use when pricing the asset or liability.
Accounting guidance establishes a fair value hierarchy
that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair
value. A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is
significant to the fair value measurement. Accounting guidance establishes three levels of inputs that may be used to measure fair
value:
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of shares data)
Level 1-Observable inputs that reflect quoted prices
(unadjusted) for identical assets or liabilities in active markets
Level 2-Includes other inputs that are directly or
indirectly observable in the market place
Level 3-Unobservable inputs which are supported by
little or no market activity
ASC 820 describes three main approaches for measuring
the fair value of assets and liabilities: (1) market approach; (2) income approach and (3) cost approach. The market approach uses
prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities.
The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based
on the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that
would currently be required to replace an asset.
In accordance with ASC 820, investment in
marketable equity securities and investment in real estate investment trusts ("REITs") classified as is within
Level 1 as the Company measures the fair value using quoted trading prices that are published on a regular basis, and
investment in equity securities in unlisted companies categorized as Level 3 is measured at fair value using alternative
method, less any impairment, plus or minus changes resulting from observable price in orderly transactions.
(d)
|
Foreign currency translation
|
The Group's financial information is presented in U.S.
dollars. The functional currency of the Company is U.S. dollars. The functional currency of the Company's subsidiaries in the PRC
is Renminbi ("RMB"), the currency of the PRC. The functional currency of the Company's subsidiaries in Malaysia is Malaysian
Ringgit ("MYR"), the currency of Malaysia. The functional currency of the Company's subsidiaries other than those in
the PRC and Malaysia is U.S. dollars. Transactions by the Company's subsidiaries in the PRC which are denominated in currencies
other than RMB are remeasured into RMB at the exchange rate quoted by the People's Bank of China ("PBOC") prevailing
at the dates of the transactions. Exchange gains and losses resulting from transactions denominated in a currency other than RMB
are included in the consolidated statements of comprehensive income as exchange gains (losses). The consolidated financial statements
of the Company's subsidiaries have been translated into U.S. dollars in accordance with ASC 830, Foreign Currency Matters.
The PRC subsidiaries' financial information is first prepared in RMB and then is translated into U.S. dollars at period-end exchange
rates as to assets and liabilities and average exchange rates as to revenue and expenses. Capital accounts are translated at their
historical exchange rates when the capital transactions occurred.
The RMB is not freely convertible into foreign currency
and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts
could have been, or could be, converted into U.S. dollars at the rates used in translation.
(e)
|
Cash and cash equivalents
|
The Group considers all highly liquid investments with
original maturities of three months or less to be cash equivalents. The Group maintains bank accounts mainly in the PRC, Hong Kong
and United States. The vast majority of the PRC bank balances are denominated in RMB. Hong Kong and United States bank balances
are denominated in U.S. dollars.
Cash includes cash on hand and demand deposits in
accounts maintained with various state-owned and private banks within the PRC, Hong Kong and United States. Total cash in
banks (excluding restricted cash) at December 31, 2019 amounted to US$662,606,063 (December 31, 2018: US$674,141,554), of
which the vast majority of deposits are not covered by insurance.
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of
shares data)
The Group is required to maintain certain
deposits with banks that provide mortgage loans to the Group's customers in order to purchase residential units from the
Group. These balances are subject to withdrawal restrictions and totaled US$32,420,073 as of December 31, 2019 (December 31,
2018: US$43,748,940). As of December 31, 2019, the Group held US$270,714,930 (December 31, 2018: US$338,633,911) in its
restricted cash accounts, representing funds received from sales proceeds that are subject to withdrawal restrictions. The
Group is also required to maintain certain deposits with banks and financial institutions that provide loans to the Group. As
of December 31, 2019, the Group also held US$20,691,781 in its restricted cash accounts (December 31, 2018: nil) as security
for its short-term loans (Note 10), held US$3,153,579(December 31, 2018: US$129,492,074) in its restricted cash accounts as
security for its current portion of long-term loans (Note 11).
As of December 31, 2019, the Group held US$112,998,481
(December 31, 2018: nil) in its bank accounts with withdrawal restriction for its long-term loans (Note 11).
(g)
|
Real estate properties development completed and under development
|
Real estate properties completed and under development
consist of residential unit sites and commercial offices. The Group leases the land for the residential unit sites under land use
right leases with various terms from the PRC government. Real estate properties development completed and under development are
stated at the lower of carrying amounts or fair value less selling costs.
Expenditures for land development, including cost of
land use rights, deed tax, pre-development costs and engineering costs, are capitalized and allocated to development projects by
the specific identification method. Costs are allocated to specific units within a project based on the ratio of the sales value
of units to the estimated total sales value times the total project costs.
Costs of amenities transferred to buyers are allocated
as common costs of the project that are allocated to specific units as a component of total construction costs. For amenities retained
by the Group, costs in excess of the related fair value of the amenities are also treated as common costs. Results of operations
of amenities retained by the Group are included in the current operating results.
In accordance with ASC 360, Property, Plant and
Equipment ("ASC 360"), real estate property development completed and under development are subject to valuation
adjustments when the carrying amount exceeds fair value. An impairment loss is recognized only if the carrying amount of the assets
is not recoverable and exceeds fair value. The carrying amount is not recoverable if it exceeds the sum of the undiscounted cash
flows expected to be generated by the assets.
When the profitability of a current project deteriorates
due to a slowdown in the sales pace, reduction of pricing or some other factor, this indicates that there may be a possible future
loss on delivery and possible impairment in the recoverability of the assets. Accordingly, the assets of such project are subsequently
reviewed for future losses and impairment by comparing the estimated future undiscounted cash flows for the project to the carrying
value of such project. If the estimated future undiscounted cash flows are less than the asset's carrying value, such deficit will
be charged as a future loss and the asset will then be written down to its estimated fair value.
The Group determines estimated fair value primarily
by discounting the estimated future cash flows relating to the asset. In estimating the cash flows for a project, the Group uses
various factors including (a) the expected pace at which the planned number of units will be sold, based on competitive market
conditions, historical trends in sales pace and actual average selling prices of similar product offerings and any other long or
short-term economic conditions which may impact the market in which the project is located; (b) the estimated net sales prices
expected to be attained based on the current market conditions and historical price trends, as well as any estimated increases
in future sales prices based upon the projected rate of unit sales, the estimated time gap between presale and expected delivery,
the impact of government policies, the local and regional competitive environment, and certain external factors such as the opening
of a subway line, school or factory; and (c) the expected costs to be incurred in the future by the Group, including, but not limited
to, construction cost, construction overhead, sales and marketing, sales taxes and interest costs.
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of
shares data)
The Group's determination of fair value requires discounting
the estimated cash flows at a rate commensurate with the inherent risk associated with the assets and related estimated cash flows.
The discount rate used in determining each project's fair value depends on the stage of development, location and other specific
factors that increase or decrease the risk associated with the estimated cash flows.
For the periods presented, the Group did not recognize
any impairment for real estate properties completed and under development.
Revenue is recognized when control of the goods or
services are transferred to the customer at an amount that reflects the consideration to which the Group expects to be entitled
in exchange for those goods or services. The Group also elected to exclude sales taxes and other similar taxes from the measurement
of the transaction price. Therefore, revenues are recognized net of business tax, value added taxes ("VAT").
Real estate sales
Revenues arising from real estate sales are recognized
when or as the control of the asset is transferred to the customer. Depending on the terms of the contract and the laws that apply
to the contract, control of the asset may transfer over time or at a point in time.
For real estate sales contracts for which the Group has an enforceable
right to payment for performance completed to date, revenue is recognized over time by measuring the progress towards complete
satisfaction of that performance obligation. Otherwise, revenue is recognized at a point in time when the customer obtains the
physical possession, the legal title, or the significant risks and rewards of ownership of the assets and the Group has present
right to payment and the collection of the consideration is probable. The progress towards complete satisfaction of the performance
obligation is measured based on the Group's efforts or inputs to the satisfaction of the performance obligation, by reference to
the contract costs incurred up to the end of reporting period as a percentage of total estimated costs for each contract.
Generally, the Group receives short-term advances from
its customers for real estate sales. Using the practical expedient, the Group does not adjust the promised amount of consideration
for the effects of a significant financing component if it expects, at contract inception, that the period between the transfer
of the promised good or service to the customer and when the customer pays for that good or service will be one year or less. The
Group also receives long-term advances from customers for real estate sales. The transaction price for such contracts is adjusted
for the effects of a financing component, if long-term advances from customers is assessed as significant at the individual contract
level.
Real estate management services income
Real estate management services income is recognized
in the accounting period in which the services are rendered. The Group bills a fixed amount periodically for services provided
and recognizes as revenue the amount to which the Group has a right to invoice that corresponds directly with the value of performance
completed.
Real estate management lease income
Real estate lease income is generally recognized on
a straight-line basis over the terms of the tenancy agreements. For real estate leases, these contracts are treated as leases for
accounting purposes, rather than contracts with customers subject to ASC 606.
Other revenue
Other revenue includes services ancillary to the Group's
real estate projects, including construction service revenue and software consulting service income. Construction service revenue
and software consulting service income are recognized when services are provided as the customer simultaneously benefits from the
services as they are performed.
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of
shares data)
For the years ended December 31, 2018 and 2019, revenue
is recognized and disaggregated by major source as below:
|
|
2018
|
|
|
2019
|
|
|
|
US$
|
|
|
US$
|
|
Real estate sales
|
|
|
2,139,370,792
|
|
|
|
2,387,031,568
|
|
Real estate management services income
|
|
|
63,447,420
|
|
|
|
67,488,169
|
|
Other revenue
|
|
|
5,148,101
|
|
|
|
11,984,304
|
|
Revenue from contracts with customers
|
|
|
2,207,966,313
|
|
|
|
2,466,504,041
|
|
|
|
|
|
|
|
|
|
|
Real estate lease income
|
|
|
9,584,972
|
|
|
|
16,128,771
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
2,217,551,285
|
|
|
|
2,482,632,812
|
|
Contract assets
The Group pays sales commission to its real estate
sales agencies for each real estate sales contract. The Group has elected to apply the optional practical expedient for costs to
obtain a contract which allows the Group to immediately expense sales commissions (included under selling and distribution expenses)
when the amortization period of the asset that the Group otherwise would have used is one year or less. For incremental costs of
obtaining real estate sales contracts that extend beyond a one-year period, these incremental costs of obtaining real estate sales
contracts are recognized as assets if the real estate sales are collectible and amortized as the Group transfers the control of
the assets to customers. The Group recognized US$6.2 million and US$14.9 million of such costs in selling and distribution expense
during the year ended December 31, 2018 and December 31, 2019. As of December 31, 2018 and 2019, there was no impairment losses
on contract assets.
Contract liabilities
A contract liability is the obligation to transfer
goods or services to a customer for which the Group has received consideration (or an amount of consideration is due) from the
customer. If a customer pays consideration before the Group transfers goods or services to the customer, a contract liability is
recognized when the payment is made or the payment is due (whichever is earlier). The Group's contract liabilities are comprised
of customer deposits, which are recognized as revenue when the Group performs under the contract.
The following table presents the Group's contract balances
as of December 31, 2018 and 2019:
|
|
December 31, 2018
|
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
Contract assets
|
|
|
21,779,221
|
|
|
|
23,093,235
|
|
Customer deposits (note 14)
|
|
|
1,921,851,255
|
|
|
|
1,106,098,647
|
|
The amount of revenue recognized during the year
ended December 31, 2019 and included in the customer deposits as of December 31, 2018 is US$1,188,040,187.
Impact of adoption of ASC 606
As of January 1, 2018, the Group adopted
ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” as modified (ASC606), using the modified retrospective
method, which the Group does not adjust prior periods. The Group applied the rules to all open contracts existing as of January
1, 2018, recording a decrease of US$315.2 million to total equity for the cumulative effect of the change, with an increase real
estate properties development completed of US$35.1 million, real estate properties under development of US$1,176.1 million, contract
asset of US$15.6 million and other non-current assets of US$68.2 million, other current asset reductions of US$61.2 million, increase
customer deposits of US$1,602.0 million, other current liabilities reductions of US$17.7 million and non-current liabilities reductions
of US$35.3 million. A significant portion of the Group’s revenue is derived from real estate sales of development properties
in the PRC. Prior to the adoption of ASC 606, the Group recognizes revenue using the percentage-of-completion (“POC”)
method. Under ASC 606, to recognize revenue over time similar to the POC method, contractual provisions need to provide the Group
with an enforceable right to payment. Historically, the Group’s contracts did not include a specific term on enforceable
right to payment. For all contracts executed starting from January 1, 2018, the Group modified certain terms to establish an enforceable
right to payment for performance completed to date, including a reasonable profit. Under ASC 606, the Group recognizes revenue
on an “over time” basis prospectively for these new contracts by using cost inputs to measure progress towards the
completion of the performance obligation. For contracts that did not include enforceable right to payment terms, revenue is recognized
at a point in time when title to the property is transferred to the customer upon the adoption of ASC 606.
The following table summarizes the impact
of adopting ASC 606 on consolidated statement of comprehensive income as of and for the year ended December 31, 2018.
|
|
December 31, 2018
|
|
|
|
Amounts
without
adoption of
ASC606
|
|
|
Effects of
adoption
of ASC606
|
|
|
Amounts
as reported
|
|
Consolidated statement of comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
1,896,940,997
|
|
|
|
320,610,288
|
|
|
|
2,217,551,285
|
|
Cost of revenue
|
|
|
(1,499,457,049
|
)
|
|
|
(102,615,934
|
)
|
|
|
(1,602,072,983
|
)
|
Selling and distribution expenses
|
|
|
(90,805,960
|
)
|
|
|
7,214,309
|
|
|
|
(83,591,651
|
)
|
General and administrative expenses
|
|
|
(155,805,869
|
)
|
|
|
(650,301
|
)
|
|
|
(156,456,170
|
)
|
Income taxes
|
|
|
(93,887,973
|
)
|
|
|
(50,559,274
|
)
|
|
|
(144,447,247
|
)
|
Net income/(loss)
|
|
|
(68,047,068
|
)
|
|
|
173,999,088
|
|
|
|
105,952,020
|
|
Accounts receivable represents the Group's right to
an amount of consideration that is unconditional (i.e. only the passage of time is required before payment of the consideration
is due). The Group's account receivable consists of balances due from customers for the sale of residential units in the PRC and
United States and real estate management service contracts. These balances are unsecured, bear no interest and are due within a
year from the date of the sale.
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of
shares data)
Accounts receivable are reviewed periodically as to
whether their carrying value has become impaired. The Group considers the assets to be impaired if the collectability of the balances
become doubtful. As of December 31, 2019, there was US$1,456,243 allowance for doubtful accounts (December 31, 2018: US$1,539,894).
Other receivables consist of various cash advances
to unrelated companies and individuals with which the Group has business relationships.
Other receivables are reviewed periodically as to whether
their carrying value has become impaired. The Group considers the assets to be impaired if the collectability of the balances becomes
doubtful. As of December 31, 2019, there was US$8,313,052 allowance for doubtful accounts (December 31, 2018: US$10,594,423).
(k)
|
Deposits for land use rights
|
Deposits for land use rights consist of upfront cash
payments made to local land bureaus to secure land use rights under executed short-term or long-term land framework cooperation
agreements or land use rights agreements.
Deposits for land use rights are reviewed periodically
as to whether their carrying value has become impaired. The Group considers the assets to be impaired if the collectability of
the balances become doubtful. There were no impairment losses for any periods presented.
(l)
|
Other deposits and prepayments
|
Other deposits and prepayments mainly consist of upfront
cash payments made to third parties related to the direct negotiation model in acquiring land parcels and prepaid tax.
Other deposits and prepayments are reviewed periodically
as to whether their carrying value has become impaired. The Group considers the assets to be impaired if the collectability of
the balances become doubtful. There were no impairment losses for any periods presented.
(m)
|
Advances to suppliers
|
Advances to suppliers consist of balances paid to contractors
and vendors for services and materials that have not been provided or received and generally relate to the development and construction
of residential units in the PRC. Advances to suppliers are reviewed periodically to determine whether their carrying value has
become impaired. The Group considers the assets to be impaired if it is doubtful that the services and materials can be provided.
As of December 31, 2018 and 2019, there was no allowance provided.
Customer deposits consist of sales proceeds received
from customers from the sale of residential units in the PRC. In the PRC, customers will generally obtain financing for the purchase
of their residential unit prior to the completion of the project. The lending institution will provide the funding to the Group
upon the completion of the financing rather than the completion of the project. The Group receives these funds and recognizes them
as a customer deposit current liability until the revenue can be recognized.
(o)
|
Notes payable and other payables
|
Notes payable represents short-term bank acceptance
notes issued by financial institutions that entitle the holder to receive the stated amount from the financial institutions at
the maturity date of the notes. The Group has utilized notes payable to settle amounts owed to suppliers and contractors. The notes
payable is non-interest bearing and is normally settled within six months. Notes payable was US$49,652,091 and US$271,096,538 as
of December 31, 2018 and 2019, respectively.
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of
shares data)
Other payables consist of balances for non-construction
costs with unrelated companies and individuals with which the Group has business relationships.
(p)
|
Real estate properties held for lease, net
|
Real estate properties held for lease are recorded
at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives
of the assets. Estimated useful lives of the real estate properties held for lease are 20-60 years.
Maintenance, repairs and minor renewals are charged
directly to expenses as incurred. Major additions and improvements to the real estate properties held for lease are capitalized.
In accordance with ASC 360, Property, Plant and
Equipment, real estate properties held for lease is subject to valuation adjustments when the carrying amount exceeds fair
value. An impairment loss is recognized only if the carrying amount of the assets is not recoverable and exceeds fair value. The
carrying amount is not recoverable if it exceeds the sum of the undiscounted cash flows expected to be generated by the assets.
For the periods presented, the Group did not recognize
any impairment for real estate properties held for lease.
(q)
|
Property and equipment, net
|
Property and equipment are recorded at cost less accumulated
depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Estimated
useful lives of the assets are as follows:
Corporate aircraft
|
15 years
|
Vehicles
|
5 years
|
Furniture and fixtures
|
5 years
|
Office buildings
|
20-60 years
|
Maintenance, repairs and minor renewals are charged
directly to expense as incurred unless such expenditures extend the useful life or represent a betterment, in which case they are
capitalized.
(r)
|
Long-term Investments
|
The Group's long-term investments consist of equity
method investments and equity investments without readily determinable fair value.
Equity method Investments
Where the Group has significant influence over the
investee, the Group applies the equity method of accounting in accordance with ASC subtopic 323-10-20, Investments-Equity Method
and Joint Ventures ("ASC 323-10-20"). The reporting dates and accounting policies of the equity investee are the
same as the Group. The investment in the equity investee is stated at cost, including the Group's share of the equity investee's
net gain or loss, less any impairment in value. The Group recognizes in its consolidated statement of comprehensive income its
share of the net income (loss) of the equity investees. The Company periodically evaluate whether declines in fair values of our
investments indicate impairment and whether declines in fair value of our investments below their book value are other-than-temporary.
Nonmarketable equity securities
Nonmarketable equity securities are investments in
privately held companies without readily determinable market values.
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of
shares data)
On January 1, 2018, the Group adopted ASU 2016-01,
pursuant to which, for equity investments without readily determinable fair value, the Group elected to use the measurement alternative
to measure those investments at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly
transactions for identical or similar investments of the same issuer, if any. All gains and losses on nonmarketable equity securities,
realized and unrealized, are recognized in earnings. The Group performs a qualitative assessment of whether the investment is impaired
at each reporting date. If a qualitative assessment indicates that the investment is impaired, the entity has to estimate the investment's
fair value in accordance with the principles of ASC 820. If the fair value is less than the investment's carrying value, the entity
recognizes an impairment loss in net income equal to the difference between the carrying value and fair value.
The Group capitalizes interest as a component of building
construction costs in accordance with ASC 835, Interest ("ASC 835").
As a result of the total interest costs capitalized
during the period, the interest expense for the years ended December 31, 2017, 2018 and 2019, was as follows:
|
|
2017
|
|
2018
|
|
2019
|
|
|
US$
|
|
US$
|
|
US$
|
Amortization of issuance cost related to long-term debt
|
|
4,384,801
|
|
|
8,624,334
|
|
|
8,132,103
|
|
Interest expense of finance leases
|
|
1,705,739
|
|
|
1,385,292
|
|
|
973,842
|
|
Interest on borrowings
|
|
197,410,532
|
|
|
271,831,465
|
|
|
308,747,957
|
|
Total interest costs
|
|
203,501,072
|
|
|
281,841,091
|
|
|
317,853,902
|
|
Total interest costs capitalized
|
|
(137,347,632
|
)
|
|
(182,595,395
|
)
|
|
(204,078,542
|
)
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
66,153,440
|
|
|
99,245,696
|
|
|
113,775,360
|
|
Regulations in the PRC require the Group to contribute
to a defined contribution retirement plan for all permanent employees. Pursuant to the mandatory requirement from the local authority
in the PRC, the retirement pension insurance, unemployment insurance, health insurance and housing fund were established for the
employees during the term they are employed. For the years ended December 31, 2017, 2018 and 2019, the Group is obligated to contribute
for each employee an amount equal to 45%, 45% and 40%, respectively, of last year average salary determined by the Social Welfare
Bureau. For the year ended December 31, 2019, the Group recorded expense in the amount of US$20,420,474 (2017: US$17,101,606;
2018: US$18,422,330).
(u)
|
Distribution of earnings and reserve fund
|
The Company's ability to pay dividends is primarily
dependent on the Company receiving distributions from its subsidiaries. The earnings reflected in the consolidated financial statements
prepared in accordance with U.S. GAAP differ from those reflected in the statutory financial statements of the Company's subsidiaries.
In accordance with the PRC Company Law, the PRC subsidiaries are required to transfer 10% of their profit after tax, as determined
in accordance with PRC accounting standards and regulations, to the statutory surplus reserve (the "SSR") until such
reserve reaches 50% of the registered capital of the subsidiaries. Subject to certain restrictions set out in the PRC Company Law,
the SSR may be distributed to stockholders in the form of share bonus issued to increase share capital, provided that the remaining
balance after the capitalization is not less than 25% of the registered capital before capital increase.
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of
shares data)
The Group accounts for income tax using the balance
sheet method. Deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts used for income tax purposes, as well as unutilized net operating
losses. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire
before the Group is able to realize their benefits, or that future utilization is uncertain. The Group assesses its need for valuation
allowances by tax reporting unit by jurisdiction.
Late payment interests and penalties arising from underpayment
of income taxes is recognized according to the relevant tax law. The amount of interest expense to be recognized is computed by
applying the applicable statutory rate of interest to the difference between the tax position recognized and the amount previously
taken or expected to be taken in a tax return. Interest recognized in accordance with ASC 740-10, Income Tax ("ASC
740-10") is classified in the consolidated financial statements as interest expense, while penalties recognized in accordance
with this interpretation are classified in the consolidated financial statements as other expenses.
In accordance with the provisions of ASC 740-10, the
Group recognizes in its consolidated financial statements the impact of a tax position if a tax return's position or future tax
position is "more likely than not" to prevail (defined as a likelihood of more than fifty percent of being sustained
upon audit, based on the technical merits of the tax position). Tax positions that meet the "more likely than not" threshold
are measured (using a probability weighted approach) at the largest amount of tax benefit that has a greater than fifty percent
likelihood of being realized upon settlement. The Group's estimated liability for unrecognized tax benefits is periodically assessed
for adequacy and may be affected by changing interpretations of laws, rulings by tax authorities, certain changes and/or developments
with respect to audits, and expiration of the statute of limitations. The outcome for a particular audit cannot be determined with
certainty prior to the conclusion of the audit and, in some cases, appeal or litigation process. The actual benefits ultimately
realized may differ from the Group's estimates. As each audit is concluded, adjustments, if any, are appropriately recorded in
the Group's consolidated financial statements. Additionally, in future periods, changes in facts, circumstances, and new information
may require the Group to adjust the recognition and measurement estimates with regards to individual tax positions. Changes in
recognition and measurement estimates are recognized in the period in which the changes occur.
(w)
|
Land Appreciation Tax ("LAT")
|
In accordance with the relevant taxation laws for real
estate companies of the provinces in which the subsidiaries operate in the PRC, the local tax authorities levy LAT based on progressive
rates ranging from 30% to 60% on the appreciation of land value, being the proceeds of sales of properties less deductible expenditures,
generally including borrowing costs and relevant property development expenditures. LAT is generally prepaid based on a fixed percentage
(varying by local tax jurisdiction) of customer deposits and is expensed when the related revenue is recognized.
Comprehensive income is defined as the changes in equity
of the Group during a period from transactions and other events and circumstances excluding transactions resulting from investments
by owners and distributions to owners. Among other disclosures, ASC 220, Comprehensive Income, requires that all items that
are required to be recognized under current accounting standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial statements. For each of the periods presented, the Group's
comprehensive income includes net income and foreign currency translation adjustments and is presented in the consolidated statements
of comprehensive income.
(y)
|
Advertising and promotion expenses
|
Advertising and promotion costs are expensed as incurred,
or the first time the activity takes place, in accordance with ASC 720-35, Advertising Costs. For the year ended December
31, 2019, the Group recorded advertising and promotion expenses of US$62,341,805 (2017: US$53,932,462;
2018: US$56,575,316).
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of
shares data)
The Company adopted ASU No. 2016-02, Leases (Topic
842) (“ASU 2016-02”) from January 1, 2019 by using the modified retrospective method and did not restate the comparable
periods. The Company has elected the package of practical expedients, which allows the Company to carry forward our original assessment
of whether contracts contained lease, lease classification, and the initial direct cost. Lastly, the Company elected the short-term
lease exemption for all contracts with lease terms of 12 months or less.
The Group determines if an arrangement is or contains
a lease at inception or modification of a contract. A contract is or contains a lease if the contract conveys the right to control
the use of an identified asset for a period in exchange for consideration. Control over the use of the identified asset means the
lessee has both (a) the right to obtain substantially all of the economic benefits from the use of the asset and (b) the right
to direct the use of the asset.
Lessee
The Group categorizes leases with contractual terms
longer than twelve months as either operating or finance. Finance leases are generally those leases that transfer ownership to
the Group or allow the Group to purchase assets at a nominal amount by the end of the lease term. Assets acquired under finance
leases are recorded in property and equipment, net and real estate properties held for lease, net. All other leases are recorded
as operating lease right-of-use (“ROU”) assets.
Lease liability is recorded based the present value
of the lease payments over the lease term using a discount rate at commencement date. As the implicit rate in the Group’s
leases is not typically readily available, the Group uses an incremental borrowing rate based on the information available at the
lease commencement date in determining the present value of lease payments. This incremental borrowing rate reflects the fixed
rate at which the Group could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar
term, in a similar economic environment. Leased assets are recognized based on the initial present value of the lease payments,
reduced by lease incentives.
Operating lease expense for lease payments is recognized
on a straight-line basis over the lease term. The expected lease terms are based on the non-cancelable term of the lease and may
contain options to extend or terminate the lease when it is reasonably certain that the Group will exercise that option. Finance
lease assets are amortized in a manner consistent with the Group’s normal depreciation policy for owned assets. Variable
lease payments not dependent on an index or rate are excluded from the ROU assets and lease liability calculations and are recognized
in expense in the period which the obligation for those payments is incurred.
Upon adoption, the Company recognized ROU assets
of US$15.0 million and total lease liability (including current and non-current) of US$14.4 million for operating leases as
of January 1, 2019. The impact of adopting ASU 2016-02 on the Company’s opening retained earnings and current year net
income was insignificant. As of December 31, 2019, the Company recognized operating lease ROU assets of US$11.8 million and
total lease liability US$11.2 million, including current portion of US$4.9 million for operating lease.
Lessor
As a lessor, the Company’s leases are classified
as operating leases under ASC 842, and thus the pattern of recognition of real estate lease income remains unchanged from previous
lease accounting guidance. Leases, in which the Group is the lessor, are substantially all accounted for as operating leases and
the lease components and non-lease components are accounted for separately.
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of
shares data)
The Company and its subsidiaries provide customers
with assurance-type warranties which cover major defects of building structure and certain fittings and facilities of properties
sold as stipulated in the relevant sales contracts. The warranty period varies from two months to three years, depending on different
property components the warranty covers.
The Group regularly estimates potential costs for materials
and labor with regards to warranty-type claims expected to be incurred subsequent to the delivery of a property. The Group regularly
monitors the warranty reserve and makes adjustments to its pre-existing warranties, if any, in order to reflect changes in trends
and historical data as information becomes available. The Group may seek recourse against its contractors or any related third
parties if it can be demonstrated they are at fault. In addition, the Group withholds up to 5% of the contract cost from sub-contractors
for periods of two to five years. These amounts are included in current liabilities, and are only paid to the extent that there
has been no warranty claim against the Group relating to the work performed or materials supplied by the subcontractors. For the
periods presented, the Group had not recognized any warranty liability nor incurred any warranty costs in excess of the amount
retained from subcontractors.
