A loan of 160 million yuan has "vanished," revealing a complex and secretive transaction between Joy City (000031.SZ) and institutions such as Shanghai Caitong Asset Management Co.,Ltd.(hereinafter referred to as "Caitong Assets"),and Shanghai Huafulide Asset Management Co.,Ltd.(hereinafter referred to as "Huafulide").

The story dates back to 2014 when Joy City's predecessor,COFCO Property (hereinafter referred to as "COFCO Property"),collaborated with Shanghai Jingrun Equity Investment Fund Management Co.,Ltd.(hereinafter referred to as "Jingrun Company") to raise funds and establish Shanghai Jingshi Chengpan Investment Center (hereinafter referred to as "Jingshi Chengpan") to jointly develop the Chengdu COFCO Hongyun residential real estate project.For this purpose,they established the project company Chengdu Hongyue Real Estate Co.,Ltd.(hereinafter referred to as "Chengdu Hongyue"),holding 49% and 51% of the shares respectively.

Jingshi Chengpan was originally one of the shareholders and fund providers of Chengdu Hongyue.However,in 2018,during the project's settlement,Chengdu Hongyue provided a loan of 160 million yuan to Jingshi Chengpan in reverse.Subsequently,the funds were transferred into the account of Jingrun Company,the manager of Jingshi Chengpan.

To this day,the whereabouts of the 160 million yuan are still unknown.Although Jingrun Company acknowledges that it is the borrower,Chengdu Hongyue insists that Jingshi Chengpan must repay the loan and demands that the limited partners (LPs) of Jingshi Chengpan bear joint and several repayment obligations.This loan has led to the remaining principal of 121 million yuan and interest of the funds invested by one of Jingshi Chengpan's LPs,Caitong Assets,in the project not being repaid.

From 2022 to the present,the aforementioned parties have engaged in three lawsuits surrounding the aforementioned investment and loan.Currently,Caitong Assets has won the final judgment in two cases related to the 121 million yuan investment principal.

Various signs indicate that the loan to Jingrun Company may also have some connection with COFCO Property.A month before the loan agreement was signed,COFCO Property announced that Chengdu Hongyue intended to provide financial assistance of no more than 220 million yuan to Jingshi Chengpan.

Jingrun Company has a close relationship with COFCO Property.Jingrun Company,Shanghai Jingshi Equity Investment Fund Management Co.,Ltd.(hereinafter referred to as "Jingshi Company"),and Shanghai Jingrong Investment Holding Co.,Ltd.(hereinafter referred to as "Jingrong Company"),which are jointly controlled by natural persons Hu Jiangang and Huang Jinbo,have collaborated with COFCO Property on more than 20 real estate projects.

Jingrun Company,which admits to the loan,has become a dishonest executor in multiple cases,losing its ability to repay.According to media reports,in 2020,a project company of COFCO Property sued a minority shareholder of a real estate project in Chengdu,Shanghai Jingshi Binhua Investment Center (Limited Partnership) and its manager Jingshi Company,to repay a loan of 100 million yuan.This case also involved a subsidiary of COFCO Property transferring funds into the account of the manager Jingshi Company.

The perplexing loan issue emerged two years ago in 2022 when Chengdu Hongyue filed a lawsuit against Jingshi Chengpan at the Chengdu Intermediate Court,demanding the company and its four limited partners—Jingrun Company (GP,general partner,manager of Jingshi Chengpan),Jingshi Company (LP),Huafulide (LP),and Caitong Assets (LP)—to jointly repay the principal and interest of the 160 million yuan loan.The loan in question occurred in 2018.On May 25th of that year,Chengdu Hongyue provided a loan of 160 million yuan to Jing Shi Cheng Pan at an annual interest rate of 9.5%,with the funds to be received by Jing Run Company as designated by Jing Shi Cheng Pan.The relevant "Loan Agreement" was signed with the official seals of Chengdu Hongyue and Jing Shi Cheng Pan,as well as the personal seals of Hu Jiangang and Cao Ronggen,the legal representative of Chengdu Hongyue at that time.

Regarding the aforementioned loan,Jing Run Company claimed that Chengdu Hongyue's requirement at the time was that Jing Shi Cheng Pan must be the borrower.However,in reality,it was Jing Run Company that was the actual borrower.Therefore,the money belonged to its own liabilities and should be repaid by the company itself.

Despite this,Chengdu Hongyue insisted on pursuing Jing Shi Cheng Pan and all its partners for the repayment.

