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Everything Is Falling - The Evergrande Crisis Explained » You Are Rich
Home Trending VideosGraham Stephan Everything Is Falling – The Evergrande Crisis Explained

Everything Is Falling – The Evergrande Crisis Explained

by You Are Rich

Graham Stephan Channel

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All of this starts with the Massive Chinese Real Estate company: Evergrande.

They were originally founded in 1996, and since then – they’ve become China’s second largest property developer, specializing in residential construction, hotel operations, finance, and the health industry. Their core business is buying up empty plots of land, and then transforming them into large residential buildings….although, over time, the company ALSO diversified their business across bottled water, electric vehicles, theme parks, a streaming service…and even a soccer team!

But…there was a growing problem, and that would be: Debt. In order to PAY for the cost of building a new residential skyscraper…they need to borrow money. Most of that is generated from large banks, institutional investors, bond holders, and even homebuyers who agree to loan them money in exchange for a downpayment, or a modest interest rate over the following few years until the project is complete.

Evergrande took on $300 BILLION DOLLARS worth of debt to continue developing real estate, and this WORKED when they could build nonstop and continually roll that over to the next project…but when the Coronavirus lockdowns hit…everything was stalled. Supply chains were backed up, material cost went through the roof, labor was difficult to come by – and, as a result, their operations slowed down massively.

Investors, lenders, and bond holders don’t care if properties are half-finished and materials now cost 300% more…they want their interest payments as agreed. But, in June of 2021…Evergrande warned investors that they might not make their next payment, and that they were aggressively working to restructure debts to stay afloat.

At the same time, China issued a statement that banks should STESS TEST their exposure to Evergrande, meaning – they need to make sure they’ve not over-exposed in the event something were to happen…but the entire time, Evergrande said that they were operating as normal, there’s nothing to worry about…and it was business as usual…except, as we later found out, it wasn’t.

On September 16th, China warned that Evergrande wouldn’t pay their interest the following week…and, instead, they would be renegotiating the terms to give them more runway to operate, and sell off their buildings to raise capital..but, that presented another problem.

Evergrande was at a complete standstill. They don’t have the resources to finish their half-built projects. No one wants to buy a half-built property for fear that values might continue to drop. Evergrande stock has dropped more than 90%, and the company is behind on its obligation to more than 70,000 investors. More than one MILLION buyers of unfinished projects are in limbo, having already submitted a downpayment that could now be worth absolutely nothing.

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For business or one-on-one real estate investing/real estate agent consulting inquiries, you can reach me at [email protected]

*Some of the links and other products that appear on this video are from companies which Graham Stephan will earn an affiliate commission or referral bonus. Graham Stephan is part of an affiliate network and receives compensation for sending traffic to partner sites. The content in this video is accurate as of the posting date. Some of the offers mentioned may no longer be available. This is not investment advice. Public Offer valid for U.S. residents 18+ and subject to account approval. There may be other fees associated with trading. See Public.com/disclosures/

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