Earnings per share are calculated in accordance with
ASC 260, Earnings per Share. Basic earnings per share is computed by dividing net income attributable to holders of common
shares by the weighted average number of common shares outstanding during the period. Diluted earnings per common share reflects
the potential dilution that could occur if securities or other contracts to issue common shares were exercised or converted into
common shares. Common share equivalents consists of common shares issuable upon the exercise of the share options and vesting of
restricted shares units using treasury stock method. Common equivalents shares are excluded from the computation of diluted earnings
per share if their effects would be anti-dilutive. The non-vested options granted with performance conditions are excluded in the
computation of diluted EPS unless the options are dilutive and unless their conditions (a) have been satisfied at the reporting
date or (b) would have been satisfied if the reporting date was the end of the contingency period.
The Company accounted for shares repurchased as treasury
shares at cost in accordance to ASC Subtopic 505-30, Treasury Shares. When the Company decides to retire the treasury shares,
the difference between the original issuance price and the repurchase price may be allocated between additional paid-in capital
and retained earnings.
On July 12, 2013, the Board of Directors unanimously
authorized management to repurchase up to US$60 million of the Company's shares from the approval date to July 5, 2015. On December
28, 2015, the Board of Directors unanimously authorized management to repurchase up to US$40 million of the Company's shares from
the approval date to the end of 2017. The Board of Directors review the Company's share repurchase program periodically and to
adjust the amount authorized for repurchase as necessary. On March 21, 2017, the Board of Directors unanimously authorized management
to repurchase up to US$40 million of the Company's shares from the approval date to the end of 2019. On August 14, 2018, the Board
of Directors unanimously authorized management to repurchase up to US$50 million of the Company's shares from the approval date
to the end of 2019. On May 20, 2019, the Board of Directors unanimously authorized management to repurchase up to US$50 million
of the Company's shares from the approval date to the end of 2021. As of December 31, 2019, the Company had a balance of 52,850,536
(2018: 41,135,198) treasury shares amounting to US$113,719,964 (2018: US$87,639,088).
(ad)
|
Senior Secured Notes
|
On August 30, 2016, the Company issued notes with an
aggregate principal amount of US$300,000,000 due on August 30, 2019 (the "August 2019 Senior Secured Notes") at a coupon
rate of 8.125% per annum payable semi-annually. Interest is payable on February 28 and August 30 of each year, commencing February
28, 2017. The August 2019 Senior Secured Notes have a three year term maturing on August 30, 2019. Given that the August 2019 Senior
Secured Notes is debt in its legal form and is not a derivative in its entirety, it has been classified as other long-term debt.
The Company has evaluated and determined that there was no embedded derivative requiring bifurcation from the August 2019 Senior
Secured Notes under the requirements of ASC 815. The embedded redemption options and repurchase features did not qualify for derivative
accounting because the embedded derivatives were considered clearly and closely related to the characteristics of the August 2019
Senior Secured Notes. The August 2019 Senior Secured Notes were issued at par.
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of
shares data)
On February 28, 2017, the Company issued notes with
an aggregate principal amount of US$300,000,000 due on February 28, 2021 (the "February 2021 Senior Secured Notes") at
a coupon rate of 7.75% per annum payable semi-annually. Interest is payable on February 28 and August 28 of each year, commencing
August 28, 2017. The February 2021 Senior Secured Notes have a four year term maturing on February 28, 2021. Given that the February
2021 Senior Secured Notes is debt in its legal form and is not a derivative in its entirety, it has been classified as other long-term
debt. The Company has evaluated and determined that there was no embedded derivative requiring bifurcation from the February 2021
Senior Secured Notes under the requirements of ASC 815. The embedded redemption options and repurchase features did not qualify
for derivative accounting because the embedded derivatives were considered clearly and closely related to the characteristics of
the February 2021 Senior Secured Notes. The February 2021 Senior Secured Notes were issued at a discount.
On November 22, 2017 and December 1, 2017, the Company
issued notes with an aggregate principal amount of US$200,000,000 and US$100,000,000 due on November 22, 2020 (the "November
2020 Senior Secured Notes") at a coupon rate of 8.875% per annum payable semi-annually. Interest will be payable on November
22 and May 22 of each year, commencing May 22, 2018. The November 2020 Senior Secured Notes have a three year term maturing on
November 22, 2020. Given that the November 2020 Senior Secured Notes is debt in its legal form and is not a derivative in its entirety,
it has been classified as other long-term debt. The Company has evaluated and determined that there was no embedded derivative
requiring bifurcation from the November 2020 Senior Secured Notes under the requirements of ASC 815. The embedded redemption options
and repurchase features did not qualify for derivative accounting because the embedded derivatives were considered clearly and
closely related to the characteristics of the November 2020 Senior Secured Notes. The November 2020 Senior Secured Notes were issued
at a discount.
On March 19, 2018, the Company issued notes with an
aggregate principal amount of US$200,000,000 due on March 19, 2020 (the "March 2020 Senior Secured Notes") at a coupon
rate of 9.875% per annum payable semi-annually. Interest is payable on March 19 and September 19 of each year, commencing September
19, 2018. The March 2020 Senior Secured Notes have a two year term maturing on March 19, 2020. Given that the March 2020 Senior
Secured Notes is debt in its legal form and is not a derivative in its entirety, it has been classified as other long-term debt.
The Company has evaluated and determined that there was no embedded derivative requiring bifurcation from the March 2020 Senior
Secured Notes under the requirements of ASC 815. The embedded redemption options and repurchase features did not qualify for derivative
accounting because the embedded derivatives were considered clearly and closely related to the characteristics of the March 2020
Senior Secured Notes. The March 2020 Senior Secured Notes were issued at a discount.
On April 15, 2019 and April 26, 2019, the Company issued
notes with an aggregate principal amount of US$200,000,000 and US$100,000,000 due on October 15, 2021 (the “October 2021
Senior Secured Notes”) at a coupon rate of 14.20% per annum payable semi-annually. Interest is payable on April 15 and October
15 of each year, commencing October 15, 2019. The October 2021 Senior Secured Notes have a two and a half years term maturing on
October 15, 2021. Given that the October 2021 Senior Secured Notes is debt in its legal form and is not a derivative in its entirety,
it has been classified as other long-term debt. The Company has evaluated and determined that there was no embedded derivative
requiring bifurcation from the October 2021 Senior Secured Notes under the requirements of ASC 815. The embedded redemption options
and repurchase features did not qualify for derivative accounting because the embedded derivatives were considered clearly and
closely related to the characteristics of the October 2021 Senior Secured Notes. The October 2021 Senior Secured Notes were issued
at a premium.
Onshore corporate bonds
During the periods presented, Xinyuan China issued
a series of onshore corporate bonds. Given that each onshore corporate bond individually is debt in its legal form and is not a
derivative in its entirety, it has been classified as other long-term debt. The Company has evaluated and determined that there
was no embedded derivative requiring bifurcation from these onshore corporate bonds under the requirements of ASC 815. The onshore
corporate bonds were issued at par.
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of
shares data)
(ae)
|
Short-term investments
|
All highly liquid investments with original maturities
of greater than three months, but less than 12 months, are classified as short-term investments. Investments that are expected
to be realized in cash during the next 12 months are also included in short-term investments.
Equity investments that have readily determinable fair
values are measured at fair value with changes recognized in gain(loss) on short-term investments in consolidated statements of
comprehensive income. Equity investments without readily determinable fair values and for which we do not have the ability to exercise
significant influence are accounted for at cost with adjustments for observable changes in prices or impairments.
(af)
|
Assets acquisition and business combinations
|
Pursuant to ASC 805, Business Combinations ("ASC
805"), the Company determines whether a transaction or other event is a business combination by applying the definition below,
which requires that the assets acquired and liabilities assumed constitute a business. The guidance requires an entity to first
evaluate whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset
or a group of similar identifiable assets. If that threshold is met, the set of assets and activities is not a business. If it
is not met, the entity evaluates whether the set meets the definition of a business. ASC 805 defines a business as consisting of
inputs and processes applied to those inputs that have the ability to contribute to the creation of outputs. Inputs are defined
as economic resources, while processes are defined as protocols, systems or standards. Inputs and processes create, or have the
ability to contribute to the creation of, outputs. Outputs are often present in businesses but are not required to meet the definition
of a business. To be considered a business under ASC 805, the acquisition of net assets must include, at a minimum, an input and
a substantive process that together significantly contribute to the ability to create outputs. If the assets acquired are not a
business, the reporting entity shall account for the transaction or other event as an assets acquisition.
The Company accounted for its acquisitions of Suzhou
Yefang, Wuhan Yinghexin and Qingdao Keda as asset acquisitions either because the fair value of the gross assets acquired is concentrated
in a single identifiable asset or a group of similar identifiable assets or the acquired entities had no processes in place to
apply to inputs to have the ability to create outputs.
The excess of the fair value of purchase consideration over
the fair values of identifiable assets acquired and liabilities assumed is recorded as goodwill. The Group reviews goodwill for
impairment at least annually or more frequently if events or changes in circumstances would more likely than not reduce the fair
value of our single reporting unit below its carrying value. As of December 31, 2019, no impairment of goodwill has been identified.
(ag)
|
Non-controlling interests
|
A non-controlling interest is recognized to reflect
the portion of their equity which is not attributable, directly or indirectly, to the Group. Consolidated net income on the consolidated
statements of comprehensive income includes the net loss/(income) attributable to non-controlling interests. The cumulative results
of operations attributable to non-controlling interests are recorded as non-controlling interests in the Group's consolidated balance
sheets. Losses attributable to the Group and the non-controlling interest in a subsidiary may exceed their interests in the subsidiary's
equity. The excess, and any further losses attributable to the Group and the non-controlling interest, shall continue to be attributed
to those interests.
(ah)
|
Effect of change in estimate
|
Revisions in estimated gross profit margins
related to estimated costs and revenues are made in the period in which circumstances requiring the revisions become known.
During the year ended December 31, 2019, real estate development projects (Zhengzhou International New City IV, Zhengzhou
Hangmei International Wisdom City I, Henan Xin Central I, Jinan Royal Palace, Chengdu Xinyuan City and Sanya Yazhou Bay
No.1), which recognized gross profit in 2018, had changes in their estimated gross profit margins. As these projects moved
closer to completion during 2019, the Company adjusted its prior estimates related to selling prices and development costs.
As a result of the changes in estimate above, gross profit, net income and basic and diluted earnings per share decreased by
US$59.1 million (2017: decreased US$11.1 million, 2018: increased US$34.5 million), US$44.3 million (2017: decreased US$8.3
million, 2018: increased US$25.9 million), US$0.39 per share (2017: decreased US$0.06 per share, 2018: increased US$0.20 per
share), and US$0.39 per share (2017: decreased US$0.06 per share, 2018: increased US$0.20 per share), respectively, for the year
ended December 31, 2019.
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of
shares data)
(ai)
|
Share-based compensation
|
The Group has adopted ASC 718, Compensation-Stock
Compensation, which requires that share-based payment transactions with employees, such as restricted shares or stock options,
be measured based on the grant-date fair value of the equity instrument issued, and the Company has elected to recognize compensation
expense using the straight-line method for all restricted shares and stock options granted with service conditions that have a
graded vesting schedule. In addition, the Company recognizes share-based compensation expense net of an estimated forfeiture rate
and therefore, only recognizes compensation cost for those shares expected to vest over the service period of the award. The estimation
of the forfeiture rate is primarily based on historical experience of employee turnover. To the extent the Company revises this
estimate in the future, the share-based payments could be materially impacted in the year of revision, as well as in the following
years.
The Company also has a policy of using authorized shares
in the existing pool to satisfy any future exercise of share options and shares repurchased held by a third party trustee to satisfy
the RSUs granted under the Company's 2014 Restricted Stock Unit plan.
For options granted with performance conditions, share-based
compensation expense is recognized based on the probable outcome of the performance condition using the accelerated method over
the requisite service period. A performance condition is not taken into consideration in determining fair value of the non-vested
shares granted. The fair value of liabilities incurred in share-based payment transactions with employees are remeasured at the
end of each reporting period through settlement. Changes in the fair value of a liability incurred under a share-based payment
arrangement that occur during the requisite service period are recognized as compensation costs over that period.
In accordance with ASC 280, Segment Reporting,
segment reporting is determined based on how the Group's chief operating decision maker reviews operating results to make decisions
about allocating resources and assessing performance for the Group. According to the management approach, the Group operates in
geographical segments. Therefore, each of its individual property developments is a discrete operating segment. The Group has aggregated
its segments on a geographical basis as property development projects undertaken within a region have similar expected economic
characteristics, type of properties offering, customers and market and regulatory environment (Note 21).
(ak)
|
Comparative information
|
Certain of the prior year comparative figures have
been reclassified to conform to the current year's presentation.
(al)
|
Recent Accounting Pronouncements
|
In June 2016, the FASB issued ASU No. 2016-13, Financial
Instruments—Credit Losses ("ASU 2016-13"). The amendments in ASU 2016-13 update guidance on reporting credit
losses for financial assets. This ASU requires entities to measure credit losses for financial assets measured at amortized cost
based on expected losses rather than incurred losses. For available-for-sale debt securities with unrealized losses, entities will
be required to recognize credit losses through an allowance for credit losses. These amendments affect loans, debt securities,
trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial
assets not excluded from the scope that have the contractual right to receive cash. For public business entities that are U.S.
SEC filers, ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, and interim periods within those
fiscal years. The Group is currently evaluating the impact on its consolidated financial statements of adopting this guidance.
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of
shares data)
In January 2017, the FASB issued ASU 2017-04, Simplifying
the Test for Goodwill Impairment (“ASU 2017-04”), which simplifies the accounting for goodwill impairment by eliminating
Step two from the goodwill impairment test. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss
shall be recognized in an amount equal to that excess, versus determining an implied fair value in Step two to measure the impairment
loss. The guidance is effective for annual and interim impairment tests performed in periods beginning after December 15, 2019.
Early adoption is permitted for all entities for annual and interim goodwill impairment testing dates on or after January 1, 2017.
The guidance should be applied on a prospective basis. The Group does not believe the adoption of ASU 2017-04 will have a material
impact on its consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13, Fair
Value Measurement (Topic 820): Disclosure Framework- Changes to the Disclosure Requirements for Fair Value Measurement. The
update eliminates, modifies, and adds certain disclosure requirements for fair value measurements. This update is effective in
fiscal years, including interim periods, beginning after December 15, 2019, and early adoption is permitted. The added disclosure
requirements and the modified disclosure on the narrative description of measurement uncertainty should be applied prospectively
for only the most recent interim or annual period presented. All other changes to disclosure requirements in this update should
be applied retrospectively to all periods presented upon their effective date. The Group does not believe the adoption of ASU 2018-13
will have a material impact on its consolidated financial statements.
In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill
and Other-Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing
Arrangement That Is a Service Contract. This update requires a customer in a cloud computing arrangement that is a service
contract to follow the internal-use software guidance in ASC 350-40 to determine which implementation costs to defer and recognize
as an asset. This update is effective in fiscal years, including interim periods, beginning after December 15, 2019, and early
adoption is permitted. This guidance should be applied either retrospectively or prospectively to all implementation costs incurred
after the date of adoption. The Group does not believe the adoption of ASU 2018-15 will have a material impact on its consolidated
financial statements.
In November 2018, the FASB issued ASU 2018-18, Collaborative
Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606. This update clarifies that certain transactions
between participants in a collaborative arrangement should be accounted for under ASC 606 when the counterparty is a customer and
precludes an entity from presenting consideration from a transaction in a collaborative arrangement as revenue from contracts with
customers if the counterparty is not a customer for that transaction. The update is effective in fiscal years beginning after December
15, 2019, and interim periods therein, and early adoption is permitted for entities that have adopted ASC 606. This guidance should
be applied retrospectively to the date of initial application of Topic 606. The Group does not believe the adoption of ASU 2018-18
will have a material impact on its consolidated financial statements.
In December 2019, the FASB issued ASU 2019-12, Income
Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This update simplifies the accounting for income taxes as part
of the FASB's overall initiative to reduce complexity in accounting standards. The amendments include removal of certain exceptions
to the general principles of ASC 740, Income taxes, and simplification in several other areas such as accounting for a franchise
tax (or similar tax) that is partially based on income. The update is effective in fiscal years beginning after December 15, 2020,
and interim periods therein, and early adoption is permitted. Certain amendments in this update should be applied retrospectively
or modified retrospectively, all other amendments should be applied prospectively. The Group is currently evaluating the impact
on its financial statements of adopting this guidance.
|
3.
|
Short-term investments
|
The short-term investments represent investments in
REITs, which are publicly traded on the Hong Kong Stock Exchange, marketable equity securities, and investment in private equity
fund, which are expected to be realized in cash during the next 12 months.
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of
shares data)
The following summarizes the short-term investments
measured at fair value at December 31, 2018 and 2019:
|
|
December 31, 2018
|
|
|
|
|
|
|
US$
|
|
|
|
|
|
|
Fair
value
|
|
|
Cost
|
|
|
Unrealized
gain in profit
|
|
Level 1
|
|
|
|
|
|
|
|
|
|
|
|
|
REITs
|
|
|
8,442,063
|
|
|
|
7,291,863
|
|
|
|
1,150,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
8,442,063
|
|
|
|
7,291,863
|
|
|
|
1,150,200
|
|
|
|
December 31, 2019
|
|
|
|
|
|
|
US$
|
|
|
|
|
|
|
Fair
value
|
|
|
Cost
|
|
|
Unrealized
loss in profit
|
|
|
|
|
|
|
|
|
|
|
|
Level 1
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities with readily determinable fair value
|
|
|
2,076,443
|
|
|
|
3,700,257
|
|
|
|
(1,623,814
|
)
|
Level 3
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities without readily determinable fair value
|
|
|
3,519,182
|
|
|
|
3,519,182
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
5,595,625
|
|
|
|
7,219,439
|
|
|
|
(1,623,814
|
)
|
During the year ended December 31, 2019,
there was no change in the carrying amount of equity securities without readily determinable fair value measured under fair value
alternative method using significant unobservable inputs (Level 3).
During the year ended December 31, 2019, US$3,075,014
(2018: US$3,407,090 realized loss) net realized gain and US$1,623,814 (2018: US$1,150,200 unrealized gain) unrealized loss are
included in earnings.
As of December 31, 2019, other receivables consisted of the followings:
|
|
December 31,
2019
|
|
|
|
US$
|
|
Henan Derun Real Estate Co. Ltd (“Henan Derun”)
|
|
|
124,436,299
|
|
Zhengzhou Jiahe Real Estate Co. Ltd (“Zhengzhou Jiahe”)
|
|
|
67,429,462
|
|
Zhangjiakou Xingyuan City Construction Development Co. Ltd
|
|
|
19,696,568
|
|
Huzhou Xinhong Jingcheng Construction and Development Co. Ltd
|
|
|
16,369,944
|
|
Due from contractors
|
|
|
24,444,823
|
|
Others
|
|
|
34,923,080
|
|
|
|
|
|
|
Other receivables
|
|
|
287,300,176
|
|
Other non-current assets as of December 31, 2018
included a prepayment of US$95.6 million to Henan Derun for the purchase of 10% equity interest in Henan Derun. In December
2019, the Group and Henan Derun agreed to terminate the equity interest purchase. In addition, the Group agreed to provide
Henan Derun financing using the prepayment and charge an interest of 18% per annum commencing from the date of prepayment
made to Henan Derun. As of December 31, 2019, the prepayment is recorded as other receivable aggregating to US$124.4 million
(December 31, 2018: US$13.5 million). In March 2020, the Group entered into an agreement with Henan Derun pursuant to which
the above receivables shall be settled by Henan Derun’s transfer of certain parcels of land properties to a project
company 80% owned by the Group and the Group will assume the bank loans of Henan Derun aggregating to US$77.1 million which
were pledged by such land properties. The Group evaluated the potential impairment and concluded that no impairment allowance
is required because the fair value of the relevant land properties attributed to the Group as appraised by an external valuer exceeded the total amount of the above receivables and bank loans assumed by the Group.
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of
shares data)
Receivable from Zhengzhou Jiahe of US$67.4 million
(December 31, 2018: US$60.7 million) bears an interest from 15% to 18% per annum with a due date of December 31, 2019. The balance
is now overdue. The directors of the Company are of the view that no impairment provision is required for the balance because
it was secured by the 100% equity interest in Zhengzhou Jiahe with a fair value appraised by an external valuer significantly
higher than the balance.
|
5.
|
Real estate properties development completed and under development
|
The following summarizes the components of real estate
properties development completed and under development at December 31, 2018 and 2019:
|
|
December 31,
2018
|
|
|
December 31,
2019
|
|
|
|
US$
|
|
|
US$
|
|
Development completed:
|
|
|
|
|
|
|
|
|
Zhengzhou Century East A
|
|
|
4,000,881
|
|
|
|
3,913,910
|
|
Suzhou International City Garden
|
|
|
1,460,187
|
|
|
|
1,579,238
|
|
Jinan Xinyuan Splendid
|
|
|
4,952,551
|
|
|
|
5,175,618
|
|
Zhengzhou Xin City
|
|
|
14,946,209
|
|
|
|
11,094,087
|
|
Beijing Xindo Park
|
|
|
42,003,855
|
|
|
|
41,462,271
|
|
Suzhou Lake Royal Palace
|
|
|
4,880,245
|
|
|
|
4,966,527
|
|
Xingyang Splendid I
|
|
|
16,616,861
|
|
|
|
3,201,168
|
|
Zhengzhou Thriving Family
|
|
|
14,908,355
|
|
|
|
11,397,709
|
|
Shanghai Yipin Royal Palace
|
|
|
82,320,988
|
|
|
|
80,709,011
|
|
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of
shares data)
|
|
December 31,
2018
|
|
|
December 31,
2019
|
|
|
|
US$
|
|
|
US$
|
|
New York Oosten
|
|
|
127,749,947
|
|
|
|
1,201,783
|
|
Chengdu Thriving Family
|
|
|
88,492,260
|
|
|
|
64,327,235
|
|
Sanya Yazhou Bay No.1
|
|
|
31,716,745
|
|
|
|
6,627,299
|
|
Xi'an Metropolitan
|
|
|
48,352,943
|
|
|
|
43,103,208
|
|
Kunshan Royal Palace
|
|
|
8,279,289
|
|
|
|
5,742,133
|
|
Jinan Xin Central
|
|
|
41,158,302
|
|
|
|
29,175,427
|
|
Changsha Xinyuan Splendid
|
|
|
7,340,408
|
|
|
|
7,540,854
|
|
Zhengzhou Fancy City II (South)
|
|
|
151,224
|
|
|
|
1,263,824
|
|
Kunshan Xindo Park
|
|
|
23,673,323
|
|
|
|
8,251,834
|
|
Zhengzhou Xindo Park
|
|
|
13,794,988
|
|
|
|
8,301,650
|
|
Zhengzhou Fancy City I
|
|
|
19,329,493
|
|
|
|
17,254,407
|
|
Henan Xin Central I
|
|
|
36,230,637
|
|
|
|
14,913,267
|
|
Xuzhou Colorful City
|
|
|
—
|
|
|
|
5,547,620
|
|
Henan Xin Central II
|
|
|
—
|
|
|
|
9,884,003
|
|
Zhengzhou International New City I
|
|
|
—
|
|
|
|
17,458,454
|
|
Zhengzhou International New City II
|
|
|
—
|
|
|
|
17,044,177
|
|
Tianjin Spring Royal Palace I
|
|
|
—
|
|
|
|
19,221,577
|
|
Xingyang Splendid Phase II
|
|
|
—
|
|
|
|
15,283,105
|
|
Xingyang Splendid Phase III
|
|
|
—
|
|
|
|
2,563,122
|
|
|
|
|
|
|
|
|
|
|
Real estate properties development completed
|
|
|
632,359,691
|
|
|
|
458,204,518
|
|
|
|
|
|
|
|
|
|
|
Under development:
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
|
Xuzhou Colorful City
|
|
|
49,972,999
|
|
|
|
—
|
|
Xingyang Splendid II
|
|
|
44,074,338
|
|
|
|
—
|
|
Xingyang Splendid III
|
|
|
62,771,683
|
|
|
|
—
|
|
Xingyang Splendid IV
|
|
|
11,743,049
|
|
|
|
46,472,092
|
|
Jinan Royal Palace
|
|
|
328,737,914
|
|
|
|
223,967,341
|
|
Tianjin Spring Royal Palace I
|
|
|
101,091,391
|
|
|
|
—
|
|
Henan Xin Central II
|
|
|
99,196,076
|
|
|
|
—
|
|
Zhengzhou Fancy City II(North)
|
|
|
77,295,404
|
|
|
|
95,360,634
|
|
Zhengzhou International New City I
|
|
|
339,890,348
|
|
|
|
—
|
|
Zhengzhou International New City II
|
|
|
171,711,098
|
|
|
|
—
|
|
Tongzhou Xinyuan Royal Palace
|
|
|
214,011,166
|
|
|
|
234,987,743
|
|
Changsha Mulian Royal Palace
|
|
|
108,637,317
|
|
|
|
—
|
|
XIN Eco Marine Group Properties Sdn Bhd
|
|
|
15,064,162
|
|
|
|
27,488,080
|
|
Hudson Garden Project
|
|
|
106,844,124
|
|
|
|
123,555,996
|
|
Flushing Project
|
|
|
92,821,714
|
|
|
|
107,304,741
|
|
Changsha Furong Thriving Family
|
|
|
39,054,048
|
|
|
|
15,540,229
|
|
Zhengzhou International New City III A
|
|
|
86,999,855
|
|
|
|
110,507,107
|
|
Zhuhai Xin World
|
|
|
102,997,747
|
|
|
|
153,864,698
|
|
Xinyuan Chang'an Royal Palace
|
|
|
144,771,923
|
|
|
|
157,044,224
|
|
Kunshan Xinyu Jiayuan
|
|
|
159,974,516
|
|
|
|
146,779,965
|
|
Zhengzhou International New City Pending Staging
|
|
|
238,835,232
|
|
|
|
376,230,958
|
|
Zhengzhou Hangmei International Wisdom City I
|
|
|
91,069,505
|
|
|
|
75,943,506
|
|
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of
shares data)
|
|
December 31,
2018
|
|
|
December 31,
2019
|
|
|
|
US$
|
|
|
US$
|
|
Xinyuan Golden Water View City
|
|
|
428,430,649
|
|
|
|
438,686,015
|
|
Suzhou Galaxy Bay
|
|
|
51,739,509
|
|
|
|
62,557,317
|
|
Xi'an Metropolitan II
|
|
|
5,609,532
|
|
|
|
5,903,626
|
|
Zhengzhou International New City III B
|
|
|
94,547,682
|
|
|
|
19,164,288
|
|
Zhengzhou International New City III C
|
|
|
99,240,244
|
|
|
|
88,758,649
|
|
Zhengzhou International New City III D
|
|
|
42,706,005
|
|
|
|
8,416,916
|
|
Tianjin Spring Royal Palace II
|
|
|
70,891,230
|
|
|
|
62,093,526
|
|
Zhengzhou Fancy City III
|
|
|
89,529,453
|
|
|
|
79,922,540
|
|
Jinan Royal Spring Bay
|
|
|
119,400,947
|
|
|
|
135,015,228
|
|
Suzhou Gusu Shade I (Suzhou New Project)
|
|
|
39,163,694
|
|
|
|
45,267,243
|
|
Wuhan Canglong Royal Palace (Wuhan New Project)
|
|
|
124,701,587
|
|
|
|
141,707,492
|
|
Dalian International Health Technology Town I
|
|
|
33,796,959
|
|
|
|
85,174,478
|
|
Qingdao Royal Dragon Bay
|
|
|
246,387,446
|
|
|
|
212,457,554
|
|
Chengdu Xinyuan City
|
|
|
688,987,085
|
|
|
|
723,555,656
|
|
Zhengzhou International New City IV
|
|
|
176,269,525
|
|
|
|
220,859,532
|
|
Xingyang Splendid V
|
|
|
45,984,974
|
|
|
|
31,136,007
|
|
Xingyang Splendid Building 46
|
|
|
4,836,734
|
|
|
|
7,997,771
|
|
Foshan Xinchuang AI International Science and Technology Innovation Valley
|
|
|
—
|
|
|
|
225,362,486
|
|
|
|
|
5,049,788,864
|
|
|
|
4,489,083,638
|
|
Profit recognized
|
|
|
348,170,931
|
|
|
|
301,358,319
|
|
Less: progress billings (Note 14)
|
|
|
(1,329,243,487
|
)
|
|
|
(1,536,054,208
|
)
|
|
|
|
|
|
|
|
|
|
Total real estate properties under development
|
|
|
4,068,716,308
|
|
|
|
3,254,387,749
|
|
|
|
|
|
|
|
|
|
|
Total real estate properties development completed and under development
|
|
|
4,701,075,999
|
|
|
|
3,712,592,267
|
|
As of December 31, 2019, land use rights included in
the real estate properties under development totaled US$2,179,888,833 (December 31, 2018: US$2,733,197,585).
As of December 31, 2019, land use rights with an aggregate
net book value of US$798,910,332 (December 31, 2018: US$1,046,360,853) was pledged as collateral for certain bank loans and other
debts.
|
6.
|
Real estate properties held for lease, net
|
The Group leases buildings to various third parties
its owned properties including elementary schools, basement parking, kindergartens, parking facilities, clubhouses as well as shopping
mall. These leases are non-cancelable operating leases with remaining lease periods that vary from 25 days to 20 years. The leases
may include minimum base rents with escalated contingent rent clauses.
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of
shares data)
|
|
December 31,
2018
|
|
|
December 31,
2019
|
|
|
|
US$
|
|
|
US$
|
|
Elementary schools
|
|
|
3,107,711
|
|
|
|
3,057,371
|
|
Basement parking
|
|
|
9,633,568
|
|
|
|
14,694,085
|
|
Kindergartens
|
|
|
10,194,286
|
|
|
|
10,049,512
|
|
Parking facilities
|
|
|
55,941,369
|
|
|
|
100,036,672
|
|
Clubhouses
|
|
|
7,789,415
|
|
|
|
8,574,329
|
|
Shopping mall
|
|
|
243,346,989
|
|
|
|
290,610,416
|
|
Residential properties
|
|
|
—
|
|
|
|
124,280,030
|
|
Others
|
|
|
2,972,811
|
|
|
|
2,924,658
|
|
Total costs
|
|
|
332,986,149
|
|
|
|
554,227,073
|
|
Accumulated depreciation
|
|
|
(30,221,932
|
)
|
|
|
(38,358,165
|
)
|
|
|
|
|
|
|
|
|
|
Real estate properties held for lease, net
|
|
|
302,764,217
|
|
|
|
515,868,908
|
|
The Group has shopping mall equipment with gross amount
of US$7,266,822 and US$7,149,114 acquired under finance lease as of December 31, 2018 and 2019, respectively.
Depreciation expense for real estate properties held
for lease for the year ended December 31, 2019 amounted to US$8,625,765(2017: US$7,280,421; 2018: US$7,963,627).
As of December 31, 2019, US$206,516,986 of real
estate properties held for lease were pledged as collateral for certain bank loans and other debts (2018:
US$175,429,630).
As of December 31, 2019, minimum future rental income
on non-cancellable leases (none of which contains any contingent rental clauses), in the aggregate and for each of the five succeeding
fiscal years and thereafter, is as follows:
Year
|
|
Amount
|
|
|
|
US$
|
|
|
|
|
|
2020
|
|
|
15,986,263
|
|
2021
|
|
|
15,587,876
|
|
2022
|
|
|
14,786,872
|
|
2023
|
|
|
13,728,432
|
|
2024 and thereafter
|
|
|
107,158,511
|
|
|
|
|
|
|
Total
|
|
|
167,247,954
|
|
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of
shares data)
|
7.
|
Property and equipment, net
|
Property and equipment consisted of the following:
|
|
December 31,
2018
|
|
|
December 31,
2019
|
|
|
|
US$
|
|
|
US$
|
|
Finance lease right-of-use asset –Corporate aircraft
|
|
|
37,494,502
|
|
|
|
36,887,168
|
|
Vehicles
|
|
|
5,109,037
|
|
|
|
5,069,515
|
|
Furniture and fixtures
|
|
|
12,580,384
|
|
|
|
10,523,537
|
|
Office buildings
|
|
|
10,994,284
|
|
|
|
21,842,187
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
66,178,207
|
|
|
|
74,322,407
|
|
Accumulated depreciation
|
|
|
(28,063,724
|
)
|
|
|
(31,318,028
|
)
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
38,114,483
|
|
|
|
43,004,379
|
|
On October 23, 2012, the Group acquired a corporate
aircraft under a finance lease. The lease has an eight-year term and expires on September 15, 2021 with 32 quarterly lease payments
of US$1,426,000. A deposit in the amount of US$6.7 million may be used as full and final payment to Minsheng to purchase the corporate
aircraft.
Depreciation expense for property and equipment for
the year ended December 31, 2019 amounted to US$5,904,454 (2017: US$5,350,256; 2018: US$4,908,299) which includes amortization
expense related to the corporate aircraft capital lease amounting to US$2,336,187 (2017: US$2,613,008; 2018: US$2,582,340).
Accumulated depreciation expense for property and equipment
as of December 31, 2019 amounted to US$31,318,028 (2017: US$23,994,047; 2018: US$28,063,724) which includes accumulated amortization
expense related to the corporate aircraft capital lease amounting to US$14,601,171 (2017: US$11,375,747; 2018: US$13,238,949).
As of December 31, 2018 and 2019, the long-term investment
consisted of the following:
|
|
Initial Cost
|
|
|
Ownership
|
|
|
December 31,
2018
|
|
|
|
US$
|
|
|
|
|
|
US$
|
|
Nonmarketable equity securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Zhengzhou Lianhe Real Estate Co., Ltd.
|
|
|
241,648
|
|
|
|
1.85
|
%
|
|
|
291,409
|
|
Zhengzhou Taike Real Estate Co., Ltd.
|
|
|
738,073
|
|
|
|
3.75
|
%
|
|
|
728,523
|
|
Equity method investees
|
|
|
|
|
|
|
|
|
|
|
|
|
Qingdao Huiju Zhihui City Industrial Development Co., Ltd.
|
|
|
505,162,873
|
|
|
|
49
|
%
|
|
|
478,778,879
|
|
Wuhu Penghong Investment Center (Limited Partnership)
|
|
|
30,608,185
|
|
|
|
n/a
|
|
|
|
23,613,358
|
|
Madison Developments Limited.
|
|
|
19,095,969
|
|
|
|
50
|
%
|
|
|
16,743,122
|
|
Others
|
|
|
59,289,036
|
|
|
|
n/a
|
|
|
|
44,184,928
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
564,340,219
|
|
|
|
Initial Cost
|
|
|
Ownership
|
|
|
December 31,
2019
|
|
|
|
US$
|
|
|
|
|
|
US$
|
|
Nonmarketable equity securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Zhengzhou Lianhe Real Estate Co., Ltd.
|
|
|
241,648
|
|
|
|
1.85
|
%
|
|
|
286,689
|
|
Zhengzhou Taike Real Estate Co., Ltd.
|
|
|
738,073
|
|
|
|
3.75
|
%
|
|
|
716,723
|
|
Equity method investees
|
|
|
|
|
|
|
|
|
|
|
|
|
Qingdao Huiju Zhihui City Industrial Development Co., Ltd.
|
|
|
523,459,957
|
|
|
|
49
|
%
|
|
|
488,227,667
|
|
Wuhu Penghong Investment Center (Limited Partnership)
|
|
|
30,608,185
|
|
|
|
n/a
|
|
|
|
18,333,122
|
|
Madison Developments Limited.
|
|
|
19,095,969
|
|
|
|
50
|
%
|
|
|
16,294,996
|
|
Suzhou Rongjingchen Real Estate Co., Ltd
|
|
|
42,041,464
|
|
|
|
24
|
%
|
|
|
41,452,466
|
|
Others
|
|
|
69,160,051
|
|
|
|
n/a
|
|
|
|
48,308,262
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
613,619,925
|
|
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of
shares data)
Equity method investees
On April 19, 2017, the Company signed an agreement
to acquire up to 70% equity interest of Qingdao Huiju Zhihui City Industrial Development Co., Ltd. ("Qingdao Huiju"),
which is developing a real estate project in Qingdao city from Beijing Huiju Technology Industry Development Co., Ltd. ("Beijing
Huiju"), a non-affiliated company for a consideration of US$505.2 million. As of December 31, 2019, US$505.2 million had been
paid and a 49% equity interest has been transferred to the Company. Based on the articles of association, the Company cannot exercise
control of Qingdao Huiju until it acquires the entire 70% equity interest, but has the ability to exercise significant influence
over Qingdao Huiju's operating and financial decisions and accounted for it as an equity method investment.
The Group initiated various legal actions against
Beijing Huiju for, inter alia, (i) the transfer of the remaining 21% equity interest in Qingdao Huiju to the Group and
appointment of directors into the board of Qingdao Huiju, (ii) refund of unauthorized transfer of cash of US$98.7 million
from Qingdao Huiju to Beijing Huiju, and (iii) return of business license and official seals of Qingdao Huiju to Qingdao
Huiju. In March 2019, the PRC local court held that Beijing Huiju shall refund the unauthorized cash transferred to Beijing
Huiju to Qingdao Huiju and has frozen the cash of US$98.7 million in Beijing Huiju’s bank account. In January 2020,
local PRC court held that Beijing Huiju shall return the business license and official seals of Qingdao Huiju to Qingdao
Huiju. However, Beijing Huiju appealed to PRC Courts against the refund of cash and return of business and official seals to
Qingdao Huiju. Currently the above lawsuits are in progress. Based on independent legal advice and after due and careful
enquiry, the directors of the Company are of the view that Group is entitled to the receipt of the 21% equity interest in
Qingdao Huiju and the appointment of directors into the board of Qingdao Huiju, and Qingdao Huiju is entitled to get back the
cash, business license and seals from Beijing Huiju. Hence the above events shall have not any material adverse effect
on the Group’s investment in and receivable from Qingdao Huiju.
On September 4, 2017, the Company with two non-affiliated
companies, established a limited partnership, Wuhu Penghong Investment Center (Limited Partnership) ("Wuhu Penghong"),
in which the Company and the other two partners each invested US$30.6 million, US$91.8 million and US$3.1 million in cash, respectively,
to invest in real estate project. The other two partners hold substantive participating rights whereas the Company only exercises
significant influence, and therefore, accounted for its investment in Wuhu Penghong under the equity method.
On March 21, 2018, the Company acquired 50% equity
interest in Madison Developments Limited ("MDL"), which is developing a real estate project in London, England from ED
Jersey Limited, a non-affiliated company for a consideration of US$19.1 million. Based on the articles of association, the Company
cannot exercise control of MDL, but has the ability to exercise significant influence over MDL's operating and financial decisions
and accounts for it as an equity method investment.
In July 2019, the Company acquired 24% equity interest
in Suzhou Rongjingchen Real Estate Co., Ltd. ("Suzhou Rongjingchen"), which is developing a real estate project in Suzhou
city from Suzhou Kaijingsheng Real Estate Co., Ltd., a non-affiliated company, for a consideration of US$42.0 million. Based on
the articles of association, the Company cannot exercise control of Suzhou Rongjingchen, but has the ability to exercise significant
influence over Suzhou Rongjingchen's operating and financial decisions and accounted for it as an equity method investment.
As of December 31, 2019, the Group's investment in
the investees in the aggregate exceeded its proportionate share of the net assets of the equity method investee by nil (December
31, 2018: nil). This difference, if any, represents equity method goodwill and therefore, is not amortized. For the year ended
December 31, 2019, the Group recognized its share of loss from its equity method investments of US$5,416,471 (2017: loss of US$1,710,070;
2018: loss of US US$9,374,451). As of December 31, 2018 and 2019, there was no material impairment related to these investments.
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of
shares data)
Summarized combined financial information of the equity
method investees is as follows:
|
|
December 31,
2019
|
|
|
|
US$
|
|
|
|
(in thousands)
|
|
|
|
|
|
Current assets
|
|
|
1,413,713
|
|
Noncurrent assets
|
|
|
411,764
|
|
Current liabilities
|
|
|
499,078
|
|
Non-current liabilities
|
|
|
460,617
|
|
Non-controlling interest
|
|
|
5,778
|
|
Gross revenue
|
|
|
68,353
|
|
Gross profit
|
|
|
14,976
|
|
Loss from continuing operations
|
|
|
(5,928
|
)
|
Net loss
|
|
|
(10,691
|
)
|
Net loss attributable to the Company
|
|
|
(11,614
|
)
|
The above summarized financial
information represents the operating performance and financial position of the investees since they became equity method investees
of the Group.
|
9.
|
Acquisition of subsidiaries
|
2018 Acquisition Activitiy
On September 6, 2018, the Group's equity method investee,
Wuhu Penghua Tenth Investment Center (Limited Partnership) ("Wuhu Penghua"), repurchased all partnership interests from
all its partners except the Group for a consideration of US$146.6 million. As a result, the Company was the sole partner remaining.
Therefore, Wuhu Penghua and its subsidiaries Chengdu Renju and Chengdu Guohongteng Real Estate Co., Ltd. (collectively, the "Wuhu
Group") became wholly-owned by the Company.
This acquisition was consistent with the Group's strategy
to develop residential real estate markets in fast growth cities in China, and was accounted for under the acquisition method of
accounting with acquired assets and assumed liabilities recorded at their acquisition date fair values. A gain of US$4,384,563
was recognized as a result of the re-measurement of previously held equity interest in the Wuhu Group based on the acquisition-date
fair value and is presented as a component of other income. The goodwill recognized at the acquisition date amounting to US$534,697
is primarily as a result of the ASC 740 requirement to recognize a deferred tax liability, calculated as the difference between
the tax effect of the fair value of the acquired real estate property under development and its corresponding tax base. None of
the goodwill recognized is tax deductible.
The operational results of the Wuhu Group have been
included in the Group's consolidated financial statements since September 6, 2018 ("Acquisition Date").
The purchase price allocation for the acquisition is
primarily based on a valuation determined by the Group with the assistance of an independent third party valuation firm. The following
table summarizes the fair values of the assets acquired and liabilities assumed on Acquisition Date.
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of
shares data)
|
|
US$
|
|
|
|
|
|
Carrying amount of previously held equity interests
|
|
|
202,354,932
|
|
Remeasurement gain
|
|
|
4,384,563
|
|
Fair value of previously held equity interests(i)
|
|
|
206,739,495
|
|
Less: Goodwill
|
|
|
534,697
|
|
|
|
|
206,204,798
|
|
|
|
|
|
|
Fair value of net identifiable assets acquired:
|
|
|
|
|
Cash and cash equivalents
|
|
|
11,761,992
|
|
Real estate properties under development
|
|
|
538,393,230
|
|
Current assets
|
|
|
7,471,403
|
|
Current liabilities
|
|
|
(57,705,079
|
)
|
Deferred tax liabilities
|
|
|
(534,697
|
)
|
Long-term bank loan
|
|
|
(293,182,051
|
)
|
|
|
|
|
|
Net assets acquired
|
|
|
206,204,798
|
|
(i) The business combination was achieved without the
transfer of consideration. The difference between the fair value of previously held equity interest and the fair value of net identifiable
assets acquired was recognized as goodwill. As the Wuhu Group were private companies, the fair value of the Group's previously
held equity interest is estimated based on asset-based approach using significant unobservable inputs that market participants
would consider, which mainly include estimated revenue and estimated cost for the construction project.
The amount of revenue and net income of the Wuhu Group
included in the Group's consolidated statement of comprehensive income for the period from the Acquisition Date to December 31,
2018 are US$30,248,316 and US$6,710,751, respectively.
The pro forma results of operations for the acquisition
has not been presented because the revenue and earnings generated before the acquisition is immaterial.
2019 Acquisition Activity
In November 2019, the Group acquired Beijing Ruizhuo Xitou Development Co., Ltd. (“Xitou”), a related party, for a total consideration of US$16,486,299,
represents extinguishment of pre-existing receivable (Note 18). Xitou is primarily engaged in provision of online platform services
for real estate project financing purposes.
In November 2019, the Group acquired Beijing Ruizhuo Xichuang Technology
Development Co., Ltd. (“Xichuang”), a related party, for a total consideration of US$11,212,797, represents extinguishment
of pre-existing receivable (Note 18). Xichuang is primarily engaged in the provision of online platform services for sourcing,
sale and purchase of real estate properties.
In November 2019, the Group acquired Beijing I-Journey Science
and Technology Development Co,Ltd.("I-Journey"), a related party, for a total consideration of US$21,062,847, represents extinguishment
of pre-existing receivable (Note 18). I-journey is primarily engaged in the sale of household robots and provision of community
cloud services.
The acquisitions of Xitou, Xichuang and I-journey were in line
with the Group’s strategy to extend its business to provide real estate and property management related technology services.
The above acquisitions were accounted for under the acquisition method of accounting with acquired assets and assumed liabilities
recorded at their acquisition date fair values. The goodwill recognized upon the acquisitions amounting to US$6,624,594, US$5,159,916
and US$12,927,103 respectively is primarily as a result of the excess of the acquisition considerations over the respective fair
value of net identifiable assets acquired. The goodwill recognized in other non-current assets is attributable primarily to expected
synergies and the assembled workforce. The goodwill is not deductible for tax purposes. None of the goodwill recognized is tax
deductible.
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of
shares data)
The operational results of Xitou, Xichuang and I-journey
have been included in the Group's consolidated financial statements since November 30, 2019 ("Date of Acquisition").
The pro forma results of operations for the acquisitions have not been presented because the revenue and earnings generated before
the acquisitions is immaterial.
The purchase price allocation for the acquisitions is primarily based on a valuation determined
by the Group with the assistance of an independent third party valuation firm. The following table summarizes the fair values
of the assets acquired and liabilities assumed on Date of Acquisition.
|
|
Xinruifeng subgroup
|
|
|
Xinhujin subgroup
|
|
|
Xinzhihui subgroup
|
|
|
Total
|
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
Cash and cash equivalents
|
|
|
472,974
|
|
|
|
276,511
|
|
|
|
77,526
|
|
|
|
827,011
|
|
Intangible assets (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Technology
|
|
|
9,446,403
|
|
|
|
5,877,125
|
|
|
|
6,249,820
|
|
|
|
21,573,348
|
|
Trade mark
|
|
|
—
|
|
|
|
—
|
|
|
|
2,623,205
|
|
|
|
2,623,205
|
|
Other current assets
|
|
|
262,373
|
|
|
|
164,373
|
|
|
|
691,872
|
|
|
|
1,118,618
|
|
Deferred tax assets
|
|
|
1,057,527
|
|
|
|
1,170,995
|
|
|
|
658,831
|
|
|
|
2,887,353
|
|
Other non-current assets
|
|
|
29,935
|
|
|
|
14,176
|
|
|
|
43,115
|
|
|
|
87,226
|
|
Goodwill
|
|
|
6,624,594
|
|
|
|
5,159,916
|
|
|
|
12,927,103
|
|
|
|
24,711,613
|
|
Current liabilities
|
|
|
(269,349
|
)
|
|
|
(241,318
|
)
|
|
|
(1,499,623
|
)
|
|
|
(2,010,290
|
)
|
Deferred tax liabilities
|
|
|
(1,057,527
|
)
|
|
|
(1,170,995
|
)
|
|
|
(658,831
|
)
|
|
|
(2,887,353
|
)
|
Non-controlling interest
|
|
|
(80,631
|
)
|
|
|
(37,986
|
)
|
|
|
(50,171
|
)
|
|
|
(168,788
|
)
|
Total Consideration
|
|
|
16,486,299
|
|
|
|
11,212,797
|
|
|
|
21,062,847
|
|
|
|
48,761,943
|
|
|
(1)
|
Intangible assets acquired in 2019 have estimated useful lives between six and ten years.
|
|
(2)
|
Xinruifeng,
Xinhujin and Xinzhihui are parents of Xitou, Xichuang and I-journey, respectively.
|
|
10.
|
Short-term bank loans and other debt
|
Short-term bank loans and other debt represent amounts
due to various banks and financial institutions that are due on the dates indicated below. Short-term bank loans and other debt
at December 31, 2018 and 2019 consisted of the following:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2019
|
|
|
|
US$
|
|
|
US$
|
|
Loan from The Bank of East Asia
|
|
|
|
|
|
|
|
|
Due January 2, 2020, at 1.10% plus 1 month LIBOR
|
|
|
—
|
|
|
|
19,900,000
|
|
|
|
|
|
|
|
|
|
|
Loan from Henan Zhongyuan Microfinance Co., Ltd.
|
|
|
|
|
|
|
|
|
Due July 26, 2019, at 11.60% per annum
|
|
|
7,285,231
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Loan from Zhongyuan Aviation Finance Leasing Co., Ltd.
|
|
|
|
|
|
|
|
|
Due December 20 2020, at 10.00% per annum
|
|
|
—
|
|
|
|
11,467,562
|
|
|
|
|
|
|
|
|
|
|
Loan from Hua Xia Bank Co., Ltd.
|
|
|
|
|
|
|
|
|
Due May 30, 2020, at 6.5250% per annum
|
|
|
—
|
|
|
|
8,600,671
|
|
|
|
|
|
|
|
|
|
|
Loan from Shandong Rongyue Finance Leasing Co., Ltd.
|
|
|
|
|
|
|
|
|
Due December 24, 2020, at 5.00% per annum
|
|
|
—
|
|
|
|
4,300,335
|
|
|
|
|
|
|
|
|
|
|
Loan from Kunlun Trust Co., Ltd.
|
|
|
|
|
|
|
|
|
Due June 28, 2019, at 10.50% per annum
|
|
|
36,426,157
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Loan from Zhongyuan Commercial Factoring Co., Ltd.
|
|
|
|
|
|
|
|
|
Due January 30, 2020, at 10.00% per annum
|
|
|
—
|
|
|
|
28,668,902
|
|
|
|
|
|
|
|
|
|
|
Loan from Tianjin financial exchange center Co., Ltd. at 9.00% per annum
|
|
|
|
|
|
|
189,215
|
|
Loan from Tianjin financial exchange center Co., Ltd. at 8.50% per annum
|
|
|
|
|
|
|
51,604
|
|
Loan from Tianjin financial exchange center Co., Ltd. at 8.00% per annum
|
|
|
—
|
|
|
|
240,819
|
|
|
|
|
|
|
|
|
|
|
Total short-term bank loans and other debt
|
|
|
43,711,388
|
|
|
|
73,419,108
|
|
As of December 31, 2019, except when otherwise indicated,
the Group's short-term bank loans and other debt were all denominated in RMB and were mainly secured by the Group's real estate
properties held for lease with net book value of US$ 14,899,171 (December 31, 2018: nil), the real estate properties development
completed with net book value of US$ 10,168,195 (December 31, 2018: nil), and restricted cash of US$20,691,781 (December 31, 2018:nil).
The weighted average interest rate on short-term bank
loans and other debt as of December 31, 2019 was 8.33% (December 31, 2018: 10.68%).
Long-term bank loans as of December 31, 2018 and 2019
analyzed by final installment maturity dates consisted of the following:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2019
|
|
|
|
US$
|
|
|
US$
|
|
Loan from ICBC
|
|
|
|
|
|
|
|
|
Due December 26, 2021, at 6.175% per annum
|
|
|
116,560,788
|
|
|
|
66,890,284
|
|
Due December 22, 2021, at 6.175% per annum
|
|
|
58,284,765
|
|
|
|
33,448,009
|
|
Due December 30, 2021, at 6.60% per annum
|
|
|
53,619,303
|
|
|
|
30,770,333
|
|
Due December 22, 2021, at 9.80% per annum
|
|
|
58,281,851
|
|
|
|
33,448,009
|
|
Due July 23, 2022, at 4.75% per annum
|
|
|
—
|
|
|
|
14,334,451
|
|
|
|
|
286,746,707
|
|
|
|
178,891,086
|
|
Loan from China Guangfa Bank
|
|
|
|
|
|
|
|
|
Due July 17, 2021, at 6.175% per annum
|
|
|
—
|
|
|
|
18,048,508
|
|
Due October 20, 2019, at 6.4125% per annum
|
|
|
10,490,733
|
|
|
|
—
|
|
|
|
|
10,490,733
|
|
|
|
18,048,508
|
|
Loan from Bank of China
|
|
|
|
|
|
|
|
|
Due March 30, 2020, at 6.65% per annum
|
|
|
33,512,064
|
|
|
|
7,167,226
|
|
Due October 31, 2021 at 4.75% per annum
|
|
|
64,110,036
|
|
|
|
50,457,269
|
|
|
|
|
97,622,100
|
|
|
|
57,624,495
|
|
Loan from Bank of Beijing
|
|
|
|
|
|
|
|
|
Due February 14, 2020 at 4.75% per annum
|
|
|
42,810,934
|
|
|
|
32,372,065
|
|
|
|
|
|
|
|
|
|
|
Loan from The Bank of East Asia
|
|
|
|
|
|
|
|
|
Due June 1, 2019, at 1.10% plus 1 month LIBOR
|
|
|
9,675,654
|
|
|
|
—
|
|
Due June 5, 2019, at 1.10% plus 1 month LIBOR
|
|
|
10,000,000
|
|
|
|
—
|
|
Due August 15, 2019, at 1.10% plus 1 month LIBOR
|
|
|
20,000,000
|
|
|
|
—
|
|
Due August 30, 2019, at 1.10% plus 1 month LIBOR
|
|
|
9,700,000
|
|
|
|
—
|
|
Due September 19, 2019, at 1.10% plus 1 month LIBOR
|
|
|
2,220,000
|
|
|
|
—
|
|
Due January 9, 2020, at 1.10% plus 1 month LIBOR
|
|
|
3,178,000
|
|
|
|
3,178,000
|
|
Due June 2, 2019, at 1.10% plus 1 month LIBOR
|
|
|
34,421,617
|
|
|
|
—
|
|
Due September 27, 2019, at 1.10% plus 3 month LIBOR
|
|
|
24,294,636
|
|
|
|
—
|
|
Due June 4, 2021, at 1.10% plus 1 month LIBOR
|
|
|
—
|
|
|
|
22,500,000
|
|
Due June 6, 2021, at 1.10% plus 1 month LIBOR
|
|
|
—
|
|
|
|
30,000,000
|
|
Due August 20, 2021, at 1.10% plus 1 month LIBOR
|
|
|
—
|
|
|
|
19,170,000
|
|
Due September 27, 2021, at 1.10% plus 1 month LIBOR
|
|
|
—
|
|
|
|
9,100,000
|
|
Due October 20, 2021, at 1.10% plus 1 month LIBOR
|
|
|
—
|
|
|
|
2,100,000
|
|
Due October 27, 2021, at 1.10% plus 1 month LIBOR
|
|
|
—
|
|
|
|
17,570,000
|
|
|
|
|
113,489,907
|
|
|
|
103,618,000
|
|
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of
shares data)
Loan from Ping An Bank Co., Ltd.
|
|
|
|
|
|
|
|
|
Due May 31, 2021, at 6.8875% per annum
|
|
|
116,417,997
|
|
|
|
80,272,928
|
|
Due May 27, 2021, at 7.3625% per annum
|
|
|
14,570,463
|
|
|
|
9,890,771
|
|
Due March 27, 2022, at 6.9825% per annum
|
|
|
—
|
|
|
|
39,405,407
|
|
|
|
|
130,988,460
|
|
|
|
129,569,106
|
|
|
|
|
|
|
|
|
|
|
Loan from China Construction Bank
|
|
|
|
|
|
|
|
|
Due July 2, 2021, at 6.65% per annum
|
|
|
56,824,805
|
|
|
|
—
|
|
Due August 1, 2021, at 4.35% per annum
|
|
|
—
|
|
|
|
44,723,488
|
|
Due August 1, 2021, at 4.75% per annum
|
|
|
—
|
|
|
|
11,180,872
|
|
Due August 1, 2021, at 4.75% per annum
|
|
|
17,484,555
|
|
|
|
17,201,343
|
|
Due April 4, 2021, at 6.175% per annum
|
|
|
36,424,700
|
|
|
|
—
|
|
|
|
|
110,734,060
|
|
|
|
73,105,703
|
|
Loan from Bank of Minsheng
|
|
|
|
|
|
|
|
|
Due June 14, 2031, at 8.50% per annum
|
|
|
62,798,694
|
|
|
|
59,487,973
|
|
Due March 30, 2023 at 8.8825% per annum
|
|
|
291,394,685
|
|
|
|
286,402,339
|
|
|
|
|
354,193,379
|
|
|
|
345,890,312
|
|
Loan from Bank of Hengfeng
|
|
|
|
|
|
|
|
|
Due September 20, 2021, at 8.0009% per annum
|
|
|
73,580,837
|
|
|
|
65,150,082
|
|
|
|
|
|
|
|
|
|
|
Loan from Zheshang Bank Co., Ltd
|
|
|
|
|
|
|
|
|
Due September 21, 2021, at 7.60% per annum
|
|
|
29,286,630
|
|
|
|
17,344,686
|
|
|
|
|
|
|
|
|
|
|
Loan from Bank of Communications Co., Ltd
|
|
|
|
|
|
|
|
|
Due March 18, 2022, at 7.600% per annum
|
|
|
—
|
|
|
|
37,104,728
|
|
|
|
|
|
|
|
|
|
|
Loan from Bank of Zhengzhou Co., Ltd
|
|
|
|
|
|
|
|
|
Due September 26, 2021, at 7.000075% per annum
|
|
|
—
|
|
|
|
64,505,031
|
|
|
|
|
|
|
|
|
|
|
Loan from Bank of Huaxia Co., Ltd
|
|
|
|
|
|
|
|
|
Due December 27, 2021, at 5.08% per annum
|
|
|
—
|
|
|
|
11,610,908
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,249,943,747
|
|
|
|
1,134,834,710
|
|
Less: current portion of long-term bank loans
|
|
|
(529,904,807
|
)
|
|
|
(448,770,014
|
)
|
|
|
|
|
|
|
|
|
|
Total long-term bank loans
|
|
|
720,038,940
|
|
|
|
686,064,696
|
|
As of December 31, 2019, the contractual maturities
of these loans are as follows:
Year
|
|
Amount
|
|
|
|
US$
|
|
2020
|
|
|
448,770,014
|
|
2021
|
|
|
599,627,953
|
|
2022
|
|
|
37,269,574
|
|
2023
|
|
|
4,156,992
|
|
2024 and thereafter
|
|
|
45,010,177
|
|
Less: current portion of long-term bank loans
|
|
|
(448,770,014
|
)
|
|
|
|
|
|
Total: long-term bank loans
|
|
|
686,064,696
|
|
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of shares data)
As of December 31, 2019, except when otherwise indicated,
the Group's long term bank loans were all denominated in RMB and were mainly secured by the Group's real estate properties under
development with net book value of US$78,726,065 (December 31, 2018: US$30,727,630), land use rights with net book value of US$382,772,544
(December 31, 2018: US$462,352,750), the Group's real estate properties held for lease with net book value of US$144,272,409 (December
31, 2018: 123,781,349), the real estate properties development completed with net book value of US$457,032 (December 31, 2018:
nil),and restricted cash of US$116,152,060 (December 31, 2018:nil).
The interest rates of these bank loans are adjustable
based on the range of 100% to 206% of the PBOC prime rate. The weighted average interest rate on long-term bank loans as of December
31, 2019 was 6.94% (December 31, 2018: 7.16%).
As of December 31, 2018 and 2019, other long-term debt
analyzed by final installment maturity dates consisted of the following:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2019
|
|
|
|
US$
|
|
|
US$
|
|
Senior notes
|
|
|
|
|
|
|
|
|
November 2020 Senior Secured notes due on November 22, 2020 at 8.875%
|
|
|
295,673,796
|
|
|
|
296,897,742
|
|
August 2019 Senior Notes due on August 30, 2019 at 8.125%
|
|
|
286,741,749
|
|
|
|
—
|
|
February 2021 Senior notes due on February 28, 2021 at 7.75%
|
|
|
270,624,821
|
|
|
|
261,941,119
|
|
March 2020 Senior Secured Notes due on March 12, 2020 at 9.875%
|
|
|
197,226,325
|
|
|
|
123,055,415
|
|
October 2021 Senior Secured Notes due on October 16, 2021 at 14.20%
|
|
|
—
|
|
|
|
295,968,740
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds
|
|
|
|
|
|
|
|
|
Due December 28, 2020 at 8.20%
|
|
|
58,275,179
|
|
|
|
1,962,386
|
|
Due January 27, 2021 at 7.47%
|
|
|
43,709,787
|
|
|
|
8,213,641
|
|
Due March 14, 2021 at 7.09%
|
|
|
72,849,705
|
|
|
|
7,551,597
|
|
Due August 15, 2019 at 8.20%
|
|
|
63,404,057
|
|
|
|
—
|
|
Due April 7, 2020 at 8.20%
|
|
|
89,655,359
|
|
|
|
—
|
|
Due September 21, 2020 at 8.50%
|
|
|
28,998,553
|
|
|
|
21,947,434
|
|
Due April 1, 2024 at 8.40%
|
|
|
—
|
|
|
|
58,887,016
|
|
Due January 4, 2022 at 8.50%
|
|
|
—
|
|
|
|
650,673
|
|
|
|
|
|
|
|
|
|
|
Loan from Ping An Trust Co., Ltd
|
|
|
|
|
|
|
|
|
Due May 22, 2020 at 10.3192%
|
|
|
189,416,016
|
|
|
|
43,003,354
|
|
Due November 30, 2019 at 10.3192%
|
|
|
130,813,615
|
|
|
|
—
|
|
Due May 23, 2019 at 10.3192%
|
|
|
189,780,277
|
|
|
|
—
|
|
Due November 23, 2020 at 11.20%
|
|
|
—
|
|
|
|
200,682,320
|
|
Due May 22, 2021 at 15.00%
|
|
|
—
|
|
|
|
42,989,020
|
|
Due May 29, 2021 at 11.50%
|
|
|
—
|
|
|
|
85,863,364
|
|
Due April 26, 2021 at 11.50%
|
|
|
—
|
|
|
|
24,248,158
|
|
|
|
|
|
|
|
|
|
|
Loan from Guo Tou Tai Kang Trust Co., Ltd
|
|
|
|
|
|
|
|
|
Due October 30, 2019 at 9.30%
|
|
|
2,360,415
|
|
|
|
—
|
|
Due November 2, 2019 at 9.30%
|
|
|
26,780,511
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Kunlun Trust Co., Ltd
|
|
|
|
|
|
|
|
|
Due March 17, 2020 at 7.62%
|
|
|
21,855,694
|
|
|
|
21,501,677
|
|
|
|
|
|
|
|
|
|
|
Loan from Wanxiang Trust Co., Ltd
|
|
|
|
|
|
|
|
|
Due December 4, 2020 at 12.00%
|
|
|
1,427,905
|
|
|
|
—
|
|
Due April 30, 2021 at 12.00%
|
|
|
—
|
|
|
|
28,668,903
|
|
Due January 4, 2020 at 12.00%
|
|
|
—
|
|
|
|
12,929,675
|
|
Due July 18, 2020 at 12.00%
|
|
|
—
|
|
|
|
21,501,677
|
|
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of shares data)
Loan from China Huarong Asset Management Co., Ltd
|
|
|
|
|
|
|
|
|
Due November 27, 2020 at 11.50%
|
|
|
11,656,370
|
|
|
|
10,894,183
|
|
Due October 30, 2020 at 11.50%
|
|
|
40,951,099
|
|
|
|
28,095,525
|
|
Due November 8, 2021 at 12.00%
|
|
|
—
|
|
|
|
30,145,351
|
|
|
|
|
|
|
|
|
|
|
Loan from China Resources Investment Trust Co., Ltd
|
|
|
|
|
|
|
|
|
Due November 9, 2020 at 9.405%
|
|
|
50,996,620
|
|
|
|
42,286,632
|
|
|
|
|
|
|
|
|
|
|
Loan from Chang An International Trust Co., Ltd
|
|
|
|
|
|
|
|
|
Due December 10, 2023 at 9.00%
|
|
|
—
|
|
|
|
172,013,417
|
|
|
|
|
|
|
|
|
|
|
Loan from Henan Zhongyuan Microfinance Co., Ltd
|
|
|
|
|
|
|
|
|
Due July 23, 2021 at 11.60%
|
|
|
—
|
|
|
|
6,880,537
|
|
|
|
|
|
|
|
|
|
|
Loan from Kent EB-5 LLC
|
|
|
|
|
|
|
|
|
Due January 23, 2020 at 5.95%
|
|
|
9,500,000
|
|
|
|
9,500,000
|
|
Due April 30, 2020 at 5.95%
|
|
|
5,000,000
|
|
|
|
5,000,000
|
|
Due June 25, 2020 at 5.95%
|
|
|
5,000,000
|
|
|
|
5,000,000
|
|
Due August 4, 2020 at 5.95%
|
|
|
5,000,000
|
|
|
|
5,000,000
|
|
Due August 20, 2020 at 5.95%
|
|
|
5,000,000
|
|
|
|
5,000,000
|
|
Due October 1, 2020 at 5.95%
|
|
|
10,000,000
|
|
|
|
10,000,000
|
|
Due November 23, 2020 at 5.95%
|
|
|
10,000,000
|
|
|
|
10,000,000
|
|
Due March 15, 2021 at 5.95%
|
|
|
9,500,000
|
|
|
|
9,500,000
|
|
Due September 12, 2021 at 5.95%
|
|
|
500,000
|
|
|
|
500,000
|
|
|
|
|
|
|
|
|
|
|
Loan from Bank of Ozark
|
|
|
|
|
|
|
|
|
Due March 24, 2021 at 4.50% plus 1 month LIBOR
|
|
|
24,008,924
|
|
|
|
50,157,305
|
|
|
|
|
|
|
|
|
|
|
Loan from Bank Direct Capital Finance
|
|
|
|
|
|
|
|
|
Due November 1, 2020 at 5.5%
|
|
|
1,762,072
|
|
|
|
822,506
|
|
|
|
|
|
|
|
|
|
|
Loan from CMGT Lender 35 LLC
|
|
|
|
|
|
|
|
|
Due May 24, 2021 at 12.26%
|
|
|
—
|
|
|
|
18,660,737
|
|
|
|
|
|
|
|
|
|
|
Loan from 135-35 NORTHERN BLVD 1&2 LLC
|
|
|
|
|
|
|
|
|
Due May 1, 2021 at 8.5%
|
|
|
—
|
|
|
|
28,955,968
|
|
|
|
|
|
|
|
|
|
|
Total principal of other long-term debt
|
|
|
2,158,468,849
|
|
|
|
2,006,876,072
|
|
|
|
|
|
|
|
|
|
|
Less: current portion of other long-term debt
|
|
|
(1,118,013,649
|
)
|
|
|
(970,185,445
|
)
|
|
|
|
|
|
|
|
|
|
Total other long-term debt
|
|
|
1,040,455,200
|
|
|
|
1,036,690,627
|
|
The March 2020, November 2020, February 2021 and October
2021 Senior Secured Notes are senior secured pari passu obligations of the Company.
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of shares data)
As of December 31, 2019, the contractual maturities
of these debts are as follows:
Year
|
|
Amount
|
|
|
|
|
US$
|
|
2020
|
|
|
970,185,445
|
|
2021
|
|
|
989,429,149
|
|
2022
|
|
|
34,402,683
|
|
2023
|
|
|
12,858,795
|
|
Less: current portion of other long term debt
|
|
|
(970,185,445
|
)
|
|
|
|
|
|
Total: Other long-term debt
|
|
|
1,036,690,627
|
|
As of December 31, 2019, except when otherwise indicated
and the Senior Secured Notes, the Group's other long-term debt was all denominated in RMB and mainly secured by the Group's real
estate properties under development with net book value of US$1,445,969 (December 31, 2018: US$963,588), land use rights with net
book value of US$ 416,137,788 (December 31, 2018: US$584,008,103), real estate properties held for lease with net book value of
US$47,345,406 (December 31, 2018: US$51,648,281), and real estate properties development completed with net book value of US$50,301,375
(December 31, 2018: US$36,801,393).
August 2019 Senior Secured Notes
On August 30, 2016, the Company issued an aggregate
principal amount of US$300,000,000 of the August 2019 Senior Secured Notes. The August 2019 Senior Secured Notes bear interest
at 8.125% per annum payable semi-annually. Interest will be payable on February 28 and August 30 of each year, commencing February
28, 2017.
The effective interest rate of August 2019 Senior Secured
Notes is 9.06%.
The August 2019 Senior Secured Notes were issued pursuant
to an indenture, dated August 30, 2016, between the Company, the "Subsidiary Guarantors" identified below and Citicorp
International Limited, as trustee and collateral agent (the "August 2019 Indenture"). The Company's obligations under
the August 2019 Indenture and the August 2019 Senior Secured Notes have been guaranteed by certain of the Company's wholly-owned
subsidiaries, Xinyuan Real Estate, Ltd., Xinyuan International Property Investment Co., Ltd., Victory Good Development Ltd., South
Glory International Ltd., Elite Quest Holdings Ltd. and Xinyuan International (HK) Property Investment Co., Limited (the "Subsidiary
Guarantors") and will be guaranteed by such other future subsidiaries of the Company as is set forth in and in accordance
with the terms of the August 2019 Indenture. The Company's obligations under the August 2019 Indenture and the August 2019 Senior
Secured Notes are secured by a pledge of the capital stock of the Company's wholly-owned subsidiaries, Xinyuan Real Estate, Ltd.,
Xinyuan International Property Investment Co., Ltd., Victory Good Development Limited, South Glory International Limited and Elite
Quest Holdings Ltd.
At any time prior to August 30, 2019, the Company may
at its option redeem the August 2019 Senior Secured Notes, in whole but not in part, at a redemption price equal to 100.0% of the
principal amount of the August 2019 Senior Secured Notes plus the Applicable Premium as of, and accrued and unpaid interest, if
any, to (but not including) the redemption date. "Applicable Premium" means with respect to any August 2019 Senior Secured
Note at any redemption date, the greater of (i) 1.00% of the principal amount of such August 2019 Senior Secured Note and (ii)
the excess of (A) the present value at such redemption date of the principal amount of such August 2019 Senior Secured Note, plus
all required remaining scheduled interest payments due on such August 2019 Senior Secured Note through the maturity date of the
August 2019 Senior Secured Notes (but excluding accrued and unpaid interest to the redemption date), computed using a discount
rate equal to the Adjusted Treasury Rate (as defined in the August 2019 Indenture) plus 100 basis points, over (B) the principal
amount of such August 2019 Senior Secured Note on such redemption date.
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of shares data)
At any time prior to August 30, 2019, the Company may redeem up to 35% of
the aggregate principal amount of the August 2019 Senior Secured Notes with the net cash proceeds of one or more sales of our common
shares in certain equity offerings, within a specified period after the equity offering, at a redemption price of 108.125% of the
principal amount of the August 2019 Senior Secured Notes, plus accrued and unpaid interest, if any, to (but not including) the
redemption date, provided that at least 65% of the aggregate principal amount of the August 2019 Senior Secured Notes issued on
August 30, 2016 remain outstanding after each such redemption.
The Company has evaluated and determined that there
was no embedded derivative requiring bifurcation from the August 2019 Senior Secured Notes under the requirements of ASC 815. The
embedded redemption options and repurchase features did not qualify for derivative accounting because the embedded derivatives
were considered clearly and closely related to the characteristics of the August 2019 Secured Senior Notes.
The August 2019 Indenture, contains certain covenants
that, among others, restrict the Company's ability and the ability of the Company's Restricted Subsidiaries (as defined in the
August 2019 Indenture) to incur additional debt or to issue preferred stock, to make certain payments or investments, to pay dividends
or purchase or redeem capital stock, to sell assets (including limitations on the use of proceeds of asset sales), to grant liens
on the collateral securing the August 2019 Senior Secured Notes or other assets, to make certain other payments or to engage in
transactions with affiliates and holders of more than 10% of the Company's Common Shares, subject to certain qualifications and
exceptions and satisfaction, in certain circumstances of specified conditions, such as a Fixed Charge Coverage Ratio (as defined
in the August 2019 Indenture) of 2.50 to 1.0.
From August 31, 2018 to December 31, 2018, the Company
redeemed the August 2019 Senior Secured Notes for a total principal amount of US$11.9 million. The Company recognized gain on extinguishment
of debt amounting to US$511,919, consisting of the gain from the difference between repurchase price and principal amount of the
debt amounting to US$577,449 and the loss from unamortized deferred debt issuance costs amounting to US$65,530.
From January 1, 2019 to December 31, 2019, the Company
redeemed the August 2019 Senior Secured Notes for a total principal amount of US$288.1 million.
The Company recognized loss on extinguishment of debt amounting to US$1,111,583 in 2019, consisting of the loss from the difference
between repurchase price and principal amount of the debt amounting to US$125,165 and the loss from unamortized deferred debt issuance
costs amounting to US$986,418.
February 2021 Senior Secured Notes
On February 28, 2017, The Company issued an aggregate
principal amount of US$300,000,000 of the February 2021 Senior Secured Notes. The February 2021 Senior Secured Notes bear interest
at 7.75% per annum payable semi-annually. Interest will be payable on February 28 and August 28 of each year, commencing August
28, 2017. The February 2021 Senior Secured Notes have a four year term maturing on February 28, 2021.
The effective interest rate of February 2021 Senior
Secured Notes is 8.68%.
The February 2021 Senior Secured Notes were issued
pursuant to an indenture, dated February 28, 2017, between the Company, the "Subsidiary Guarantors" identified below
and Citicorp International Limited, as trustee and collateral agent (the "February 2021 Indenture"). The Company's obligations
under the February 2021 Indenture and the February 2021 Senior Secured Notes have been guaranteed by certain of the Company's wholly-owned
subsidiaries, Xinyuan Real Estate, Ltd., Xinyuan International Property Investment Co., Ltd., Victory Good Development Ltd., South
Glory International Ltd., Elite Quest Holdings Ltd. and Xinyuan International (HK) Property Investment Co., Limited (the "Subsidiary
Guarantors") and will be guaranteed by such other future subsidiaries of the Company as is set forth in and in accordance
with the terms of the February 2021 Indenture. The Company's obligations under the February 2021 Indenture and the February 2021
Senior Secured Notes are secured by a pledge of the capital stock of the Company's wholly-owned subsidiaries, Xinyuan Real Estate,
Ltd., Xinyuan International Property Investment Co., Ltd., Victory Good Development Limited, South Glory International Limited
and Elite Quest Holdings Ltd.
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of shares data)
At any time prior to February 28, 2021, the Company
may at its option redeem the February 2021 Senior Secured Notes, in whole but not in part, at a redemption price equal to 100.0%
of the principal amount of the February 2021 Senior Secured Notes plus the Applicable Premium as of, and accrued and unpaid interest,
if any, to (but not including) the redemption date. "Applicable Premium" means with respect to any February 2021 Senior
Secured Note at any redemption date, the greater of (i) 1.00% of the principal amount of such February 2021 Senior Secured Note
and (ii) the excess of (A) the present value at such redemption date of the principal amount of such February 2021 Senior Secured
Note, plus all required remaining scheduled interest payments due on such February 2021 Senior Secured Note through the maturity
date of the February 2021 Senior Secured Notes (but excluding accrued and unpaid interest to the redemption date), computed using
a discount rate equal to the Adjusted Treasury Rate (as defined in the February 2021 Indenture) plus 100 basis points, over (B)
the principal amount of such February 2021 Senior Secured Note on such redemption date.
At any time prior to February 28, 2021, the Company may redeem up to 35%
of the aggregate principal amount of the February 2021 Senior Secured Notes with the net cash proceeds of one or more sales of
our common shares in certain equity offerings, within a specified period after the equity offering, at a redemption price of 107.75%
of the principal amount of the February 2021 Senior Secured Notes, plus accrued and unpaid interest, if any, to (but not including)
the redemption date, provided that at least 65% of the aggregate principal amount of the February 2021 Senior Secured Notes issued
on February 28, 2017 remain outstanding after each such redemption.
The Company has evaluated and determined that there
was no embedded derivative requiring bifurcation from the February 2021 Senior Secured Notes under the requirements of ASC 815.
The embedded redemption options and repurchase features did not qualify for derivative accounting because the embedded derivatives
were considered clearly and closely related to the characteristics of the February 2021 Secured Senior Notes.
The February 2021 Indenture, contains certain covenants
that, among others, restrict the Company's ability and the ability of the Company's Restricted Subsidiaries (as defined in the
February 2021 Indenture) to incur additional debt or to issue preferred stock, to make certain payments or investments, to pay
dividends or purchase or redeem capital stock, to sell assets (including limitations on the use of proceeds of asset sales), to
grant liens on the collateral securing the February 2021 Senior Secured Notes or other assets, to make certain other payments or
to engage in transactions with affiliates and holders of more than 10% of the Company's Common Shares, subject to certain qualifications
and exceptions and satisfaction, in certain circumstances of specified conditions, such as a Fixed Charge Coverage Ratio (as defined
in the February 2021 Indenture) of 2.0 to 1.0.
From August 31, 2018 to December 31, 2018, the Company
redeemed the February 2021 Senior Secured Notes for a total principal amount of US$25.4 million. The Company recognized gain on
extinguishment of debt amounting to US$2,642,710, consisting of the gain from the difference between repurchase price and principal
amount of the debt amounting to US$3,043,135 and the loss from unamortized deferred debt issuance costs amounting to US$400,425.
From January 1, 2019 to December 31, 2019, the Company
redeemed the February 2021 Senior Secured Notes for a total principal amount of US$10.6 million.
The Company recognized gain on extinguishment of debt amounting to US$1,126,617, consisting of the gain from the difference between
repurchase price and principal amount of the debt amounting to US$1,246,256 and the loss from unamortized deferred debt issuance
costs amounting to US$119,639.
November 2020 Senior Secured Notes
On November 22, 2017 and December 1, 2017, the Company
issued an aggregate principal amount of US$200,000,000 and US$100,000,000 of the November 2020 Senior Secured Notes, respectively.
The November 2020 Senior Secured Notes bear interest at 8.875% per annum payable semi-annually. Interest will be payable on May
22 and November 22 of each year, commencing May 22, 2018. The November 2020 Senior Secured Notes have a three year term maturing
on November 22, 2020.
The effective interest rate of November 2020 Senior
Secured Notes is 9.95%.
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of shares data)
The November 2020 Senior Secured Notes were issued
pursuant to an indenture, dated November 22, 2017, between the Company, the "Subsidiary Guarantors" identified below
and Citicorp International Limited, as trustee and collateral agent (the "November 2020 Indenture"). The Company's obligations
under the November 2020 Indenture and the November 2020 Senior Secured Notes have been guaranteed by certain of the Company's wholly-owned
subsidiaries, Xinyuan Real Estate, Ltd., Xinyuan International Property Investment Co., Ltd., Victory Good Development Ltd., South
Glory International Ltd., Elite Quest Holdings Ltd. and Xinyuan International (HK) Property Investment Co., Limited (the "Subsidiary
Guarantors") and will be guaranteed by such other future subsidiaries of the Company as is set forth in and in accordance
with the terms of the November 2020 Indenture. The Company's obligations under the November 2020 Indenture and the November 2020
Senior Secured Notes are secured by a pledge of the capital stock of the Company's wholly-owned subsidiaries, Xinyuan Real Estate,
Ltd., Xinyuan International Property Investment Co., Ltd., Victory Good Development Limited, South Glory International Limited
and Elite Quest Holdings Ltd.
At any time prior to November 22, 2020, the Company
may at its option redeem the November 2020 Senior Secured Notes, in whole but not in part, at a redemption price equal to 100.0%
of the principal amount of the November 2020 Senior Secured Notes plus the Applicable Premium as of, and accrued and unpaid interest,
if any, to (but not including) the redemption date. "Applicable Premium" means with respect to any November 2020 Senior
Secured Note at any redemption date, the greater of (i) 1.00% of the principal amount of such November 2020 Senior Secured Note
and (ii) the excess of (A) the present value at such redemption date of the principal amount of such November 2020 Senior Secured
Note, plus all required remaining scheduled interest payments due on such November 2020 Senior Secured Note through the maturity
date of the November 2020 Senior Secured Notes (but excluding accrued and unpaid interest to the redemption date), computed using
a discount rate equal to the Adjusted Treasury Rate (as defined in the November 2020 Indenture) plus 100 basis points, over (B)
the principal amount of such November 2020 Senior Secured Note on such redemption date.
At any time prior to November 22, 2020, the Company
may redeem up to 35% of the aggregate principal amount of the November 2020 Senior Secured Notes with the net cash proceeds of
one or more sales of our common shares in certain equity offerings, within a specified period after the equity offering, at a redemption
price of 108.875% of the principal amount of the November 2020 Senior Secured Notes, plus accrued and unpaid interest, if any,
to (but not including) the redemption date, provided that at least 65% of the aggregate principal amount of the November 2020 Senior
Secured Notes issued on November 22, 2017 remain outstanding after each such redemption.
The Company has evaluated and determined that there
was no embedded derivative requiring bifurcation from the November 2020 Senior Secured Notes under the requirements of ASC 815.
The embedded redemption options and repurchase features did not qualify for derivative accounting because the embedded derivatives
were considered clearly and closely related to the characteristics of the November 2020 Secured Senior Notes.
The November 2020 Indenture, contains certain covenants
that, among others, restrict the Company's ability and the ability of the Company's Restricted Subsidiaries (as defined in the
November 2020 Indenture) to incur additional debt or to issue preferred stock, to make certain payments or investments, to pay
dividends or purchase or redeem capital stock, to sell assets (including limitations on the use of proceeds of asset sales), to
grant liens on the collateral securing the November 2020 Senior Secured Notes or other assets, to make certain other payments or
to engage in transactions with affiliates and holders of more than 10% of the Company's Common Shares, subject to certain qualifications
and exceptions and satisfaction, in certain circumstances of specified conditions, such as a Fixed Charge Coverage Ratio (as defined
in the November 2020 Indenture) of 2.0 to 1.0.
From January 1, 2019 to December 31, 2019, the
Company redeemed the November 2020 Senior Secured Notes for a total principal amount of US$0.9 million. The Company
recognized gain on extinguishment of debt amounting to US$38,136, consisting of the gain from the difference between
repurchase price and principal amount of the debt amounting to US$47,200 and the loss from unamortized deferred debt issuance
costs amounting to US$9,064.
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of shares data)
March 2020 Senior Secured Notes
On March 19, 2018, the Company issued an aggregate
principal amount of US$200,000,000 of the March 2020 Senior Secured Notes. The March 2020 Senior Secured Notes bear interest at
9.875% per annum payable semi-annually. Interest will be payable on March 19 and September 19 of each year, commencing September
19, 2018. The March 2020 Senior Secured Notes have a two year term maturing on March 19, 2020.
The effective interest rate of March 2020 Senior Secured
Notes is 11.34%.
The March 2020 Senior Secured Notes were issued pursuant
to an indenture, dated March 19, 2017, between the Company, the "Subsidiary Guarantors" identified below and Citicorp
International Limited, as trustee and collateral agent (the "March 2020 Indenture"). The Company's obligations under
the March 2020 Indenture and the March 2020 Senior Secured Notes have been guaranteed by certain of the Company's wholly-owned
subsidiaries, Xinyuan Real Estate, Ltd., Xinyuan International Property Investment Co., Ltd., Victory Good Development Ltd., South
Glory International Ltd., Elite Quest Holdings Ltd. and Xinyuan International (HK) Property Investment Co., Limited (the "Subsidiary
Guarantors") and will be guaranteed by such other future subsidiaries of the Company as is set forth in and in accordance
with the terms of the March 2020 Indenture. The Company's obligations under the March 2020 Indenture and the March 2020 Senior
Secured Notes are secured by a pledge of the capital stock of the Company's wholly-owned subsidiaries, Xinyuan Real Estate, Ltd.,
Xinyuan International Property Investment Co., Ltd., Victory Good Development Limited, South Glory International Limited and Elite
Quest Holdings Ltd.
At any time prior to March 19, 2020, the Company may
at its option redeem the March 2020 Senior Secured Notes, in whole but not in part, at a redemption price equal to 100.0% of the
principal amount of the March 2020 Senior Secured Notes plus the Applicable Premium as of, and accrued and unpaid interest, if
any, to (but not including) the redemption date. "Applicable Premium" means with respect to any March 2020 Senior Secured
Note at any redemption date, the greater of (i) 1.00% of the principal amount of such March 2020 Senior Secured Note and (ii) the
excess of (A) the present value at such redemption date of the principal amount of such March 2020 Senior Secured Note, plus all
required remaining scheduled interest payments due on such March 2020 Senior Secured Note through the maturity date of the March
2020 Senior Secured Notes (but excluding accrued and unpaid interest to the redemption date), computed using a discount rate equal
to the Adjusted Treasury Rate (as defined in the March 2020 Indenture) plus 100 basis points, over (B) the principal amount of
such March 2020 Senior Secured Note on such redemption date.
At any time prior to March 19, 2020, the Company may
redeem up to 35% of the aggregate principal amount of the March 2020 Senior Secured Notes with the net cash proceeds of one or
more sales of our common shares in certain equity offerings, within a specified period after the equity offering, at a redemption
price of 109.875% of the principal amount of the March 2020 Senior Secured Notes, plus accrued and unpaid interest, if any, to
(but not including) the redemption date, provided that at least 65% of the aggregate principal amount of the March 2020 Senior
Secured Notes issued on March 19, 2018 remain outstanding after each such redemption.
The Company has evaluated and determined that there
was no embedded derivative requiring bifurcation from the March 2020 Senior Secured Notes under the requirements of ASC 815. The
embedded redemption options and repurchase features did not qualify for derivative accounting because the embedded derivatives
were considered clearly and closely related to the characteristics of the March 2020 Senior Secured Notes.
The March 2020 Indenture, contains certain covenants
that, among others, restrict the Company's ability and the ability of the Company's Restricted Subsidiaries (as defined in the
March 2020 Indenture) to incur additional debt or to issue preferred stock, to make certain payments or investments, to pay dividends
or purchase or redeem capital stock, to sell assets (including limitations on the use of proceeds of asset sales), to grant liens
on the collateral securing the March 2020 Senior Secured Notes or other assets, to make certain other payments or to engage in
transactions with affiliates and holders of more than 10% of the Company's Common Shares, subject to certain qualifications and
exceptions and satisfaction, in certain circumstances of specified conditions, such as a Fixed Charge Coverage Ratio (as defined
in the March 2020 Indenture) of 2.0 to 1.0.
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of shares data)
From January 1, 2019 to December 31, 2019, the Company redeemed the March 2020 Senior Secured Notes for a total principal
amount of US$75.7 million. The Company recognized loss on extinguishment of debt amounting to US$563,941, mainly consisting
of the loss from unamortized deferred debt issuance costs amounting to US$563,941.
October 2021 Senior Secured Notes
On April 15, 2019 and April 26, 2019, the Company issued
Senior Notes with an aggregate principal amount of US$300,000,000 due on October 15, 2021 (the “October 2021 Notes”).
The October 2021 Notes bear interest at 14.2% per annum, payable semi-annually. Interest will be payable on April 15 and October
15 of each year, commencing October 15, 2019. The October 2021 Notes have a two and a half year (thirty month) term maturing on
October 15, 2021.
The October 2021 Notes were issued pursuant to an indenture,
dated as of April 15, 2019, between the Company, the Subsidiary Guarantors (as defined below) and Citicorp International Limited,
as trustee and shared security agent (the “October 2021 Indenture”). The Company’s obligations under the October
2021 Indenture and the October 2021 Notes are guaranteed initially by certain of the Company's wholly-owned subsidiaries, Xinyuan
Real Estate, Ltd., Xinyuan International Property Investment Co., Ltd., Victory Good Development Limited, South Glory International
Limited, Elite Quest Holdings Limited and Xinyuan International (HK) Property Investment Co., Limited (the “Subsidiary Guarantors”)
and will be guaranteed by such other future subsidiaries of the Company as is set forth in and in accordance with the terms of
the October 2021 Indenture. The Company’s obligations under the October 2021 Indenture and the October 2021 Notes are secured
by a pledge of the capital stock of the Company's wholly-owned subsidiaries, Xinyuan Real Estate, Ltd., Xinyuan International Property
Investment Co., Ltd., Victory Good Development Limited, South Glory International Limited and Elite Quest Holdings Limited.
At any time prior to October 15, 2021, the Company
may at its option redeem the October 2021 Notes, in whole but not in part, at a redemption price equal to 100.0% of the principal
amount of the October 2021 Notes plus the Applicable Premium as of, and accrued and unpaid interest, if any, to (but not including)
the redemption date. "Applicable Premium" means with respect to any October 2021 Note at any redemption date, the greater
of (i) 1.00% of the principal amount of such Note and (ii) the excess of (A) the present value at such redemption date of the principal
amount of such Note, plus all required remaining scheduled interest payments due on such Note through the maturity date of the
October 2021 Notes (but excluding accrued and unpaid interest to the redemption date), computed using a discount rate equal to
the Adjusted Treasury Rate (as defined in the Indenture) plus 100 basis points, over (B) the principal amount of such Note on such
redemption date.
At any time prior to October 15, 2021, the Company
may redeem up to 35% of the aggregate principal amount of the October 2021 Notes with the net cash proceeds of one or more sales
of the Company's common shares in certain equity offerings, within a specified period after the equity offering, at a redemption
price of 114.2% the principal amount of the October 2021 Notes, plus accrued and unpaid interest, if any, to (but not including)
the redemption date, provided that at least 65% of the aggregate principal amount of the October 2021 Notes issued on April 15,
2019 remain outstanding after each such redemption and any such redemption takes place within 60 days after the closing of the
related equity offering.
Following a Change of Control (as defined in the October
2021 Indenture), the Company must make an offer to purchase all outstanding October 2021 Notes at a purchase price equal to 101.0%
of the principal amount thereof plus accrued and unpaid interest, if any, to (but not including) the offer to purchase payment date.
The October 2021 Indenture contains certain covenants
that, among others, restrict the Company's ability and the ability of the Company's Restricted Subsidiaries (as defined in the
October 2021 Indenture) to incur additional debt or to issue preferred stock, to make certain payments or investments, to pay dividends
or purchase or redeem capital stock, sell assets, or make certain other payment, subject to certain qualifications and exceptions
and satisfaction, in certain circumstances of specified conditions, such as a Fixed Charge Coverage Ratio (as defined in the October
2021 Indenture) of 2.0 to 1.0.
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of shares data)
From January 1, 2019 to December 31, 2019, the Company
redeemed the October 2021 Senior Secured Notes for a total principal amount of US$2.5 million. The Company recognized loss on extinguishment
of debt amounting to US$25,240, consisting of the gain from the difference between repurchase price and principal amount of the
debt amounting to US$52,500 and the loss from unamortized deferred debt issuance costs amounting to US$77,740.
Onshore Corporate Bonds
On December 28, 2015, Xinyuan China issued the first
tranche of the onshore corporate bonds with an aggregate principal amount of RMB 1 billion (US$154 million) due on December 28,
2020 (the "First Tranche Bonds") at a coupon rate of 7.5% per annum payable annually. Interest is payable on December
28 of each year, commencing December 28, 2016.
From November 19, 2018 to November 30, 2018, the Company
redeemed the First Tranche Bonds for a total principal amount of RMB 0.6 billion (US$87 million). The Company recognized loss on
extinguishment of debt amounting to US$6,518,487, consisting of both the debt redemption price amounting to US$6,509,574 and unamortized
deferred debt issuance costs amounting to US$8,913.
From August 14, 2019 to November 12, 2019, the Company
redeemed the First Tranche Bonds for a total principal amount of RMB 0.4 billion (US$57 million). The Company recognized loss on
extinguishment of debt amounting to US$1,484, consisting of both the debt redemption price amounting to US$175 and unamortized
deferred debt issuance costs amounting to US$1,659.
On January 27, 2016, Xinyuan China issued the second
tranche of the onshore corporate bonds with an aggregate principal amount of RMB 0.7 billion (US$107 million) due on January 27,
2021 (the "Second Tranche Bonds") at a coupon rate of 7.47% per annum payable annually. Interest is payable on January
27 of each year, commencing January 27, 2017.
From December 14, 2018 to December 21, 2018, the Company
redeemed the Second Tranche Bonds for a total principal amount of RMB 0.4 billion (US$58 million). The Company recognized loss
on extinguishment of debt amounting to US$4,775,500, consisting of both the debt redemption price amounting to US$4,773,284 and
unamortized deferred debt issuance costs amounting to US$2,216.
From June 21, 2019 to August 12, 2019, the Company
redeemed the Second Tranche Bonds for a total principal amount of RMB90 million (US$13 million). The Company recognized gain on
extinguishment of debt amounting to US$127,864, consisting of both the debt redemption price amounting to US$128,426 and unamortized
deferred debt issuance costs amounting to US$562.
On March 14, 2016, Xinyuan China issued the third tranche
of the onshore corporate bonds with an aggregate principal amount of RMB 0.5 billion (US$77 million) due on March 14, 2021 (the
"Third Tranche Bonds") at a coupon rate of 7.09% per annum payable annually. Interest is payable on March 14 of each
year, commencing March 14, 2017.
From March 14, 2019 to August 14, 2019, the
Company redeemed the Third Tranche Bonds for a total principal amount of RMB497.9 million (US$71 million). The Company
recognized loss on extinguishment of debt amounting to US$743,034, consisting of both the debt redemption price amounting to
US$740,934 and unamortized deferred debt issuance costs amounting to US$2,100.
The above three tranches of onshore corporate bonds
were issued at par. Upon the third anniversary of the issuance of each tranche of bonds, Xinyuan China may adjust the applicable
coupon rate and the holders have the right within a specified time period to require the Company to repurchase the bonds following
the Company's announcement of whether it intends to adjust the interest rate. Upon the third anniversary on December 28, 2017,
the first tranche of the onshore corporate bonds have been reclassified to current liabilities. Upon the third anniversary on January
27, 2018, the second tranche of the onshore corporate bonds have been reclassified to current liabilities. Upon the third anniversary
on March 14, 2018, the third tranche of the onshore corporate bonds have been reclassified to current liabilities. On December
28, 2018, Xinyuan China adjusted the annual interest rate of the First Tranche Bonds to 8.2% from 7.5%.
On August 15, 2016, Xinyuan China issued a new tranche
of onshore corporate bonds with an aggregate principal amount of RMB 1.5 billion (US$216 million) due on August 15, 2019 (the "New
Tranche") at a coupon rate of 7.5% per annum payable annually. Interest is payable on August 15 of each year, commencing August
15, 2017.
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of shares data)
On April 7, 2017, Xinyuan China issued a new second
tranche of onshore corporate bonds with an aggregate principal amount of RMB 1.13 billion (US$173 million) due on April 7, 2020
(the "2017 Tranche") at a coupon rate of 8.2% per annum payable annually. Interest is payable on April 7 of each year,
commencing April 7, 2018.
Upon the first anniversary of the issuance of the New
Tranche and 2017 Tranche, respectively, Xinyuan China may adjust the applicable coupon rate and the holders have the right within
a specified time period to require the Company to repurchase the bonds following the Company's announcement of whether it intends
to adjust the interest rate. On August 15, 2017, Xinyuan China adjusted the annual interest rate of the New
Tranche Bonds to 8.2% from 7.5%. The annual interest rate of the 2017 Tranche Bonds remained unchanged, at 8.2%.
From August 1, 2018 to August 3, 2018, the Company
redeemed the New Tranche for a total principal amount of RMB 1.05 billion (US$153 million). The Company recognized loss on extinguishment
of debt amounting to US$5,989,710, consisting of both the debt redemption price amounting to US$5,710,866 and unamortized deferred
debt issuance costs amounting to US$278,844.
On August 15, 2019, the Company redeemed the New Tranche for a total principal amount of RMB 0.45 billion (US$64 million).
On March 20, 2018, the Company redeemed the 2017 Tranche
for a total principal amount of RMB 0.5 billion (US$73 million). The Company recognized loss on extinguishment of debt amounting
to US$3,782,353, consisting of both the debt redemption price amounting to US$3,494,557 and unamortized deferred debt issuance
costs amounting to US$287,796.
On April 7, 2019, the Company redeemed the remaining
amount of RMB 0.63 billion (US$90 million) 2017 Tranche, recognizing loss on extinguishment of debt amounting to US$1,535,132
in 2019, consisting of the debt redemption price amounting to US$1,535,132.
On September 20, 2018, Xinyuan China issued a new tranche
of onshore corporate bonds with an aggregate principal amount of RMB 600 million (US$87 million) due on September 21, 2020 (the
"2018 Tranche") at a coupon rate of 8.5% per annum payable annually. Interest is payable on September 21 of each year,
commencing September 21, 2019. The above tranches of onshore corporate bonds were issued at par.
On September 21, 2018, the Company redeemed the 2018
Tranche for a total principal amount of RMB 400 million (US$58 million). The Company recognized loss on extinguishment of debt
amounting to US$3,599,937, consisting of both the debt redemption price amounting to US$3,291,086 and unamortized deferred debt
issuance costs amounting to US$308,851.
From August 26, 2019 to September 23, 2019, the Company
redeemed the 2018 Tranche for a total principal amount of RMB76 million (US$11 million). The Company recognized loss on extinguishment
of debt amounting to US$20,958, consisting of unamortized deferred debt issuance costs amounting to US$20,958.
On January 4, 2019, Xinyuan (China) Real Estate, Ltd.
issued a new tranche of the onshore corporate bonds with an aggregate principal amount of RMB600 million (US$87 million) due on
January 4, 2022 (the “2019 Tranche”) at a coupon rate of 8.5% per annum payable annually. Interest is payable on January
4 of each year, commencing January 4, 2020.
From January 4, 2019 to June 21, 2019, the
Company redeemed the 2019 Tranche for a total principal amount of RMB591 million (US$85 million). The Company recognized loss
on extinguishment of debt amounting to US$1,894,262 in 2019, consisting of both the debt redemption price amounting to
US$1,428,945 and unamortized deferred debt issuance costs amounting to US$465,317.
On April 1, 2019, Xinyuan (China) Real Estate, Ltd.
issued another new tranche of the onshore corporate bonds with an aggregate principal amount of RMB 980 million (US$146 million)
due on April 1, 2024 (the “2019 First Tranche Bonds”) at a coupon rate of 8.4% per annum payable annually. Interest
is payable on April 1 of each year, commencing April 1, 2020.
From April 1, 2019 to June 21, 2019, the Company redeemed
the 2019 First Tranche Bonds for a total principal amount of RMB637 million (US$91 million). The Company recognized loss on extinguishment
of debt amounting to US$3,977,493 in 2019, consisting of both the debt redemption price amounting to US$3,494,668 and unamortized
deferred debt issuance costs amounting to US$482,825.
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of shares data)
Lessee
The Group has operating and finance leases, which primarily
consist of corporate aircraft, office space and equipment. The Group’s leases include options to extend the lease term. The
Group’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. The Group
has operating leases for office and dormitory in the United States and China. The leases have remaining lease terms of up to 2
years.
Lease recorded on the consolidated balance sheets are
summarized as follows:
|
|
December 31,
2019
|
|
|
|
US$
|
|
|
|
|
|
Lease Assets
|
|
|
|
|
Finance lease ROU assets
|
|
|
|
|
Property and equipment, net
|
|
|
22,285,997
|
|
Real estate properties held for lease, net
|
|
|
7,020,033
|
|
Total
|
|
|
29,306,030
|
|
Operating lease ROU assets
|
|
|
11,801,491
|
|
|
|
|
|
|
Lease Liabilities
|
|
|
|
|
Current
|
|
|
|
|
Current portion of finance lease
|
|
|
6,409,827
|
|
Current portion of operating lease
|
|
|
4,873,897
|
|
Total
|
|
|
11,283,724
|
|
Non-current
|
|
|
|
|
Finance lease, net of current portion
|
|
|
3,839,456
|
|
Operating lease, net of current portion
|
|
|
6,348,249
|
|
Total
|
|
|
10,187,705
|
|
The components of lease expenses
recognized as follows:
|
|
Year ended
December 31,
|
|
|
|
2019
|
|
|
|
US$
|
|
Operating lease cost:
|
|
|
|
|
Operating lease cost
|
|
|
6,480,093
|
|
Short-term lease cost
|
|
|
2,612,901
|
|
Finance lease cost:
|
|
|
|
|
Amortization of ROU assets
|
|
|
2,465,268
|
|
Interest on the lease liabilities
|
|
|
1,019,758
|
|
|
|
|
|
|
Total lease cost
|
|
|
12,578,020
|
|
For the years ended December 31, 2017 and 2018, the Group recorded operating lease expenses of US$5,132,393 and US$9,614,639,
respectively.
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of shares data)
Supplemental cash flow information
related to leases was as follows:
|
|
Year ended
December 31,
|
|
|
|
2019
|
|
|
|
US$
|
|
|
|
|
|
Operating cash flows for operating leases
|
|
|
6,275,565
|
|
Operating cash flows for finance leases
|
|
|
1,393,198
|
|
Financing cash flows for finance leases
|
|
|
6,135,547
|
|
|
|
|
|
|
|
|
|
|
|
Maturities of lease liabilities
are as follows:
|
|
December 31, 2019
|
|
|
|
Finance Leases
|
|
|
Operating Leases
|
|
|
|
US$
|
|
|
US$
|
|
|
|
|
|
|
|
|
Year ending December 31, 2020
|
|
|
7,511,008
|
|
|
|
6,470,913
|
|
Year ending December 31, 2021
|
|
|
4,059,224
|
|
|
|
4,443,336
|
|
Year ending December 31, 2022
|
|
|
—
|
|
|
|
1,007,535
|
|
Year ending December 31, 2023
|
|
|
—
|
|
|
|
294,239
|
|
Total lease payments
|
|
|
11,570,232
|
|
|
|
12,216,023
|
|
Less: imputed interest
|
|
|
1,320,949
|
|
|
|
993,877
|
|
Present value of lease liabilities
|
|
|
10,249,283
|
|
|
|
11,222,146
|
|
Other supplemental information
related to lease term and discount rate is summarized below:
|
|
December 31,
|
|
|
|
2019
|
|
|
|
|
|
Weighted-average remaining lease term (years)
|
|
|
|
|
Operating leases
|
|
|
2.32
|
|
Finance leases
|
|
|
1.63
|
|
Weighted-average discount rate
|
|
|
|
|
Operating leases
|
|
|
4.35
|
%
|
Finance leases
|
|
|
8.05
|
%
|
Advances for real estate properties comprise of sales
proceeds received from customers for the pre-sale of residential units in the PRC. Advances for real estate properties are typically
funded up to 40% - 80% by mortgage loans made by banks to the customers. The Group holds certain cash balances in restricted cash
accounts at the relevant banks (Note 2 (f)). The Group, in return, has a right to withhold transfer of title to the customer until
outstanding amounts are fully settled.
|
|
December 31,
2018
|
|
|
December 31,
2019
|
|
|
|
US$
|
|
|
US$
|
|
Advances for real estate properties
|
|
|
3,218,686,349
|
|
|
|
2,616,487,072
|
|
Add: increase in revenue recognized in excess of amounts received from customers
|
|
|
32,408,393
|
|
|
|
25,665,783
|
|
Less: recognized as progress billings (Note 5)
|
|
|
(1,329,243,487
|
)
|
|
|
(1,536,054,208
|
)
|
|
|
|
|
|
|
|
|
|
Customer deposits (Note 2(h))
|
|
|
1,921,851,255
|
|
|
|
1,106,098,647
|
|
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of shares data)
(a)
|
Corporate income tax ("CIT")
|
Under the current law of the Cayman Islands, the Company
is not subject to income tax and withholding tax.
The Company's PRC subsidiaries are subject to income
tax at the statutory rate of 25% in accordance to the PRC corporate income tax laws and regulations. Further, under the same tax
laws and regulations, dividends paid by PRC enterprises out of profits earned post-2007 to non-PRC tax resident investors are subject
to PRC dividend withholding tax of 10%. A lower withholding tax rate may be applied based on applicable tax treaty with certain
jurisdictions.
The Company's HK subsidiaries are subject to income
tax at the statutory rate of 16.5% in accordance to the HK profits tax laws and regulations. The Company did not make any provisions
for Hong Kong Profits Tax as there were no assessable profits arising in or derived from Hong Kong for any of the periods presented.
Under the Hong Kong tax law, the Company's HK subsidiaries are exempted from income tax on its foreign-derived income and there
are no withholding taxes in Hong Kong on remittance of dividends.
The Company's US subsidiaries are subject to income
tax at the effective rate of approximately 33% in accordance with US corporate income tax laws and regulations, dividends and interests
paid by US enterprises to non-US tax resident enterprises are subject to US withholding tax of 30%.
Income before income tax expenses consists of:
|
|
Year ended December 31,
|
|
|
|
2017
|
|
|
2018
|
|
|
2019
|
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
PRC
|
|
|
275,898,007
|
|
|
|
355,674,888
|
|
|
|
355,606,696
|
|
Non PRC
|
|
|
(82,669,476
|
)
|
|
|
(105,275,621
|
)
|
|
|
(122,099,522
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
193,228,531
|
|
|
|
250,399,267
|
|
|
|
233,507,174
|
|
Income tax expenses for the years ended December 31,
2017, 2018 and 2019 are summarized as follows:
|
|
Year ended December 31,
|
|
|
|
2017
|
|
|
2018
|
|
|
2019
|
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
CIT tax expense
|
|
|
103,302,037
|
|
|
|
141,399,866
|
|
|
|
133,862,272
|
|
Land Appreciation Tax ("LAT") expense
|
|
|
40,203,748
|
|
|
|
62,996,403
|
|
|
|
68,631,338
|
|
Deferred tax benefit
|
|
|
(30,388,659
|
)
|
|
|
(59,949,022
|
)
|
|
|
(52,015,238
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
113,117,126
|
|
|
|
144,447,247
|
|
|
|
150,478,372
|
|
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of shares data)
The Group's income tax expense differs from the tax
expense computed by applying the PRC statutory CIT rate of 25% for the years ended December 31, 2017, 2018 and 2019, are as follows:
|
|
Year ended December 31,
|
|
|
|
2017
|
|
|
2018
|
|
|
2019
|
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
CIT at rate of 25%
|
|
|
48,307,133
|
|
|
|
62,599,817
|
|
|
|
58,376,794
|
|
Tax effect of non-deductible expenses
|
|
|
3,641,665
|
|
|
|
5,799,761
|
|
|
|
8,867,037
|
|
LAT expense
|
|
|
40,203,748
|
|
|
|
62,996,403
|
|
|
|
68,631,338
|
|
CIT benefit of LAT
|
|
|
(10,050,937
|
)
|
|
|
(15,749,101
|
)
|
|
|
(17,157,834
|
)
|
Changes in valuation allowance
|
|
|
3,180,741
|
|
|
|
(491,075
|
)
|
|
|
23,073,210
|
|
International rate differences
|
|
|
10,149,331
|
|
|
|
18,224,012
|
|
|
|
17,351,758
|
|
Dividend and interest withholding taxes
|
|
|
18,877,500
|
|
|
|
15,403,663
|
|
|
|
(3,816,800
|
)
|
Adjustment of estimated income tax accruals
|
|
|
(954,552
|
)
|
|
|
(3,952,396
|
)
|
|
|
(4,285,329
|
)
|
Others
|
|
|
(237,503
|
)
|
|
|
(383,837
|
)
|
|
|
(561,802
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
113,117,126
|
|
|
|
144,447,247
|
|
|
|
150,478,372
|
|
(b)
|
Unrecognized tax benefit
|
The following table summarizes the activities related
to the Group's unrecognized tax benefits:
|
|
2017
|
|
|
2018
|
|
|
2019
|
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
Balance at January 1
|
|
|
20,491,988
|
|
|
|
31,231,376
|
|
|
|
45,939,234
|
|
Additions for tax positions of current year
|
|
|
10,813,497
|
|
|
|
15,500,052
|
|
|
|
14,547,590
|
|
Reclassification from prior year tax payable
|
|
|
—
|
|
|
|
—
|
|
|
|
13,118,260
|
|
Movement in current year due to foreign exchange rate fluctuation
|
|
|
2,001
|
|
|
|
—
|
|
|
|
—
|
|
Reductions for tax positions of prior years
|
|
|
(76,110
|
)
|
|
|
—
|
|
|
|
—
|
|
Reduction due to company liquidation
|
|
|
—
|
|
|
|
(792,194
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31
|
|
|
31,231,376
|
|
|
|
45,939,234
|
|
|
|
73,605,084
|
|
The movement in the liability for unrecognized tax
benefits of US$10,813,497 in 2017 was due to deemed interest income from subsidiaries of the Company during the year. The movement
in the liability for unrecognized tax losses of US$2,001 was due to the fluctuation of US$/RMB exchange rate, and therefore was
recorded as other comprehensive income arising from the foreign currency translation. The remaining change of US$76,110 was recognized
due to the availability for taxation deductions in 2017.
The movement in the liability for unrecognized tax
benefits of US$15,500,052 in 2018 was due to deemed interest income from subsidiaries of the Company during the year. The change
of US$792,194 was recognized mainly due to the liquidation of a company.
The movement in the liability for unrecognized tax benefits in 2019 included an amount of US$12,713,235 and related late payment interests of US$1,834,355 which was due to deemed interest income
from subsidiaries of the Company during the year. Reclassification from
prior year tax payable included an amount of US$12,793,498 and related late payment interests of US$324,762, which was due
to uncertain tax position in respect of investment loss deduction claimed in the 2018 tax return filed in 2019.
As of December 31, 2018 and 2019, unrecognized tax
benefits of nil and US$12,793,498, respectively, if ultimately recognized, will impact the effective tax rate. The Group anticipates
new unrecognized tax benefits, related to tax positions similar to those giving rise to its existing unrecognized tax benefits,
to originate after December 31, 2019. It is possible that the amount of uncertain tax positions will change in the next twelve
months, however, an estimate of the range of the possible outcomes cannot be made at this time.
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of shares data)
The Group's income tax returns for fiscal year 2009
through fiscal year 2019 remain open to potential examination. In addition, local tax authorities may exercise broad discretion
in applying the tax law, thus potentially exposing the subsidiaries to audits of tax years outside the general statute of limitations.
LAT is applicable at progressive tax rates ranging
from 30% to 60% on the appreciation of land values, with an exemption provided for the sales of ordinary residential properties
if the appreciation values do not exceed certain thresholds specified in the relevant tax laws.
For all periods presented, the Group has made provision
for LAT with respect to properties sold up to the respective reporting date in accordance with the requirements set forth in the
relevant PRC tax laws and regulations.
The tax effects of temporary differences that give
rise to the Group's deferred tax assets and liabilities as of December 31, 2018 and 2019 are as follows:
|
|
December 31,
2018
|
|
|
December 31,
2019
|
|
|
|
US$
|
|
|
US$
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Tax loss carried forward
|
|
|
42,185,810
|
|
|
|
50,163,293
|
|
Accruals and provisions
|
|
|
48,850,991
|
|
|
|
62,936,343
|
|
Capitalized expenses
|
|
|
26,796,716
|
|
|
|
50,288,336
|
|
Revenue recognition at a point in time less tax paid under deemed profit method
|
|
|
130,498,661
|
|
|
|
127,927,710
|
|
Revenue recognition of real estate lease income on a straight-line basis
|
|
|
14,269,520
|
|
|
|
17,164,019
|
|
Deemed interest expense
|
|
|
43,266,604
|
|
|
|
55,979,839
|
|
Valuation allowance
|
|
|
(5,941,941
|
)
|
|
|
(28,022,499
|
)
|
Operating lease liability
|
|
|
—
|
|
|
|
2,805,537
|
|
Others
|
|
|
—
|
|
|
|
418,310
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
299,926,361
|
|
|
|
339,660,888
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Revenue recognition over time
|
|
|
(77,968,759
|
)
|
|
|
(84,241,946
|
)
|
Real estate properties accelerated cost deduction
|
|
|
(1,212,993
|
)
|
|
|
(1,193,345
|
)
|
Taxable temporary differences arising from asset acquisitions
|
|
|
(307,747,731
|
)
|
|
|
(280,540,093
|
)
|
Dividend and interest withholding taxes
|
|
|
(52,991,279
|
)
|
|
|
(49,174,479
|
)
|
Operating lease right-of-use assets
|
|
|
—
|
|
|
|
(2,950,373
|
)
|
Others
|
|
|
(61,732
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
(439,982,494
|
)
|
|
|
(418,100,236
|
)
|
Certain of the Company's PRC subsidiaries have PRC
tax net operating loss carry forwards of US$173.4 million (2018: US$159.9 million) which will expire in one to ten years, if unutilized.
Losses incurred in the U.S. amounting to US$10.3 million (2018: US$1.5 million) can be carried forward for 20 years.
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of shares data)
During 2018 and 2019, the Company has considered its
operational funding needs, future development initiatives and its dividend distribution plan and is permanently reinvesting all
but US$374.4 million and US$491.7 million of its PRC subsidiaries earnings as at December 31, 2018 and 2019 respectively. Accordingly,
the Company accrued deferred income tax liabilities of US$37.4 million and US$49.2 million for the withholding tax liability associated
with the distribution of retained earnings that are not permanently reinvested as at December 31, 2018 and 2019, respectively.
As of December 31, 2018 and 2019, the total amount of undistributed earnings from the Company's PRC subsidiaries that are considered
to be permanently reinvested were US$227.2 million and US$283.7 million, and the related unrecognized deferred tax liabilities
were approximately US$22.7 million and US$28.4 million, respectively. The Company's remaining subsidiaries do not have retained
earnings for all the periods presented.
In assessing the ability to realize the deferred tax
assets, the Group has considered whether it is more likely than not that some portion or all of the deferred tax assets will not
be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. Accordingly, the Group recorded valuation allowances amounting
US$5,941,941 and US$28,022,499 as of December 31, 2018 and 2019, respectively.
|
16.
|
Share-based compensation
|
As of December 31, 2019, the Company primarily has
three share-based compensation plans under which awards may be granted to both employees and non-employees, namely, the 2007 Long
Term Incentive Plan (the "2007 Plan"), 2015 Long Term Incentive Plan (the "2015 Plan"), and 2014 Restricted Stock Unit Plan (the
"2014 RSU Plan"). On 31 January 2019, Cayman Property Management Service (Cayman) Ltd., a subsidiary of the Company, operates
a restricted share award scheme (the “Scheme”). On September 28, 2019, the Company approved the employee stock option
plan of Xinchuang Technology Co. Ltd. ("Xinchuang Technology"). Compensation cost of US$5,621,588 (2017: US$4,894,478, 2018: US$3,382,628)
was recorded in general and administrative expenses with a corresponding credit to additional paid-in capital in the year ended
December 31, 2019. The compensation cost is primarily regarded as a permanent difference for income tax purposes as relevant
equity awards were mainly granted by the Company and a subsidiary, which are registered in the Cayman Islands, a tax-free
jurisdiction. Hence, no tax benefit was recognized upon the recognition of compensation cost. The Company has a policy of using
authorized shares in the existing pool to satisfy any future exercise of share options and shares repurchased held by a third
party trustee to satisfy the RSUs granted under the 2014 RSU Plan.
2007 Plan
In November 2007, the Company adopted the 2007 Plan
which provides for the grant of options, restricted shares, restricted stock units, stock appreciation rights and other stock-based
awards to purchase its common shares. The maximum aggregate number of common shares which may be issued pursuant to all awards,
including options, is 10 million common shares, subject to adjustment to account for changes in the capitalization of the Company.
Under the 2007 Plan, the Company granted share options
with service conditions to purchase common shares to employees, at an exercise price ranging from US$1.085 to US$1.81 per option.
These options have a weighted average grant date fair value of US$0.36 ~ US$0.61 per option and the total expected compensation
cost has considered the expected forfeitures. These options generally have vesting periods based on length of service of 36 months
and will expire no later than 2025.
2015 Plan
In June 2015, the Company approved the 2015 Plan to
provide grant of options to purchase shares of company stock with maximum aggregate number of 20 million common shares, subject
to adjustment to account for changes in the capitalization of the Company.
On July 1, 2015, under the 2015 Plan, the Company granted
share options with service conditions to purchase up to 6,574,600 common shares to twenty-two employees, at an exercise price of
US$1.71 per share. These options have a weighted average grant date fair value of US$0.48 per option and a total expected compensation
cost, net of expected forfeitures, of US$3,165,867. These options have vesting periods based on length of service of 34 months
and will expire no later than July 1, 2025.
On July 29, 2015, under the 2015 Plan, the Company
granted share options with service conditions to purchase up to 81,600 common shares to one employee, at an exercise price of US$1.71
per share. These options have a weighted average grant date fair value of US$0.42 per option and a total expected compensation
cost, net of expected forfeitures, of US$34,294. These options have vesting periods based on length of service of 33 months and
will expire no later than July 29, 2025.
No options were granted during the years ended December
31, 2018 and 2019, for 2007 Plan and 2015 Plan.
Assumptions
The fair value of each option is estimated on the date
of grant using the Dividend Adjusted Black-Scholes option-pricing model that uses the assumptions noted below.
|
|
|
Options
Granted in
2015
Under the
2007 Plan
|
|
|
Options
Granted in
2015
Under the
2015 Plan
|
|
Average risk-free rate of return
|
|
|
|
1.82-1.92%
|
|
|
|
1.57-1.92%
|
|
Expected term
|
|
|
|
6 Years
|
|
|
|
6 Years
|
|
Volatility rate
|
|
|
|
46.3-55.2%
|
|
|
|
55.0-55.9%
|
|
Dividend yield
|
|
|
|
5%
|
|
|
|
5%
|
|
The risk-free rate for periods within the expected
life of the option is based on the implied yield rates of U.S treasury yield curve in effect at the time of grant. The expected
life of options represents the period of time the granted options are expected to be outstanding. The Company had limited historical
exercise data. Therefore, the expected life was estimated as the average of the contractual term and the vesting period. The dividend
yield was based on the Company's dividend distribution plan. The expected volatility was based on the historical daily stock price
of the Company, annualized.
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of shares data)
Share Option Activity
As of January 1, 2019, all options granted under 2007
plan were fully vested. The following table is a summary of the Company's share option activity under the 2007 Plan (in US$, except
options):
Options Under the 2007 Plan
|
|
Number of
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Remaining
Contractual
Life (Years)
|
|
|
Aggregate
Intrinsic Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, January 1, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.21 (exercise price)
|
|
|
12,738
|
|
|
|
1.21
|
|
|
|
1.95
|
|
|
|
32,991
|
|
1.085 (exercise price)
|
|
|
100,000
|
|
|
|
1.085
|
|
|
|
2.50
|
|
|
|
271,500
|
|
1.64 (exercise price)
|
|
|
100,000
|
|
|
|
1.64
|
|
|
|
3.87
|
|
|
|
216,000
|
|
1.21 (exercise price)
|
|
|
39,400
|
|
|
|
1.21
|
|
|
|
5.50
|
|
|
|
102,046
|
|
1.81(exercise price)
|
|
|
68,000
|
|
|
|
1.81
|
|
|
|
6.85
|
|
|
|
135,320
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.085 (exercise price)
|
|
|
40,000
|
|
|
|
1.085
|
|
|
|
—
|
|
|
|
38,893
|
|
1.81 (exercise price)
|
|
|
68,000
|
|
|
|
1.81
|
|
|
|
—
|
|
|
|
32,116
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding and Exercisable, December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.21 (exercise price)
|
|
|
12,738
|
|
|
|
1.21
|
|
|
|
0.95
|
|
|
|
8,662
|
|
1.085 (exercise price)
|
|
|
60,000
|
|
|
|
1.085
|
|
|
|
1.50
|
|
|
|
48,300
|
|
1.64 (exercise price)
|
|
|
100,000
|
|
|
|
1.64
|
|
|
|
2.87
|
|
|
|
25,000
|
|
1.21 (exercise price)
|
|
|
39,400
|
|
|
|
1.21
|
|
|
|
4.50
|
|
|
|
26,792
|
|
The aggregate intrinsic value in the table above represents
the total intrinsic value (the aggregate difference between the Company's closing stock price of US$1.89 per common share as of
December 31, 2019 and the exercise price for in-the-money options) that would have been received by the option holders if all in-the-money
options had been exercised on December 31, 2019. As of December 31, 2019, there was no unrecognized compensation cost related to
non-vested share-based compensation arrangements granted to employees, under the 2007 Plan. Total fair value of options vested
during the year ended December 31, 2017, 2018 and 2019 was US$40,703, US$33,919 and nil, respectively.
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of shares data)
As of January
1, 2019, all options granted under 2015 plan were fully vested, with no option exercised or forfeited during 2019. And
there was no new grant during the year ended December 31, 2019. The following table is a summary of the Company's share option
activity under the 2015 Plan (in US$, except options):
Options Under the 2015 Plan
|
|
Number of
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Remaining
Contractual
Life (Years)
|
|
|
Aggregate
Intrinsic Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, January 1, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.71 (exercise price)
|
|
|
2,796,734
|
|
|
|
1.71
|
|
|
|
6.50
|
|
|
|
5,845,173
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding and Exercisable, December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.71 (exercise price)
|
|
|
2,796,734
|
|
|
|
1.71
|
|
|
|
5.50
|
|
|
|
5,789,239
|
|
The aggregate intrinsic value in the table above represents
the total intrinsic value (the aggregate difference between the Company's closing stock price of US$1.89 per common share as of
December 31, 2019 and the exercise price for in-the-money options) that would have been received by the option holders if all in-the-money
options had been exercised on December 31, 2019. As of December 31, 2019, there was no unrecognized compensation cost related to
non-vested share-based compensation arrangements granted to employees, under the 2015 Plan. Total fair value of options vested
during the year ended December 31, 2017, 2018 and 2019 was US$769,798, US$228,534 and nil, respectively.
2014 RSU Plan
On May 23, 2014, the Board of Directors approved the
2014 RSU Plan, which is administered by the Compensation Committee of the Board of Directors. The 2014 RSU Plan provides for discretionary
grants of restricted stock units, or RSUs, to or for the benefit of participating employees. The maximum number of common shares
that may be delivered to 2014 RSU Plan participants in connection with RSUs granted under the 2014 RSU Plan is 10,000,000, subject
to adjustment if the Company's outstanding common shares are increased, decreased, changed into or exchanged for a different number
or kind of shares or securities of the Company through a reorganization, recapitalization, reclassification, stock dividend, stock
split, reverse stock split or other similar transaction.
On May 23, 2014, the Company established a trust that
is governed by a third party trustee and deposited US$7,042,725 into the trust. The trustee used the funds to acquire 4,234,884
common shares in the open market. Repurchased shares were granted to certain employees and awards vest ratably over a three year
service vesting period. The aggregate fair value of the restricted shares granted at the grant date shall be recognized as compensation
expense using the straight-line method.
On April 10, 2015, under the 2014 RSU Plan, the Company
deposited US$3,259,998 into the trust. The trustee used the funds to acquire 2,076,964 common shares from the open market. The
awards vest ratably over a three year service vesting period. The aggregate fair value of the restricted shares granted at the
grant date shall be recognized as compensation expense using the straight-line method.
On April 18, 2016, under the 2014 RSU Plan, the Company
deposited US$4,003,999 into the trust. The trustee used the funds to acquire 1,614,220 common shares from the open market. The
awards vest ratably over a three year service vesting period. The aggregate fair value of the restricted shares granted at the
grant date shall be recognized as compensation expense using the straight-line method.
On
July 27, 2017, under the 2014 RSU Plan, the Company deposited US$3,485,952 into the trust. The trustee has not used the funds
to acquire any common shares from the open market as of December 31, 2017. The awards vest ratably over a three year service vesting
period. The aggregate fair value of the restricted shares granted at the grant date shall be recognized as compensation expense
using the straight-line method. The trustee has used the funds to acquire 1,356,584 common shares from the open market
as of December 31, 2018.
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of shares data)
On July 30, 2018, under the 2014 RSU Plan, the Company deposited US$3,976,660
into the trust. The trustee has used the funds to acquire 1,732,466 common shares from the open market as of December 31, 2018.
The awards vest ratably over a three-year service vesting period. The aggregate fair value of the restricted shares granted at
the grant date shall be recognized as compensation expense using the straight-line method.
On August 30, 2019, under the 2014 RSU Plan, the Company
deposited US$2,912,539 into the trust. The trustee has used the funds to acquire 1,438,076 common shares from the open market as
of December 31, 2019. The awards vest ratably over a three-year service vesting period. The aggregate fair value of the restricted
shares granted at the grant date shall be recognized as compensation expense using the straight-line method.
The weighted average grant-date fair value of restricted
shares granted during the years ended December 31, 2017, 2018 and 2019 was US$2.68, US$2.21 and US$2.12, respectively, which was
derived from the fair value of the underlying ordinary shares.
Other awards
On September 28, 2019, the Board of Directors of the Company approved the employee stock option plan of Xinchuang Technology
Co., Ltd. (“Xinchuang Technology”), a subsidiary of the Company. Under the plan, the Company reserved 150 million
shares, representing 30% of Xinchuang Technology’s issued capital for purpose of providing share option awards to the
Company’s senior management and employees. In November 2019, the Company granted a total 100 million share options to
certain employees of the Group with an exercise price of US$0.14 (RMB 1). The options become vested in 5 tranches subject
to achievement of certain performance conditions as follows: (i) 5% on the grant date with no performance condition; (ii)
5% for each of the first, second, third anniversary of the grant date, respectively; and (iii) the remaining 80% shall vest
upon the completion of the initial public offering of Xinchuang. The total fair value of the share options granted in October
2019 is US$3.5 million, which shall be recognized as compensation expense using the accelerated method. The fair value is
determined by an external valuer using the discounted cash flow method to determine the underlying equity fair value of Xinchuang
Technology. Key assumptions, such as the discount rate, cash flow projections and the discount for lack of marketability,
are determined by the Group with best estimates.
As of December 31, 2019, there were no shares expired and the Group recognized
expense relating to the options is immaterial (2018: nil, 2017: nil) in profit or loss during the period.
Xinyuan Property Management Service (Cayman) Ltd.,
a subsidiary of the Company, operates a restricted share award scheme (the “Scheme”) for the purpose of providing incentives
and rewards to eligible participants (the “Participants”) who contribute to the success of its operations. The Participants
of the Scheme include its directors and senior executives. The Scheme was adopted by its board on 31 January 2019 (the “Adoption
Date”). Pursuant to the Scheme, an award of 56,250 restricted shares (subdivided into 56,250,000 restricted shares in August
2019), representing 15% of its share capital, was granted to the Participants with a total exercise price at an aggregate consideration
of US$1,204,094 (RMB8,400,000). The considerations were fully settled in cash upon the issuance of restricted shares. And the restricted
shares vest in three tranches of 2%, 18% and 80% on 1 January 2020, 1 January 2021 and 1 January 2022, respectively, in accordance
with certain vesting conditions, that is, performance condition based on the completion of IPO which requires recognition on an
accelerated basis.
On June 14, 2019, Mr. Zhang Lizhou (one of the participants)
resigned as an executive director. Upon the resignation of Mr. Zhang Lizhou, the Company repurchased the 18,750 shares granted
to him at a consideration of US$401,365 (RMB2,800,000) which was equal to the amount paid by Mr. Zhang Lizhou to the Company at
the issuance date. The remaining settled aggregate consideration of US$802,729 (RMB5,600,000) according to the Scheme was recognized
as liability because the restricted shares will be repurchased by the Company at the original amount paid by participants upon
the termination of employment.
The aggregate fair value of the restricted shares granted at the grant date amounting to US$4,931,051
(RMB34,400,000) are recognized as compensation expense using the accelerated method. The fair value is determined by an external
valuer using the discounted cash flow method to determine the underlying equity fair value of Xinyuan Property Management Service
(Cayman) Ltd. Key assumptions, such as the discount rate, cash flow projections and the discount for lack of marketability, are
determined by the Group with best estimates.
As of December 31, 2019, there were
no shares vested, expired and the Group recognized expense relating to the Scheme of US$1,762,927 (RMB12,298,534) (2018: nil,
2017: nil) in profit or loss during the period.
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of shares data)
|
17.
|
Other payables and accrued liabilities
|
The components of other payables and accrued liabilities
are as follows:
|
|
December 31,
2018
|
|
|
December 31,
2019
|
|
|
|
US$
|
|
|
US$
|
|
Contract deposit
|
|
|
107,480,079
|
|
|
|
98,280,724
|
|
Accrued expenses
|
|
|
51,306,223
|
|
|
|
47,003,084
|
|
Debt extinguishment costs
|
|
|
13,761,966
|
|
|
|
11,665,069
|
|
Deed tax and maintenance fund withheld for customers
|
|
|
9,998,534
|
|
|
|
8,272,296
|
|
Bidding deposit
|
|
|
3,723,584
|
|
|
|
4,213,479
|
|
Welfare payable
|
|
|
1,893,635
|
|
|
|
1,480,963
|
|
Other tax payable
|
|
|
14,786,612
|
|
|
|
26,734,901
|
|
Accrued aircraft operating expense
|
|
|
1,415,369
|
|
|
|
1,654,945
|
|
Accrued interest expense
|
|
|
47,214,392
|
|
|
|
38,893,375
|
|
Purchase consideration payable for asset acquisitions and business combinations
|
|
|
75,565,148
|
|
|
|
66,868,333
|
|
Others
|
|
|
13,961,958
|
|
|
|
18,096,825
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
341,107,500
|
|
|
|
323,163,994
|
|
|
18.
|
Related party and employee transactions
|
(a)
|
Amounts due from related parties
|
|
|
December 31,
2018
|
|
|
December 31,
2019
|
|
|
|
US$
|
|
|
US$
|
|
Current:
|
|
|
|
|
|
|
|
|
Starry Sky
|
|
|
8,052,075
|
|
|
|
—
|
|
I-journey
|
|
|
16,366,841
|
|
|
|
—
|
|
Xitou
|
|
|
14,494,710
|
|
|
|
—
|
|
Xichuang
|
|
|
7,539,604
|
|
|
|
—
|
|
Qingdao Huiju
|
|
|
61,392,033
|
|
|
|
84,455,456
|
|
Henan Hongguang Olympic Real Estate Co., Ltd.
|
|
|
51,340,375
|
|
|
|
84,031,006
|
|
Madison Development Limited
|
|
|
22,988,260
|
|
|
|
—
|
|
Suzhou Wanzhuo's non-controlling interest holders
|
|
|
27,201,258
|
|
|
|
—
|
|
Taicang Pengchi's non-controlling interest holders
|
|
|
5,630,819
|
|
|
|
—
|
|
Xinzheng Meihang Network Technology Co., Ltd.
|
|
|
—
|
|
|
|
22,578,925
|
|
Others
|
|
|
1,178,230
|
|
|
|
9,692,236
|
|
|
|
|
|
|
|
|
|
|
Total current amounts due from related party
|
|
|
216,184,205
|
|
|
|
200,757,623
|
|
|
|
|
|
|
|
|
|
|
Non current:
|
|
|
|
|
|
|
|
|
Xinzheng Meihang Network Technology Co., Ltd.
|
|
|
26,122,186
|
|
|
|
—
|
|
Madison Development Limited
|
|
|
—
|
|
|
|
27,739,567
|
|
Suzhou Wanzhuo's non-controlling interest holders
|
|
|
—
|
|
|
|
18,856,638
|
|
Taicang Pengchi's non-controlling interest holders
|
|
|
—
|
|
|
|
24,624,693
|
|
Suzhou Yefang's non-controlling interest holders
|
|
|
—
|
|
|
|
11,466,128
|
|
|
|
|
|
|
|
|
|
|
Total non-current amounts due from related party
|
|
|
26,122,186
|
|
|
|
82,687,026
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
242,306,391
|
|
|
|
283,444,649
|
|
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of shares data)
As of December 31, 2018, the Company advanced US$7,903,416
of working capital funds to Starry Sky. Of the amount advanced, US$1,100,070 was in the form of unsecured interest bearing loans,
which has no fixed payment terms and bears interest at 10%. Accrued interest amounted to US$148,659 as of December 31, 2018. The
remaining advances are unsecured and bear no interest. As of December 31, 2019, the Company reclassified advances to long-term
investment. On June 6, 2019 the Group and Nanjing Starry Sky (the other shareholder
of Starry Sky) agreed to convert the advance into capital contribution.
As of December 31, 2018, the Group advanced US$36,699,899 of working capital funds to I-journey, Xitou and Xichuang, without
any fixed payments terms. As of December 31, 2018, US$18,410,797 was in the form of unsecured interest bearing loans, which
bears interest from 10% to 12%. Accrued interest amounted to US$1,701,256. The remaining advances are unsecured and bear no
interest. During 2019, the Group completed its acquisitions of I-journey, Xitou and Xichuang for a total consideration of
US$48,761,943, which is settled by the outstanding advances as of the acquisition date (Note 9). Certain senior management
members became non-controlling shareholders of I-journey, Xitou and Xichang upon the completion of the acquisition by a total
cash contribution of US$168,430.
As of December 31, 2018 and December 31, 2019, the
balances due from Qingdao Huiju, the Company’s equity method investee, are related to advances for operational needs without
any fixed payment terms. This balance is unsecured, bears no interest, and is expected to be repaid in one year.
Henan Hongguang Olympic Real Estate Co., Ltd. ("Henan
Hongguang") is the non-controlling shareholder of Henan Renxin (Note1), one of the Company's subsidiaries. As of December
31, 2019, the balance due from Henan Hongguang is related to advances for operational needs without any fixed payment terms. This
balance is unsecured, bears no interest, and is expected to be repaid in one year.
Xinzheng Meihang Network Technology Co., Ltd. ("Meihang")
is the non-controlling shareholder of Zhengzhou Hangmei Technology Development Co., Ltd. ("Zhengzhou Hangmei"), one of
the Company's subsidiaries. As of December 31, 2018, and December 31, 2019, the balances due from Meihang are US$22,944,780 and
US$22,578,925, respectively, which have a three year payment terms, and bear interest at 11.5%. In 2019, the Company received interest
amounted to US$5,716,045. Accrued interest amounted to US$3,177,406 and nil as of December 31, 2018 and December 31, 2019, respectively.
As of December 31, 2019, the balance due from Madison
Development Limited, an equity method investee, amounting to US$21,055,073 is related to advances for operational needs. This balance
is unsecured, bears interest at 15%, and has no fixed repayment term. Accrued interest amounted to US$6,684,494 as of December
31, 2019. This balance is expected to be repaid over one year.
On September 12, 2017, the Company sold 80% of its
equity interest in Suzhou Wanzhuo to four non-affiliated passive investors for an aggregate cash consideration of US$23,687,327.
Pursuant to the updated articles of association, the Company still exercises control over the relevant principal activities of
Suzhou Wanzhuo and therefore, continues to consolidate it in its financial statements. As of December 31, 2019, the balances due
from the non-controlling interest holders amounting to US$18,856,638 are related to advances for working capital funds. The balances
are in the form of an unsecured interest bearing loan, which has no fixed payment terms, and bears interest at 4.75%. Accrued interest
is immaterial as of December 31, 2019. This balance is expected to be repaid over one year.
On December 1, 2017, the Company together with seven
other non-affiliated companies acquired 100% of Taicang Pengchi for an aggregate cash consideration of US$28,836,311. The Company
accounted for the acquisition of Taicang Pengchi as an asset acquisition because the only asset of Taicang Pengchi is the land.
Pursuant to the articles of association, the Company exercises control over the relevant significant activities of Taicang Pengchi
and therefore, consolidates it in its financial statements. As of December 31, 2019, the balance of due from the non-controlling
interest holders amounting to US$24,624,693 are related to advances for working capital funds. This balance is unsecured, bears
no interest, and is expected to be repaid over one year.
As of December 31, 2019, the balance due from Suzhou
Yefang amounting to US$11,466,128 is related to advances for working capital funds. This balance is unsecured, bears no interest,
and is expected to be repaid over one year.
In evaluating the collectability of the amounts due
from related parties balance, the Group considers many factors, including the related parties' repayment history and their credit-worthiness.
An allowance for doubtful accounts is made when collection of the full amount is no longer probable. For the periods presented,
based on management's evaluation, no allowance was deemed necessary.
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of shares data)
(b)
|
Amounts due to related party
|
|
|
December 31,
2018
|
|
|
December 31,
2019
|
|
|
|
US$
|
|
|
US$
|
|
Current:
|
|
|
|
|
|
|
|
|
Suzhou Wanzhuo's non-controlling interest shareholders
|
|
|
23,447,245
|
|
|
|
15,997,603
|
|
Suzhou Yefang's non-controlling interest holders
|
|
|
11,902,028
|
|
|
|
1,496,762
|
|
Xinzheng Meihang Network Technology Co., Ltd.
|
|
|
—
|
|
|
|
27,133,055
|
|
Others
|
|
|
13,153,168
|
|
|
|
9,054,876
|
|
|
|
|
|
|
|
|
|
|
Total current amounts due to related party
|
|
|
48,502,441
|
|
|
|
53,682,296
|
|
|
|
|
|
|
|
|
|
|
Non current:
|
|
|
|
|
|
|
|
|
Xinzheng Meihang Network Technology Co., Ltd.
|
|
|
31,241,768
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
79,744,209
|
|
|
|
53,682,296
|
|
As of December 31, 2018 and December 31, 2019,
Suzhou Wanzhuo's non-controlling interest holders advanced US$18,929,073 and US$11,397,546 of working capital funds in
aggregate to Suzhou Wanzhuo in the form of an unsecured interest-bearing loan, which has no fixed payment terms, and bears
annual interest from 4.25% to 4.75%, respectively. Accrued interest amounted to US$3,913,866 and US$3,131,821 as of December
31, 2018 and December 31, 2019, respectively. The remaining advance amounting to US$1,468,236 for shareholder service is
unsecured, bears no interest, and is expected to be paid in one year.
On June 6, 2018, the Company together with 4 other
non-affiliated companies acquired 100% of Suzhou Yefang for an aggregate cash consideration of US$15,615,240. The Company accounted
for the acquisition of Suzhou Yefang as an asset acquisition because the only asset of Suzhou Yefang is the land. Pursuant to the
articles of association, the Company exercises control over the relevant significant activities of Suzhou Yefang and therefore,
consolidates it in its financial statements. As of December 31, 2019, the Company repaid the entire payable to its non-controlling
shareholders except for accrued interest amounted to US$1,496,762.
Meihang is the non-controlling shareholder of Zhengzhou
Hangmei, one of the Company's subsidiaries. As of December 31, 2018, and December 31, 2019, Meihang advanced US$27,579,790 and
US$27,133,055 of working capital funds to Zhengzhou Hangmei in the form of an unsecured interest (10%) bearing loan with a three
year payment term. In 2019, the Company repaid interest amounted to US$6,315,967. Accrued interest amounted to US$3,661,978 and
nil as of December 31, 2018 and December 31, 2019, respectively.
(c)
|
Amounts due from employees
|
|
|
December 31,
2018
|
|
|
December 31,
2019
|
|
|
|
US$
|
|
|
US$
|
|
Advances to employees
|
|
|
1,694,416
|
|
|
|
2,350,852
|
|
The balance represents cash advances to employees for
traveling expenses and other expenses. The balances are unsecured, bear no interest and have no fixed payment terms.
In 2018, the Company sold a small percentage of the equity interests (ranging from 0.50% to 5.54%) in eight real estate project
companies to senior management and employees for a total consideration of US$8,720,772. In 2019, the
Company sold additional percentage of the equity interests in the eight real estate project companies to senior management
and employees for a total consideration of US$604,914 and the total sold equity interests ranges from
0.57% to 5.59% as of December 31, 2019. According to the equity transfer agreement, the Company is obligated to repurchase
the equity interest back from management. Therefore, the non-controlling interest is mandatorily redeemable and is accounted
for as a liability.
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of shares data)
In 2019, the Company sold 6.03% of the equity interests
in one real estate project company to senior management and employees for a total consideration of US$1,300,135. According to
the equity transfer agreement, the Company is obligated to repurchase the equity interest back from management. Therefore, the
non-controlling interest is mandatorily redeemable and is accounted for as a liability.
On June 24, 2017, Beijing Wanzhong, one of the Company's
subsidiaries, invested US$2,142,573 in the Xin Future No.1 Private Equity Fund. The fund is operated by Beijing Xinyuan Future
Investment Management Limited, an investment company controlled by the Company's senior management. Management
accounted for this investment at fair value using the net asset value practical expedient. The Company can redeem its investment
on the last trading day of each quarter by providing written notice in advance. On September 26, 2018, the Company redeemed its
investment resulting in US$59,970 gain recorded in net realized gain on short-term investments during the year ended December
31, 2018.
For the year ended December 31, 2019, total directors'
remuneration amounted to US$7,036,954(2017: US$10,634,720; 2018: US$7,056,388).
|
(i)
|
As at December 31, 2019, the Company's authorized share
capital was 500 million common shares, par value US$0.0001 per share (December 31, 2018: 500 million common shares).
|
|
(ii)
|
During the year ended December 31, 2019, 11,715,338 common
shares were repurchased at a total cost of US$26,080,876.
|
|
(iii)
|
During the year ended December 31, 2019, the Company
distributed quarterly dividends of US$0.05 per common share to common shareholders amounting to a total of US$23,460,775.
|
All other equity transactions have been disclosed in
consolidated statement of changes in shareholders’ equity.
Basic and diluted net earnings per share for each period
presented are calculated as follows:
|
|
December 31,
|
|
|
|
2017
|
|
|
2018
|
|
|
2019
|
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Xinyuan Real Estate Co., Ltd. Shareholders – basic and diluted
|
|
|
63,627,551
|
|
|
|
73,034,549
|
|
|
|
68,344,527
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding-basic*
|
|
|
128,704,610
|
|
|
|
127,129,478
|
|
|
|
113,482,239
|
|
Stock options
|
|
|
1,877,785
|
|
|
|
1,728,058
|
|
|
|
618,657
|
|
Restricted stock units
|
|
|
1,023,474
|
|
|
|
283,294
|
|
|
|
—
|
|
Weighted average number of shares outstanding-diluted
|
|
|
131,605,869
|
|
|
|
129,140,830
|
|
|
|
114,100,896
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
|
0.49
|
|
|
|
0.57
|
|
|
|
0.60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
|
0.48
|
|
|
|
0.57
|
|
|
|
0.60
|
|
*
|
The restricted shares repurchased by the trustee that are unvested are excluded from the number of shares outstanding for purposes of computing basic earnings per share in accordance with ASC 260. However, these unvested restricted shares are factored into the computation of diluted earnings per share using the treasury stock method.
|
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of shares data)
During the year ended December 31, 2019, nil (2017:
180,000; 2018: nil) stock options, and 876,400 (2017: nil; 2018:1,019,128) RSUs, were excluded from the calculation of earnings
per share, respectively, because their effect would be anti-dilutive.
The Group's long-lived assets and revenue are mainly
located in and derived from the PRC. Starting in 2012, a relatively smaller portion of the Group's long-lived assets and revenue
are located in and derived from the United States. The Group considers that each of its individual property developments is a discrete
operating segment. The Group has aggregated its segments on a geographical basis as property development projects undertaken within
a region have similar expected economic characteristics, type of properties offered, customers and market and regulatory environment.
The Group's reportable operating segments are comprised of Henan Region, Shandong Region, Shanghai Region (including Shanghai and
Jiangsu Province), Sichuan Region, Beijing Region (including Beijing and Tianjin), Hainan Region, Hunan Region, Shaanxi Region,
Guangdong Region, Hubei Region, and Liaoning Region in the PRC; and the United States.
Each geographic operating segment is principally engaged
in the construction and development of residential real estate units. The "property management" category relates to property
management services. The "other" category relates to investment holdings, landscaping, engineering and management, real
estate sale, purchase and lease activities. The accounting policies of the various segments are the same as those described in
Note 2, "Summary of Significant Accounting Policies".
The Group's chief operating decision maker relies upon
net sales, gross profit and net income when making decisions about allocating resources and assessing performance of the Group.
Net sales for geographic segments are generally based on the location of the project development. Net income for each segment includes
net sales to third parties, related cost of sales and operating expenses directly attributable to the segment. Capital expenditures
for each segment includes cost for acquisition of subsidiaries, vehicles, and fixtures and furniture.
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of shares data)
No single customer accounted for more than 10% of net
sales for the years ended December 31, 2017, 2018 and 2019.
Summary information by operating segment is as follows:
December 31, 2017
|
|
Henan
|
|
Shandong
|
|
Jiangsu
|
|
Sichuan
|
|
Beijing
|
|
Hainan
|
|
Hunan
|
|
Shanghai
|
|
Tianjin
|
|
Shaanxi
|
|
United
States
|
|
Guangdong
|
|
Others
|
|
Consolidated
|
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
Net real estate sales
|
|
886,207,602
|
|
|
252,186,589
|
|
|
284,388,321
|
|
|
79,054,170
|
|
|
540,766
|
|
|
87,304,257
|
|
|
133,499,073
|
|
|
973,450
|
|
|
38,646,991
|
|
|
63,283,292
|
|
|
98,476,295
|
|
|
—
|
|
|
—
|
|
|
1,924,560,806
|
|
Real estate lease income
|
|
3,567,372
|
|
|
183,530
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,071
|
|
|
209,186
|
|
|
—
|
|
|
3,832,764
|
|
|
—
|
|
|
19,659
|
|
|
914,217
|
|
|
8,732,799
|
|
Real estate management services income
|
|
1,505,932
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
356,429
|
|
|
—
|
|
|
—
|
|
|
39,875,958
|
|
|
41,738,319
|
|
Other revenue
|
|
508,891
|
|
|
52,893
|
|
|
21,184
|
|
|
87,307
|
|
|
—
|
|
|
11,396
|
|
|
118,391
|
|
|
5,046
|
|
|
74
|
|
|
—
|
|
|
307,793
|
|
|
—
|
|
|
762,332
|
|
|
1,875,307
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
891,789,797
|
|
|
252,423,012
|
|
|
284,409,505
|
|
|
79,141,477
|
|
|
540,766
|
|
|
87,315,653
|
|
|
133,623,535
|
|
|
1,187,682
|
|
|
38,647,065
|
|
|
67,472,485
|
|
|
98,784,088
|
|
|
19,659
|
|
|
41,552,507
|
|
|
1,976,907,231
|
|
Cost of real estate sales
|
|
(607,656,121
|
)
|
|
(204,691,234
|
)
|
|
(247,765,242
|
)
|
|
(71,332,282
|
)
|
|
(363,305
|
)
|
|
(55,291,475
|
)
|
|
(107,834,718
|
)
|
|
(664,093
|
)
|
|
(23,602,129
|
)
|
|
(46,516,108
|
)
|
|
(108,350,506
|
)
|
|
—
|
|
|
—
|
|
|
(1,474,067,213
|
)
|
Cost of real estate lease income
|
|
(2,170,672
|
)
|
|
(348,420
|
)
|
|
(3,353,579
|
)
|
|
(158,879
|
)
|
|
—
|
|
|
—
|
|
|
(174,601
|
)
|
|
(332,094
|
)
|
|
—
|
|
|
(4,420,100
|
)
|
|
—
|
|
|
—
|
|
|
(47,777
|
)
|
|
(11,006,122
|
)
|
Cost of real estate management services
|
|
(935,942
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(30,710,506
|
)
|
|
(31,646,448
|
)
|
Other costs
|
|
(227,081
|
)
|
|
(10,706
|
)
|
|
(127,375
|
)
|
|
—
|
|
|
(51,424
|
)
|
|
(3,846
|
)
|
|
(95,235
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(10,342
|
)
|
|
(33,226
|
)
|
|
(559,235
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of revenue
|
|
(610,989,816
|
)
|
|
(205,050,360
|
)
|
|
(251,246,196
|
)
|
|
(71,491,161
|
)
|
|
(414,729
|
)
|
|
(55,295,321
|
)
|
|
(108,104,554
|
)
|
|
(996,187
|
)
|
|
(23,602,129
|
)
|
|
(50,936,208
|
)
|
|
(108,350,506
|
)
|
|
(10,342
|
)
|
|
(30,791,509
|
)
|
|
(1,517,279,018
|
)
|
Gross profit
|
|
280,799,981
|
|
|
47,372,652
|
|
|
33,163,309
|
|
|
7,650,316
|
|
|
126,037
|
|
|
32,020,332
|
|
|
25,518,981
|
|
|
191,495
|
|
|
15,044,936
|
|
|
16,536,277
|
|
|
(9,566,418
|
)
|
|
9,317
|
|
|
10,760,998
|
|
|
459,628,213
|
|
Operating expenses
|
|
(64,061,347
|
)
|
|
(10,497,498
|
)
|
|
(16,659,076
|
)
|
|
(3,772,416
|
)
|
|
(44,507,378
|
)
|
|
(7,726,269
|
)
|
|
(10,099,854
|
)
|
|
(747,409
|
)
|
|
(6,001,987
|
)
|
|
(9,123,653
|
)
|
|
(10,597,926
|
)
|
|
(680,754
|
)
|
|
(28,092,891
|
)
|
|
(212,568,458
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income/(loss)
|
|
216,738,634
|
|
|
36,875,154
|
|
|
16,504,233
|
|
|
3,877,900
|
|
|
(44,381,341
|
)
|
|
24,294,063
|
|
|
15,419,127
|
|
|
(555,914
|
)
|
|
9,042,949
|
|
|
7,412,624
|
|
|
(20,164,344
|
)
|
|
(671,437
|
)
|
|
(17,331,893
|
)
|
|
247,059,755
|
|
Interest income
|
|
11,355,876
|
|
|
338,069
|
|
|
218,937
|
|
|
100,988
|
|
|
516,950
|
|
|
26,443
|
|
|
320,666
|
|
|
268,325
|
|
|
271,527
|
|
|
69,336
|
|
|
—
|
|
|
264
|
|
|
3,371,705
|
|
|
16,859,086
|
|
Interest expense
|
|
(18,393,523
|
)
|
|
(362,759
|
)
|
|
(1,829,665
|
)
|
|
—
|
|
|
(5,056,962
|
)
|
|
—
|
|
|
—
|
|
|
(2,100,301
|
)
|
|
(1,214,368
|
)
|
|
—
|
|
|
(3,570,310
|
)
|
|
—
|
|
|
(33,625,552
|
)
|
|
(66,153,440
|
)
|
Net realized gain on short-term investments
|
|
3,110,564
|
|
|
—
|
|
|
7,395
|
|
|
—
|
|
|
9,077
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,746,951
|
|
|
7,873,987
|
|
Share of (loss)/gain in an equity investee
|
|
(1,062,499
|
)
|
|
(974,405
|
)
|
|
(2,818
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
329,652
|
|
|
(1,710,070
|
)
|
Loss on extinguishment of debt
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(15,879,702
|
)
|
|
(15,879,702
|
)
|
Exchange gains
|
|
(362,736
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,119,662
|
|
|
756,926
|
|
Unrealized income on short-term investments
|
|
151,003
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,944,976
|
|
|
2,095,979
|
|
Other income
|
|
2,326,004
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
2,326,010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(loss) before income taxes
|
|
213,863,323
|
|
|
35,876,059
|
|
|
14,898,082
|
|
|
3,978,888
|
|
|
(48,912,276
|
)
|
|
24,320,506
|
|
|
15,739,793
|
|
|
(2,387,890
|
)
|
|
8,100,108
|
|
|
7,481,960
|
|
|
(23,734,648
|
)
|
|
(671,173
|
)
|
|
(55,324,201
|
)
|
|
193,228,531
|
|
Income tax benefit/(expense)
|
|
(77,985,230
|
)
|
|
(11,359,619
|
)
|
|
(6,913,466
|
)
|
|
(812,628
|
)
|
|
4,065,308
|
|
|
(10,189,683
|
)
|
|
(2,560,610
|
)
|
|
686,619
|
|
|
(1,713,343
|
)
|
|
(840,827
|
)
|
|
8,694,642
|
|
|
145,513
|
|
|
(14,333,802
|
)
|
|
(113,117,126
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss)
|
|
135,878,093
|
|
|
24,516,440
|
|
|
7,984,616
|
|
|
3,166,260
|
|
|
(44,846,968
|
)
|
|
14,130,823
|
|
|
13,179,183
|
|
|
(1,701,271
|
)
|
|
6,386,765
|
|
|
6,641,133
|
|
|
(15,040,006
|
)
|
|
(525,660
|
)
|
|
(69,658,003
|
)
|
|
80,111,405
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
5,597,930
|
|
|
416,607
|
|
|
3,445,463
|
|
|
218,043
|
|
|
767,841
|
|
|
148,453
|
|
|
185,123
|
|
|
68,648
|
|
|
9,836
|
|
|
1,766,074
|
|
|
232,618
|
|
|
38
|
|
|
870,852
|
|
|
13,727,526
|
|
Capital expenditure
|
|
5,756,237
|
|
|
11,636
|
|
|
13,725
|
|
|
22,550
|
|
|
2,960,195
|
|
|
1,361
|
|
|
21,262
|
|
|
—
|
|
|
20,322
|
|
|
9,571
|
|
|
257,643
|
|
|
392,779
|
|
|
294,575
|
|
|
9,761,856
|
|
Real estate properties development completed
|
|
49,708,034
|
|
|
82,128,992
|
|
|
13,625,012
|
|
|
146,791,480
|
|
|
52,675,024
|
|
|
97,350,745
|
|
|
49,346,740
|
|
|
90,003,702
|
|
|
—
|
|
|
127,107,105
|
|
|
131,656,359
|
|
|
—
|
|
|
—
|
|
|
840,393,193
|
|
Real estate properties under development
|
|
937,340,899
|
|
|
78,988,478
|
|
|
217,051,399
|
|
|
—
|
|
|
200,296,958
|
|
|
—
|
|
|
109,107,637
|
|
|
—
|
|
|
40,379,791
|
|
|
140,257,927
|
|
|
168,236,598
|
|
|
93,205,573
|
|
|
11,135,393
|
|
|
1,996,000,653
|
|
Real estate properties held for lease
|
|
53,783,548
|
|
|
5,633,936
|
|
|
38,824,172
|
|
|
23,503,438
|
|
|
—
|
|
|
—
|
|
|
50,422,065
|
|
|
4,578,302
|
|
|
—
|
|
|
100,574,370
|
|
|
—
|
|
|
—
|
|
|
613,482
|
|
|
277,933,313
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-lived assets
|
|
207,599,517
|
|
|
420,656,893
|
|
|
50,598,511
|
|
|
391,437,638
|
|
|
16,714,738
|
|
|
609,466
|
|
|
51,791,292
|
|
|
4,639,263
|
|
|
1,706,170
|
|
|
125,298,084
|
|
|
19,666,135
|
|
|
125,896
|
|
|
23,378,186
|
|
|
1,314,221,789
|
|
Total assets
|
|
2,715,305,431
|
|
|
693,368,606
|
|
|
459,080,321
|
|
|
584,350,518
|
|
|
296,118,475
|
|
|
108,984,575
|
|
|
266,196,168
|
|
|
103,055,884
|
|
|
98,249,020
|
|
|
440,219,180
|
|
|
354,473,170
|
|
|
93,723,704
|
|
|
171,309,218
|
|
|
6,384,434,270
|
|
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of shares data)
December 31, 2018
|
|
Henan
|
|
Shandong
|
|
Jiangsu
|
|
Sichuan
|
|
Beijing
|
|
Hainan
|
|
Hunan
|
|
Shanghai
|
|
Tianjin
|
|
Shaanxi
|
|
United
States
|
|
Guangdong
|
|
Hubei
|
|
Liaoning
|
|
Others
|
|
Consolidated
|
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
Net real estate sales
|
|
1,002,960,937
|
|
|
291,763,807
|
|
|
330,352,688
|
|
|
80,701,160
|
|
|
12,314,328
|
|
|
169,606,837
|
|
|
97,162,300
|
|
|
—
|
|
|
86,165,279
|
|
|
58,795,214
|
|
|
8,815,926
|
|
|
—
|
|
|
—
|
|
|
427,072
|
|
|
305,244
|
|
|
2,139,370,792
|
|
Real estate lease income
|
|
4,463,583
|
|
|
497,354
|
|
|
917,227
|
|
|
86,593
|
|
|
—
|
|
|
—
|
|
|
111,408
|
|
|
641,119
|
|
|
—
|
|
|
2,064,129
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
803,559
|
|
|
9,584,972
|
|
Real estate management services income
|
|
3,061,093
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,464,039
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
57,922,288
|
|
|
63,447,420
|
|
Other revenue
|
|
297,202
|
|
|
4,506
|
|
|
473,667
|
|
|
318,863
|
|
|
2,176,071
|
|
|
476,184
|
|
|
482,597
|
|
|
—
|
|
|
30
|
|
|
—
|
|
|
570,646
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
348,335
|
|
|
5,148,101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
1,010,782,815
|
|
|
292,265,667
|
|
|
331,743,582
|
|
|
81,106,616
|
|
|
14,490,399
|
|
|
170,083,021
|
|
|
97,756,305
|
|
|
641,119
|
|
|
86,165,309
|
|
|
63,323,382
|
|
|
9,386,572
|
|
|
—
|
|
|
—
|
|
|
427,072
|
|
|
59,379,426
|
|
|
2,217,551,285
|
|
Cost of real estate sales
|
|
(701,238,639
|
)
|
|
(228,347,098
|
)
|
|
(214,621,791
|
)
|
|
(75,842,475
|
)
|
|
(9,355,460
|
)
|
|
(87,710,266
|
)
|
|
(100,986,641
|
)
|
|
(57,369
|
)
|
|
(56,487,052
|
)
|
|
(59,670,857
|
)
|
|
(9,357,970
|
)
|
|
—
|
|
|
—
|
|
|
(298,443
|
)
|
|
—
|
|
|
(1,543,974,061
|
)
|
Cost of real estate lease income
|
|
(2,245,710
|
)
|
|
(470,614
|
)
|
|
(2,336,287
|
)
|
|
(554,861
|
)
|
|
—
|
|
|
—
|
|
|
(1,475,782
|
)
|
|
(238,406
|
)
|
|
—
|
|
|
(1,978,147
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(48,809
|
)
|
|
(9,348,616
|
)
|
Real estate management services cost
|
|
(2,733,062
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,870,604
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(39,016,117
|
)
|
|
(44,619,783
|
)
|
Other costs
|
|
(388,790
|
)
|
|
(1,224,399
|
)
|
|
(94,807
|
)
|
|
(435,324
|
)
|
|
—
|
|
|
(4,551
|
)
|
|
(517,028
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,465,624
|
)
|
|
(4,130,523
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of revenue
|
|
(706,606,201
|
)
|
|
(230,042,111
|
)
|
|
(217,052,885
|
)
|
|
(76,832,660
|
)
|
|
(9,355,460
|
)
|
|
(87,714,817
|
)
|
|
(102,979,451
|
)
|
|
(295,775
|
)
|
|
(56,487,052
|
)
|
|
(64,519,608
|
)
|
|
(9,357,970
|
)
|
|
—
|
|
|
—
|
|
|
(298,443
|
)
|
|
(40,530,550
|
)
|
|
(1,602,072,983
|
)
|
Gross profit
|
|
304,176,614
|
|
|
62,223,556
|
|
|
114,690,697
|
|
|
4,273,956
|
|
|
5,134,939
|
|
|
82,368,204
|
|
|
(5,223,146
|
)
|
|
345,344
|
|
|
29,678,257
|
|
|
(1,196,226
|
)
|
|
28,602
|
|
|
—
|
|
|
—
|
|
|
128,629
|
|
|
18,848,876
|
|
|
615,478,302
|
|
Operating expenses
|
|
(62,812,091
|
)
|
|
(12,610,671
|
)
|
|
(15,284,915
|
)
|
|
(4,275,577
|
)
|
|
(64,432,460
|
)
|
|
(12,088,762
|
)
|
|
(11,008,482
|
)
|
|
(163,680
|
)
|
|
(5,904,656
|
)
|
|
(5,834,584
|
)
|
|
(4,654,552
|
)
|
|
(1,185,184
|
)
|
|
(1,949,565
|
)
|
|
(1,485,827
|
)
|
|
(36,356,815
|
)
|
|
(240,047,821
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income/(loss)
|
|
241,364,523
|
|
|
49,612,885
|
|
|
99,405,782
|
|
|
(1,621
|
)
|
|
(59,297,521
|
)
|
|
70,279,442
|
|
|
(16,231,628
|
)
|
|
181,664
|
|
|
23,773,601
|
|
|
(7,030,810
|
)
|
|
(4,625,950
|
)
|
|
(1,185,184
|
)
|
|
(1,949,565
|
)
|
|
(1,357,198
|
)
|
|
(17,507,939
|
)
|
|
375,430,481
|
|
Interest income
|
|
23,934,452
|
|
|
478,524
|
|
|
568,283
|
|
|
104,895
|
|
|
1,388,846
|
|
|
22,667
|
|
|
194,297
|
|
|
62,536
|
|
|
230,432
|
|
|
78,014
|
|
|
3,311
|
|
|
5,506
|
|
|
—
|
|
|
5,966
|
|
|
4,147,965
|
|
|
31,225,694
|
|
Interest expense
|
|
(15,091,954
|
)
|
|
—
|
|
|
(1,009,438
|
)
|
|
(2,259,789
|
)
|
|
(2,137,378
|
)
|
|
—
|
|
|
—
|
|
|
(1,689,514
|
)
|
|
—
|
|
|
(915,585
|
)
|
|
(3,501,863
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(72,640,175
|
)
|
|
(99,245,696
|
)
|
Net realized loss on short-term investments
|
|
183,450
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,590,540
|
)
|
|
(3,407,090
|
)
|
Share of loss in an equity investee
|
|
(1,342,875
|
)
|
|
(1,067,320
|
)
|
|
(949,748
|
)
|
|
(3,719,920
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,295,899
|
)
|
|
—
|
|
|
—
|
|
|
(998,689
|
)
|
|
(9,374,451
|
)
|
(Loss)/gain on extinguishment of debt
|
|
(24,665,987
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,222,038
|
|
|
(21,443,949
|
)
|
Exchange (loss)/gain
|
|
(13,029,174
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,544
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
335,310
|
|
|
(12,982,246
|
)
|
|
(25,677,654
|
)
|
Unrealized income on short-term investments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,150,200
|
|
|
1,150,200
|
|
Other income
|
|
(3,773,556
|
)
|
|
(162,149
|
)
|
|
391,338
|
|
|
4,585,338
|
|
|
(521,424
|
)
|
|
32,867
|
|
|
27,078
|
|
|
(1,822
|
)
|
|
(948,161
|
)
|
|
(120,442
|
)
|
|
2,093,750
|
|
|
—
|
|
|
1,180
|
|
|
—
|
|
|
137,735
|
|
|
1,741,732
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(loss) before income taxes
|
|
207,578,879
|
|
|
48,861,940
|
|
|
98,406,217
|
|
|
(1,291,097
|
)
|
|
(60,569,021
|
)
|
|
70,334,976
|
|
|
(16,010,253
|
)
|
|
(1,447,136
|
)
|
|
23,055,872
|
|
|
(7,988,823
|
)
|
|
(6,030,752
|
)
|
|
(2,475,577
|
)
|
|
(1,948,385
|
)
|
|
(1,015,922
|
)
|
|
(99,061,651
|
)
|
|
250,399,267
|
|
Income tax benefit/(expense)
|
|
(66,585,136
|
)
|
|
(24,338,485
|
)
|
|
(33,672,476
|
)
|
|
(1,312,549
|
)
|
|
5,810,925
|
|
|
(33,888,754
|
)
|
|
14,764,618
|
|
|
1,503,472
|
|
|
(8,088,479
|
)
|
|
1,735,041
|
|
|
3,037,875
|
|
|
(392,906
|
)
|
|
(152,722
|
)
|
|
689,435
|
|
|
(3,557,106
|
)
|
|
(144,447,247
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss)
|
|
140,993,743
|
|
|
24,523,455
|
|
|
64,733,741
|
|
|
(2,603,646
|
)
|
|
(54,758,096
|
)
|
|
36,446,222
|
|
|
(1,245,635
|
)
|
|
56,336
|
|
|
14,967,393
|
|
|
(6,253,782
|
)
|
|
(2,992,877
|
)
|
|
(2,868,483
|
)
|
|
(2,101,107
|
)
|
|
(326,487
|
)
|
|
(102,618,757
|
)
|
|
105,952,020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
5,881,359
|
|
|
664,325
|
|
|
2,398,697
|
|
|
553,823
|
|
|
1,506,886
|
|
|
44,773
|
|
|
1,395,291
|
|
|
277,113
|
|
|
150,980
|
|
|
1,888,104
|
|
|
(95,404
|
)
|
|
137,262
|
|
|
15,028
|
|
|
8,235
|
|
|
306,403
|
|
|
15,132,875
|
|
Capital expenditure
|
|
8,700,583
|
|
|
4,689,576
|
|
|
6,226
|
|
|
10,229
|
|
|
2,279,441
|
|
|
—
|
|
|
278
|
|
|
—
|
|
|
290,791
|
|
|
13,183
|
|
|
89,510
|
|
|
—
|
|
|
197,756
|
|
|
58,259
|
|
|
318,555
|
|
|
16,654,387
|
|
Real estate property development completed
|
|
119,978,648
|
|
|
46,110,853
|
|
|
38,293,044
|
|
|
88,492,260
|
|
|
42,003,855
|
|
|
31,716,745
|
|
|
7,340,408
|
|
|
82,320,988
|
|
|
—
|
|
|
48,352,943
|
|
|
127,749,947
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
632,359,691
|
|
Real estate property under development
|
|
1,630,532,021
|
|
|
520,017,386
|
|
|
240,985,540
|
|
|
620,344,540
|
|
|
214,011,166
|
|
|
—
|
|
|
113,205,249
|
|
|
—
|
|
|
106,218,839
|
|
|
150,381,455
|
|
|
199,665,838
|
|
|
102,997,747
|
|
|
124,701,587
|
|
|
30,590,778
|
|
|
15,064,162
|
|
|
4,068,716,308
|
|
Real estate properties held for lease, net
|
|
72,389,385
|
|
|
7,929,336
|
|
|
39,824,983
|
|
|
36,086,237
|
|
|
—
|
|
|
—
|
|
|
47,347,197
|
|
|
4,037,272
|
|
|
—
|
|
|
94,612,752
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
537,055
|
|
|
302,764,217
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-lived assets
|
|
370,303,455
|
|
|
500,658,792
|
|
|
95,890,366
|
|
|
37,986,138
|
|
|
42,680,909
|
|
|
5,953,273
|
|
|
48,805,523
|
|
|
4,056,266
|
|
|
6,535,427
|
|
|
125,890,353
|
|
|
25,781,516
|
|
|
23,600,985
|
|
|
176,034
|
|
|
337,113
|
|
|
53,834,857
|
|
|
1,342,491,007
|
|
Total assets
|
|
3,326,001,406
|
|
|
902,384,756
|
|
|
740,208,056
|
|
|
839,829,759
|
|
|
340,188,589
|
|
|
39,269,241
|
|
|
274,708,013
|
|
|
95,034,595
|
|
|
185,400,019
|
|
|
330,029,859
|
|
|
384,883,423
|
|
|
134,196,645
|
|
|
127,532,829
|
|
|
34,993,328
|
|
|
279,052,154
|
|
|
8,033,712,672
|
|
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of shares data)
December 31, 2019
|
|
Henan
|
|
Shandong
|
|
Shanghai
|
|
Sichuan
|
|
Beijing
|
|
Hainan
|
|
Hunan
|
|
Shaanxi
|
|
United
States
|
|
Guangdong
|
|
Hubei
|
|
Liaoning
|
|
Property
Management
|
|
Others
|
|
Consolidated
|
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
Net real estate sales
|
|
1,382,533,759
|
|
|
275,120,959
|
|
|
279,731,401
|
|
|
85,189,227
|
|
|
126,540,125
|
|
|
43,820,016
|
|
|
157,938,663
|
|
|
6,917,948
|
|
|
750,000
|
|
|
9,738,197
|
|
|
—
|
|
|
18,621,886
|
|
|
—
|
|
|
129,387
|
|
|
2,387,031,568
|
|
Real estate lease income
|
|
6,630,994
|
|
|
321,819
|
|
|
2,920,280
|
|
|
728,016
|
|
|
657,451
|
|
|
—
|
|
|
135,279
|
|
|
3,301,027
|
|
|
893,982
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
483,944
|
|
|
55,979
|
|
|
16,128,771
|
|
Real estate management services income
|
|
7,578,862
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,783,091
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
57,126,216
|
|
|
—
|
|
|
67,488,169
|
|
Other revenue
|
|
151,102
|
|
|
700,044
|
|
|
823,150
|
|
|
1,063,557
|
|
|
3,269,965
|
|
|
—
|
|
|
583,737
|
|
|
—
|
|
|
296,091
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,187,948
|
|
|
3,908,710
|
|
|
11,984,304
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
Total revenue
|
|
1,396,894,717
|
|
|
276,142,822
|
|
|
283,474,831
|
|
|
86,980,800
|
|
|
130,467,541
|
|
|
43,820,016
|
|
|
158,657,679
|
|
|
13,002,066
|
|
|
1,940,073
|
|
|
9,738,197
|
|
|
—
|
|
|
18,621,886
|
|
|
58,798,108
|
|
|
4,094,076
|
|
|
2,482,632,812
|
|
Cost of real estate sales
|
|
(1,082,472,232
|
)
|
|
(220,925,677
|
)
|
|
(201,704,497
|
)
|
|
(81,765,082
|
)
|
|
(92,849,397
|
)
|
|
(31,764,435
|
)
|
|
(110,346,111
|
)
|
|
(6,510,485
|
)
|
|
(1,444,563
|
)
|
|
(6,821,557
|
)
|
|
(23,397
|
)
|
|
(13,440,458
|
)
|
|
—
|
|
|
(1,751,402
|
)
|
|
(1,851,819,293
|
)
|
Cost of real estate lease income
|
|
(2,348,963
|
)
|
|
(561,264
|
)
|
|
(2,565,142
|
)
|
|
(799,359
|
)
|
|
(481,276
|
|
|
—
|
|
|
(1,693,085
|
)
|
|
(2,913,152
|
)
|
|
(1,348,218
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(46,792
|
)
|
|
(12,757,251
|
)
|
Cost of real estate management services
|
|
(4,716,112
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(561,329
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(35,611,790
|
)
|
|
—
|
|
|
(40,889,231
|
)
|
Other costs
|
|
(2,449,683
|
)
|
|
(1,267,950
|
)
|
|
—
|
|
|
(3,672
|
)
|
|
(4,794,719
|
)
|
|
(2,192
|
)
|
|
(362,009
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,124,118
|
)
|
|
(6,853,073
|
)
|
|
(16,857,416
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
Total cost of revenue
|
|
(1,091,986,990
|
)
|
|
(222,754,891
|
)
|
|
(204,269,639
|
)
|
|
(82,568,113
|
)
|
|
(98,125,392
|
)
|
|
(31,766,627
|
)
|
|
(112,401,205
|
)
|
|
(9,984,966
|
)
|
|
(2,792,781
|
)
|
|
(6,821,557
|
)
|
|
(23,397
|
)
|
|
(13,440,458
|
)
|
|
(36,735,908
|
)
|
|
(8,651,267
|
)
|
|
(1,922,323,191
|
)
|
Gross profit
|
|
304,907,727
|
|
|
53,387,931
|
|
|
79,205,192
|
|
|
4,412,687
|
|
|
32,342,149
|
|
|
12,053,389
|
|
|
46,256,474
|
|
|
3,017,100
|
|
|
(852,708
|
)
|
|
2,916,640
|
|
|
(23,397
|
)
|
|
5,181,428
|
|
|
22,062,200
|
|
|
(4,557,191
|
)
|
|
560,309,621
|
|
Operating expenses
|
|
(70,839,873
|
)
|
|
(14,770,303
|
)
|
|
(18,080,374
|
)
|
|
(8,011,273
|
)
|
|
(73,333,124
|
)
|
|
(2,514,263
|
)
|
|
(3,991,323
|
)
|
|
(5,808,638
|
)
|
|
(9,414,601
|
)
|
|
(1,966,796
|
)
|
|
(3,429,583
|
)
|
|
(2,801,220
|
)
|
|
(7,076,960
|
)
|
|
(28,409,288
|
)
|
|
(250,447,619
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
Operating income/(loss)
|
|
234,067,854
|
|
|
38,617,628
|
|
|
61,124,818
|
|
|
(3,598,586
|
)
|
|
(40,990,975
|
)
|
|
9,539,126
|
|
|
42,265,151
|
|
|
(2,791,538
|
)
|
|
(10,267,309
|
)
|
|
949,844
|
|
|
(3,452,980
|
)
|
|
2,380,208
|
|
|
14,985,240
|
|
|
(32,966,479
|
)
|
|
309,862,002
|
|
Interest income
|
|
42,379,712
|
|
|
436,165
|
|
|
306,228
|
|
|
493,469
|
|
|
2,241,516
|
|
|
3,208
|
|
|
182,529
|
|
|
12,795
|
|
|
48,285
|
|
|
13,533
|
|
|
1,695
|
|
|
13,240
|
|
|
681,464
|
|
|
4,679,756
|
|
|
51,493,595
|
|
Interest expense
|
|
(14,805,529
|
)
|
|
(3,061,587
|
)
|
|
(1,066,270
|
)
|
|
—
|
|
|
(7,385,692
|
)
|
|
(11,507
|
)
|
|
—
|
|
|
(138,107
|
)
|
|
(3,472,559
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(83,834,109
|
)
|
|
(113,775,360
|
)
|
Net realized gain on short-term investments
|
|
183,450
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,891,564
|
|
|
3,075,014
|
|
Share of (loss)/gain in an equity investee
|
|
(1,370,440
|
)
|
|
(922,281
|
)
|
|
(613,155
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,903,841
|
)
|
|
—
|
|
|
—
|
|
|
(630,775
|
)
|
|
1,024,021
|
|
|
(5,416,471
|
)
|
Loss on extinguishment of debt
|
|
(8,044,499
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(536,011
|
)
|
|
(8,580,510
|
)
|
Exchange gains/(loss)
|
|
12,524,863
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(236,736
|
)
|
|
(19,664,136
|
)
|
|
(7,376,009
|
)
|
Unrealized loss on short-term investments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,623,814
|
)
|
|
(1,623,814
|
)
|
Other income/(loss)
|
|
4,536,260
|
|
|
866
|
|
|
47,762
|
|
|
246,927
|
|
|
909,298
|
|
|
156,235
|
|
|
(17,844
|
)
|
|
(199,670
|
)
|
|
—
|
|
|
(289,485
|
)
|
|
—
|
|
|
64,155
|
|
|
124,295
|
|
|
269,928
|
|
|
5,848,727
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(loss) before income taxes
|
|
269,471,671
|
|
|
35,070,791
|
|
|
59,799,383
|
|
|
(2,858,190
|
)
|
|
(45,225,853
|
)
|
|
9,687,062
|
|
|
42,429,836
|
|
|
(3,116,520
|
)
|
|
(13,691,583
|
)
|
|
(2,229,949
|
)
|
|
(3,451,285
|
)
|
|
2,457,603
|
|
|
14,923,488
|
|
|
(129,759,280
|
)
|
|
233,507,174
|
|
Income tax (expense)/benefit
|
|
(69,803,421
|
)
|
|
(23,020,472
|
)
|
|
(28,043,624
|
)
|
|
(2,864,732
|
)
|
|
(9,456,395
|
)
|
|
(4,643,587
|
)
|
|
(16,123,072
|
)
|
|
2,210,548
|
|
|
2,921,151
|
|
|
(1,017,315
|
)
|
|
704,284
|
|
|
(717,299
|
)
|
|
(241,601
|
)
|
|
(382,837
|
)
|
|
(150,478,372
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss)
|
|
199,668,250
|
|
|
12,050,319
|
|
|
31,755,759
|
|
|
(5,722,922
|
)
|
|
(54,682,248
|
)
|
|
5,043,475
|
|
|
26,306,764
|
|
|
(905,972
|
)
|
|
(10,770,432
|
)
|
|
(3,247,264
|
)
|
|
(2,747,001
|
)
|
|
1,740,304
|
|
|
14,681,887
|
|
|
(130,142,117
|
)
|
|
83,028,802
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
Depreciation and amortization
|
|
5,553,392
|
|
|
433,948
|
|
|
2,622,483
|
|
|
635,494
|
|
|
2,732,083
|
|
|
29,414
|
|
|
1,668,279
|
|
|
1,873,910
|
|
|
1,665,384
|
|
|
41,616
|
|
|
46,012
|
|
|
16,987
|
|
|
189,503
|
|
|
75,938
|
|
|
17,584,443
|
|
Capital expenditure
|
|
6,263,956
|
|
|
64,816
|
|
|
2,579
|
|
|
26,254
|
|
|
1,142,809
|
|
|
3,712
|
|
|
44,058
|
|
|
16,761
|
|
|
3,579,071
|
|
|
—
|
|
|
4,821
|
|
|
25,188
|
|
|
352,073
|
|
|
119,575
|
|
|
11,645,673
|
|
Real estate properties development completed
|
|
133,572,883
|
|
|
34,351,045
|
|
|
106,796,363
|
|
|
64,327,235
|
|
|
60,683,848
|
|
|
6,627,299
|
|
|
7,540,854
|
|
|
43,103,208
|
|
|
1,201,783
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
458,204,518
|
|
Real estate properties under development
|
|
886,160,682
|
|
|
359,079,121
|
|
|
123,381,923
|
|
|
619,020,458
|
|
|
266,984,229
|
|
|
—
|
|
|
6,433,260
|
|
|
162,947,850
|
|
|
230,860,737
|
|
|
372,170,620
|
|
|
141,707,492
|
|
|
58,153,297
|
|
|
—
|
|
|
27,488,080
|
|
|
3,254,387,749
|
|
Real estate properties held for lease
|
|
109,809,942
|
|
|
6,954,550
|
|
|
40,675,960
|
|
|
34,515,933
|
|
|
7,520,601
|
|
|
888,150
|
|
|
60,967,850
|
|
|
91,474,049
|
|
|
162,599,274
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
462,599
|
|
|
515,868,908
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-lived assets
|
|
524,367,010
|
|
|
509,819,916
|
|
|
183,400,846
|
|
|
44,244,900
|
|
|
61,281,191
|
|
|
6,664,536
|
|
|
62,686,470
|
|
|
100,419,560
|
|
|
176,115,157
|
|
|
18,237,255
|
|
|
934,102
|
|
|
1,084,510
|
|
|
8,335,524
|
|
|
79,010,347
|
|
|
1,776,601,324
|
|
Total assets
|
|
2,882,024,764
|
|
|
573,869,426
|
|
|
752,136,052
|
|
|
897,210,854
|
|
|
470,434,500
|
|
|
27,393,755
|
|
|
107,134,983
|
|
|
338,107,052
|
|
|
439,770,834
|
|
|
414,319,137
|
|
|
148,165,478
|
|
|
73,223,300
|
|
|
106,315,123
|
|
|
191,559,175
|
|
|
7,421,664,433
|
|
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of shares data)
|
22.
|
Commitments and contingencies
|
Other commitments
As of December 31, 2019, the Group had outstanding
commitments with respect to non-cancellable construction contracts for real estate development and land use rights purchases as
follows:
|
|
Amount
|
|
|
|
US$
|
|
2020
|
|
|
559,280,163
|
|
2021
|
|
|
662,777,841
|
|
2022
|
|
|
116,494,755
|
|
2023
|
|
|
28,682,333
|
|
2024 and thereafter
|
|
|
4,829,879
|
|
|
|
|
|
|
Total
|
|
|
1,372,064,971
|
|
Contingencies
As of December 31, 2019, the Group provided
guarantees of US$2,617,194,854 (2018: US$1,988,632,540), in favor of its customers in respect of mortgage loans granted by
banks to such customers for their purchases of the Group's properties where the underlying real estate ownership certificates
can only be provided to the banks on a time delay manner due to administrative procedures in the PRC. Pursuant to the terms
of the guarantees, upon default in mortgage payments by these purchasers, the Group is responsible to repay the outstanding
mortgage principal together with the accrued interest and penalty owed by the defaulted purchasers to the bank and the Group
is entitled to take over the legal titles and possession of the related properties. The Group's guarantee period starts from
the date of grant of the relevant mortgage loan and ends upon issuance of real estate ownership certificate which will
generally be available within six to twelve months after the purchaser takes possession of the relevant property. The Group
paid US$788,644, US$1,659,652, and US$1,782,038 to satisfy guarantee obligations related to customer defaults for the years
ended December 2017, 2018 and 2019, respectively.
The fair value of the guarantees is not significantly
different than the net realizable value of the properties and management considers that in case of default in payments, the net
realizable value of the related properties can cover the repayment of the outstanding mortgage principal together with the accrued
interest and penalty and therefore no provision has been made for the guarantees.
In May 2019, an authorized entity of local government (the “Government Entity”) sued Beijing Huiju, the original
controlling and existing shareholder of one of the Group’s equity method investee, Qingdao Huiju, for disputes in construction
contract entered into between the Government Entity and Beijing Huiju. The Government Entity also claimed that Qingdao Huiju
is jointly liable for the aforementioned construction contract and a commitment letter issued by Beijing Huiju, and sued both
Beijing Huiju and Qingdao Huiju to be jointly and severally liable to a liquidated damage of US$230.9 million stipulated
in the commitment letter. Qingdao Huiju received the local court verdict of the first instance in April 2020 which held that
Qingdao Huiju shall be jointly and severally liable to the liquidated damages of US$230.9 million, and court cost of US$1,167,369.
Qingdao Huiju appealed to the verdict in April 2020. Management believes that the Government Entity’s claims against
Qingdao Huiju are without merit and intends to contest vigorously against such claims because the commitment letter was unilaterally
issued by Beijing Huiju without any signature or confirmation by Qingdao Huiju. At this stage of the appeal proceedings, Qingdao
Huiju cannot predict the outcome of this lawsuit or a judgment against Qingdao Huiju, whether in whole or in part, may result
in a loss, if any. An estimate for the reasonably possible loss or a range of reasonably possible losses cannot be made at
this time.
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of shares data)
At December 31, 2019, the Group provided financial
guarantees for bank loans of two of its equity method investees. The Group could incur losses in the event of defaults under or
foreclosure of these loans and its maximum exposure to credit losses is US$202,115,765 (2018: US$280,189,999). The fair value of
the guarantees is not significant and the Group considers that in case of default in payments, the net realizable value of the
related properties can cover the repayment of the outstanding bank loans together with the accrued interest and penalty and therefore,
no provision has been made for the guarantees in the consolidated financial statements.
In December 2016, 421 Kent Development LLC ("421
Kent"), the property company for the Group's Oosten project, terminated its contract with its general contractor. The general
contractor and various subcontractors have filed lawsuits against 421 Kent and the Company for approximately US$22.0 million, in
aggregate, plus punitive damages. In addition, the general contractor filed mechanic's liens against 421 Kent and the Company for
approximately US$8.0 million. 421 Kent has answered the claims and believes the contractors' claims and liens are without merit
and intends to contest vigorously such claims. At this stage of the proceedings, 421 Kent cannot predict the outcome of this lawsuit
or a judgment against 421 Kent, whether in whole or in part, may result in a loss, if any. An estimate for the reasonably possible
loss or a range of reasonably possible losses cannot be made at this time.
In May 2015, XIN Development Management East, LLC ("XDME")
filed an arbitration claim for not less than US$10.0 million which was subsequently reduced for the purpose of a prior mediation
to US$8 million against Wanks Adams Slavin Associates LLP ("WASA"), the design company for the Group's Oosten project.
WASA has asserted a total of approximately US$2.0 million in counterclaims. XDME believes WASA's counterclaims are without merit
and intends to contest vigorously such claims. On November 26, 2018, XDME reconciled with the design company WASA and settled the
claim.
|
23.
|
Concentration of risk
|
The Group's operations are conducted mainly in the
PRC. Starting in 2012, a relatively smaller portion of the Group's operations is conducted in the United States. Accordingly, the
Group's business, financial condition and results of operations is primarily influenced by the political, economic and legal environments
in the PRC and by the general state of the PRC economy.
The Group's operations in the PRC are subject to special
considerations and significant risks. These include risks associated with, among others, the political, economic and legal environments
and foreign currency exchange. The Group's results may be adversely affected by changes in the political and social conditions
in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency
conversion and remittance abroad, and rates and methods of taxation, among other things.
The Group transacts most of its business in RMB, which
is not freely convertible into foreign currencies. All foreign exchange transactions take place either through the PBOC or other
banks authorized to buy and sell foreign currencies at the exchange rates quoted by the PBOC. Approval of foreign currency payments
by the PBOC or other institutions requires submitting a payment application form together with suppliers' invoices, shipping documents
and signed contracts.
On July 21, 2005, the PRC government changed its decade-old
policy of pegging the value of the RMB to the US$. Under the new policy, the RMB is permitted to fluctuate within a narrow and
managed band against a basket of certain foreign currencies. This change in policy has resulted in a 15.7% appreciation of the
RMB against the US$ from July 21, 2005 to December 31, 2019.
To the extent that the Company needs to convert US$
into RMB for capital expenditures and working capital and other business purposes, appreciation of RMB against US$ would have an
adverse effect on the RMB amount the Company would receive from the conversion. Conversely, if the Company decides to convert RMB
into US$ for the purpose of making payments for dividends on ordinary shares, strategic acquisitions or investments or other business
purposes, appreciation of US$ against RMB would have a negative effect on the US$ amount available to the Company. In addition,
a significant depreciation of the RMB against the US$ may significantly reduce the US$ equivalent of the Company's earnings or
losses.
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of shares data)
The Group offers certain homebuyers seller-financing
arrangements. All the homebuyers that entered into such arrangements were subject to credit verification procedures. In addition,
accounts receivable balances are unsecured, but monitored on an ongoing basis via the Group's management reporting procedures.
The Group provides longer payment terms to particular home buyers after applying strict credit requirements based on the Group's
credit policy. As of December 31, 2018 and 2019, there is no concentration of credit risk with respect to receivables and the Group
does not have a significant exposure to any individual debtor.
In 2013, PRC banks tightened the conditions on which
mortgage loans are extended to homebuyers. Therefore, mortgage loans for homebuyers have been subject to longer processing periods
or even denied by the banks. The Group monitors its homebuyers' outstanding mortgage loans on an ongoing basis via the Group's
management reporting procedures and took the position that contracts with underlying mortgage loans with processing periods exceeding
one year shall not be considered when recognizing revenue on an over time basis (Note 2(h) for further detail). As a result, sales
contracts of 280 apartments were excluded when determining revenue to be recognized in 2019.
In addition, no single customer or supplier accounted
for more than 10% of revenue or project expenditures for the years ended December 31, 2017, 2018 and 2019.
|
24.
|
Non-controlling interests
|
As of December 31, 2018, the non-controlling interests
consisted of the following:
|
|
Ownership
|
|
|
December 31,
2018
|
|
|
|
|
|
|
US$
|
|
Shaanxi Zhongmao Economy Development Co., Ltd.
|
|
|
34.02
|
%
|
|
|
3,264,319
|
|
Taicang Pengchi Real Estate Co., Limited. (Note 18 (a))
|
|
|
83.00
|
%
|
|
|
(25,096,542
|
)
|
Suzhou Xinyuan Wanzhuo Real Estate Co., Ltd. (Note 18 (a.b))
|
|
|
80.00
|
%
|
|
|
(27,912,339
|
)
|
Henan Renxin Real Estate Co., Ltd.
|
|
|
49.00
|
%
|
|
|
—
|
|
Suzhou Yefang Real Estate Co., Limited. (Note 18(a.b))
|
|
|
79.99
|
%
|
|
|
(11,652,185
|
)
|
Others
|
|
|
|
|
|
|
(3,877,921
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
(65,274,668
|
)
|
As of December 31, 2019, the non-controlling interests
consisted of the following:
|
|
Ownership
|
|
|
December 31,
2019
|
|
|
|
|
|
|
US$
|
|
Shaanxi Zhongmao Economy Development Co., Ltd.
|
|
|
34.02
|
%
|
|
|
6,285,895
|
|
Xinyuan Property Management Service (Cayman) Ltd.
|
|
|
32.50
|
%
|
|
|
(28,398,921
|
)
|
Taicang Pengchi Real Estate Co., Limited. (Note 18 (a))
|
|
|
83.00
|
%
|
|
|
(31,228,046
|
)
|
Suzhou Xinyuan Wanzhuo Real Estate Co., Ltd. (Note 18 (a.b))
|
|
|
80.00
|
%
|
|
|
(34,280,307
|
)
|
Henan Renxin Real Estate Co., Ltd.
|
|
|
49.00
|
%
|
|
|
—
|
|
Suzhou Yefang Real Estate Co., Limited. (Note 18(a.b))
|
|
|
79.99
|
%
|
|
|
(11,463,297
|
)
|
Others
|
|
|
|
|
|
|
(2,565,707
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
(101,650,383
|
)
|
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of shares data)
Since January 2020, the coronavirus pandemic (“the
COVID-19”) has spread across China and other countries, governments have implemented a series of measures including travel
restrictions and quarantines to contain COVID-19, which adversely affected the real estate industry where the Group operates. We
currently believe our first quarter results of operations will be negatively impacted by these developments. The development and
evolution of the COVID-19 in China and globally still has great uncertainty in the duration and severity, which may further amplify
and delay the impact on the recovery of the real estate industry. Given the uncertainty about the situation, the Group currently
cannot estimate the impact to the 2020 financial performance and cash flows.
|
26.
|
Condensed financial information of the Company
|
The condensed financial statements of Xinyuan Real
Estate Co., Ltd. have been prepared in accordance with U.S. GAAP. Under the PRC laws and regulations, the Company's PRC subsidiaries
are restricted in their ability to transfer certain of their net assets to the Company in the form of dividend payments, loans
or advances. The amounts restricted include paid-in capital and statutory reserves, as determined pursuant to PRC generally accepted
accounting principles, totaling US$879,070,803 as of December 31, 2019 (2018: US$777,376,696).
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of shares data)
Condensed Balance Sheets
|
|
Year ended December 31
|
|
|
|
2018
|
|
|
2019
|
|
|
|
US$
|
|
|
US$
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
93,606,791
|
|
|
|
28,591,381
|
|
Other receivables
|
|
|
665,428
|
|
|
|
10,928
|
|
Other current assets
|
|
|
250,569
|
|
|
|
77,649
|
|
Due from subsidiaries
|
|
|
667,811,964
|
|
|
|
455,222,231
|
|
Due from related parties
|
|
|
348,076
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
762,682,828
|
|
|
|
483,902,189
|
|
|
|
|
|
|
|
|
|
|
Investments in subsidiaries
|
|
|
1,142,335,163
|
|
|
|
1,338,730,125
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
|
1,905,017,991
|
|
|
|
1,822,632,314
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Short-term bank loan
|
|
|
—
|
|
|
|
19,900,000
|
|
PRC income tax payable
|
|
|
13,388
|
|
|
|
13,388
|
|
PRC other tax payable
|
|
|
902,190
|
|
|
|
902,190
|
|
Other payable and accrued liabilities
|
|
|
24,090,605
|
|
|
|
27,612,109
|
|
Current portion of long-term bank loan and other debt
|
|
|
397,039,358
|
|
|
|
423,131,157
|
|
Payroll and welfare payables
|
|
|
2,817,136
|
|
|
|
2,220,113
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
424,862,677
|
|
|
|
473,778,957
|
|
|
|
|
|
|
|
|
|
|
Long term bank loan
|
|
|
3,178,000
|
|
|
|
100,440,000
|
|
Other long-term debt
|
|
|
796,606,833
|
|
|
|
558,111,718
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,224,647,510
|
|
|
|
1,132,330,675
|
|
|
|
|
|
|
|
|
|
|
Shareholders' equity
|
|
|
|
|
|
|
|
|
Common shares, $0.0001 par value:
|
|
|
|
|
|
|
|
|
Authorized-500,000,000 shares, issued and outstanding- 107,875,468 shares for 2019 (2018: 119,805,636 shares)
|
|
|
16,399
|
|
|
|
16,410
|
|
Treasury shares
|
|
|
(87,639,088
|
)
|
|
|
(113,719,964
|
)
|
Additional paid-in capital
|
|
|
532,117,479
|
|
|
|
543,290,577
|
|
Retained earnings
|
|
|
235,875,691
|
|
|
|
260,714,616
|
|
|
|
|
|
|
|
|
|
|
Total shareholders' equity
|
|
|
680,370,481
|
|
|
|
690,301,639
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
|
1,905,017,991
|
|
|
|
1,822,632,314
|
|
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of shares data)
Condensed Statements of Comprehensive Income
|
|
Year ended December 31
|
|
|
|
2017
|
|
|
2018
|
|
|
2019
|
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
General and administrative expenses
|
|
|
(13,781,596
|
)
|
|
|
(9,877,059
|
)
|
|
|
(9,509,893
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(13,781,596
|
)
|
|
|
(9,877,059
|
)
|
|
|
(9,509,893
|
)
|
Interest expense
|
|
|
(65,387,198
|
)
|
|
|
(105,990,420
|
)
|
|
|
(107,382,764
|
)
|
Interest income
|
|
|
3,200,520
|
|
|
|
1,221,465
|
|
|
|
1,682,189
|
|
Net (loss)/gain on debt extinguishment
|
|
|
(15,879,702
|
)
|
|
|
3,267,457
|
|
|
|
536,011
|
|
Gain on short-term investments
|
|
|
—
|
|
|
|
—
|
|
|
|
27,099
|
|
Other expenses/(income)
|
|
|
1,114,517
|
|
|
|
(11,135,488
|
)
|
|
|
(20,106,250
|
)
|
Equity in profit of subsidiaries, net
|
|
|
154,361,010
|
|
|
|
195,548,594
|
|
|
|
203,098,135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations before income taxes
|
|
|
63,627,551
|
|
|
|
73,034,549
|
|
|
|
68,344,527
|
|
Income taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to common shareholders
|
|
|
63,627,551
|
|
|
|
73,034,549
|
|
|
|
68,344,527
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income/(loss), net of tax of nil
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
63,908,624
|
|
|
|
(59,347,915
|
)
|
|
|
(20,044,827
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income attributable to shareholders
|
|
|
127,536,175
|
|
|
|
13,686,634
|
|
|
|
48,299,700
|
|
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of shares data)
Condensed Statements of Cash Flows
|
|
Year ended December 31
|
|
|
|
2017
|
|
|
2018
|
|
|
2019
|
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
63,627,551
|
|
|
|
73,034,549
|
|
|
|
68,344,527
|
|
Adjustment to reconcile net income to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in profit of subsidiaries, net
|
|
|
(154,361,010
|
)
|
|
|
(195,548,594
|
)
|
|
|
(203,098,135
|
)
|
Stock based compensation expense
|
|
|
4,266,373
|
|
|
|
3,152,908
|
|
|
|
3,782,307
|
|
Amortization of deferred charges
|
|
|
4,036,412
|
|
|
|
7,415,821
|
|
|
|
7,445,276
|
|
Loss on extinguishment of debt
|
|
|
15,879,702
|
|
|
|
(3,267,457
|
)
|
|
|
(536,011
|
)
|
Other receivables
|
|
|
—
|
|
|
|
(665,428
|
)
|
|
|
654,500
|
|
Other current assets
|
|
|
(2,214
|
)
|
|
|
(203,789
|
)
|
|
|
172,920
|
|
Other payable and accrued liabilities
|
|
|
4,874,134
|
|
|
|
7,342,974
|
|
|
|
(291,915
|
)
|
Payroll and welfare payables
|
|
|
2,893,230
|
|
|
|
(590,356
|
)
|
|
|
(597,023
|
)
|
Amount due from related parties
|
|
|
(561,872
|
)
|
|
|
213,796
|
|
|
|
348,076
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(59,347,694
|
)
|
|
|
(109,115,576
|
)
|
|
|
(123,775,478
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in due from subsidiaries
|
|
|
(326,904,897
|
)
|
|
|
53,143,354
|
|
|
|
212,589,733
|
|
Proceeds from short-term bank loans
|
|
|
24,294,636
|
|
|
|
—
|
|
|
|
19,900,000
|
|
Repayments of long-term bank loans
|
|
|
—
|
|
|
|
(13,250,000
|
)
|
|
|
(110,311,908
|
)
|
Proceeds from long-term bank loans
|
|
|
—
|
|
|
|
3,178,000
|
|
|
|
100,440,000
|
|
Proceeds from other long-term debts
|
|
|
603,179,617
|
|
|
|
200,000,000
|
|
|
|
300,000,000
|
|
Repayment of other long-term debts
|
|
|
(201,002,731
|
)
|
|
|
—
|
|
|
|
(413,300,000
|
)
|
Purchase of treasury shares
|
|
|
(14,058,280
|
)
|
|
|
(19,846,720
|
)
|
|
|
(26,080,876
|
)
|
Dividends to shareholders
|
|
|
(26,090,734
|
)
|
|
|
(25,739,147
|
)
|
|
|
(19,647,356
|
)
|
Payment of financing cost
|
|
|
(26,952,084
|
)
|
|
|
(4,082,815
|
)
|
|
|
(2,075,789
|
)
|
Purchase of shares under RSU plan
|
|
|
—
|
|
|
|
(7,797,949
|
)
|
|
|
(2,920,216
|
)
|
Proceeds from exercise of stock options
|
|
|
6,111,912
|
|
|
|
1,390,666
|
|
|
|
166,480
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
38,577,439
|
|
|
|
186,995,389
|
|
|
|
58,760,068
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease)/ increase in cash and cash equivalents
|
|
|
(20,770,255
|
)
|
|
|
77,879,813
|
|
|
|
(65,015,410
|
)
|
Cash and cash equivalents, at the beginning of the year
|
|
|
36,497,233
|
|
|
|
15,726,978
|
|
|
|
93,606,791
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, at end of the period
|
|
|
15,726,978
|
|
|
|
93,606,791
|
|
|
|
28,591,381
|
|
|
(a)
|
Basis of presentation
|
In the company-only financial statements, the Company's
investment in subsidiaries is stated at cost plus its equity interest in undistributed earnings of subsidiaries since inception.
The company-only financial statements should be read in conjunction with the Company's consolidated financial statements.
The Company records its investment in its subsidiaries
under the equity method of accounting as prescribed in ASC 323, Investment-Equity Method and Joint Ventures. Such investment is
presented on the balance sheet as "Investments in subsidiaries" and share of the subsidiaries' profit or loss as "Equity
in profit of subsidiaries, net" on the condensed statements of comprehensive income.
XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in US$, except for number of shares data)
The subsidiaries did not pay any dividends to the Company
for the periods presented.
|
(b)
|
Related party transactions
|
As of December 31, 2018 and 2019, the Company had
US$551,155,875 and US$338,566,142 due from its wholly-owned subsidiaries. These amounts mainly reflect intercompany loans from the Company to Xinyuan Real Estate, Ltd. While
intercompany loans have no fixed payments terms, the Company has a legal enforceable right to demand payment at any time, and
Xinyuan Real Estate, Ltd. has the ability to repay the outstanding balance on demand.
In 2013, the Company also entered into a separate loan
facility agreement with XIN Development Group International Inc. Pursuant to the agreement, the Company will provide a loan facility
to XIN Development for the period from July 1, 2013 to January 18, 2018 amounting to US$50,000,000 at 17.5% per annum. As of December
31, 2019, the Company has US$116,656,089 (2018: US$116,656,089) including accrued interest of US$67,554,210 (2018: US$67,554,210),
due from XIN Development under this loan facility.
Except for those disclosed in the Company’s condensed financial information, the Company does not have significant
commitments or long-term obligations as of the period end presented.
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