Caitong Assets and Huafulide,as defendants,argued that the loan was not approved by the partners' resolution and did not pertain to the execution of partnership affairs.Although Jing Run Company was the manager,it had no right to represent other partners.

The two companies provided evidence that Jing Run Company and the actual controller of Chengdu Hongyue had a long-term cooperation,and there was a lot of overlap between Jing Shi Cheng Pan and the senior executives of Chengdu Hongyue,such as the actual controller of the GP serving as a director of a real estate project company.Both parties could not be unaware of the compliance requirements for such real estate private equity funds,so Chengdu Hongyue was not an external trading party.

The two companies also believed that Chengdu Hongyue,knowing that Jing Run Company had no right to represent and in light of the legal provisions that fund assets are independent of the fund manager's and fund custodian's own properties,still signed a loan agreement with Jing Shi Cheng Pan and transferred the case-related funds into Jing Run Company's account,which was already illegal.

The first-instance court determined that Chengdu Hongyue was not a bona fide third party,ruling that the loan agreement was not effective against Jing Shi Cheng Pan.Chengdu Hongyue,dissatisfied with the ruling,appealed to the Sichuan High Court in November 2023.

The loan led to Caitong Assets being "trapped."

During the real estate dividend period,in order to seize territory,real estate companies were accustomed to using full leverage.Private equity funds and real estate companies jointly held the equity of project companies,with the former providing funds and the latter developing,eventually allowing the private equity funds to exit based on the profits of the real estate projects.This model was once very popular.

The cooperation between COFCO Real Estate and Jing Shi Cheng Pan dates back 10 years.In November 2014,COFCO Real Estate announced a collaboration with Jingrun Company on a real estate project,raising funds through a combination of equity and debt to invest in its wholly-owned subsidiary,Chengdu Hongyue.

In September 2015,Caitong Assets,Huafulide,Jingshi Company,and Jingrun Company re-signed a partnership agreement,with the first three parties committing to contribute 196 million yuan,500 million yuan,and 69 million yuan (not yet paid) respectively,and Jingrun Company contributing 10 million yuan to establish Jingshi Chengpan.The funds were used for the development of the Panchenggang plot project in Jinjiang District,Chengdu,by COFCO Real Estate.

Earlier that year,in April,Huafulide issued a targeted "Winning 7 Plan" through a directed investment entrusted loan,paying an A1-level investment of 500 million yuan to Jingshi Chengpan.In November 2016,the Winning 7 Plan fully recovered the investment and expected returns.

The court found that after the aforementioned partnership agreement was signed,Caitong Assets,through its asset management plan "COFCO Real Estate Plan," subscribed to A2-level limited partnership shares of Jingshi Chengpan and paid 196 million yuan to the latter as agreed.

In March 2018,Jingshi Chengpan repaid the investment principal of 196 million yuan and earnings,totaling more than 209 million yuan,to the "COFCO Real Estate Plan."

In the same month,Caitong Assets signed the "2018 Partnership Agreement" with Jingrun Company and Jingshi Company,agreeing that Caitong Assets would continue to subscribe to 138 million yuan of Jingshi Chengpan's shares through the Tongying 5 Plan and completed the payment on the day of signing the agreement.

Eighteen days after the signing of this partnership agreement,Caitong Assets announced that Jingshi Chengpan had not distributed the expected returns to the Tongying 5 Plan as agreed,and the aforementioned 138 million yuan partnership shares were due in advance,and it pursued the remaining investment principal of 121 million yuan from Jingshi Chengpan,Jingrun Company,and its related companies.

A few days before Caitong Assets pursued the investment principal,Jingshi Chengpan signed the aforementioned 160 million yuan loan agreement with Chengdu Hongyue.Since the loan did not enter Jingshi Chengpan's account,the arrangement to repay the 121 million yuan investment principal and interest to Caitong Assets also failed to be executed as planned.

Where did the funds go?

Multiple pieces of evidence obtained by the reporter collectively point to the fact that,in addition to the unknown destination of the 160 million yuan loan funds,Chengdu Hongyue also transferred dividend payments of 31.36 million yuan and 58.8 million yuan in 2017 and 2018,respectively,into Jingrun Company's account.According to the public information on the website of the Asset Management Association of China (AMAC),Jingrun Company was established in March 2014,registered and filed in January 2015,with the last update on information dated February 27,2019.Currently,the institution is in a state of being uncontactable,and its affiliated company,Jingshi Company,also shows abnormal information reporting.

Information from Qichacha shows that Jingrun Company and Jingshi Company have been listed as dishonest executors by the court 3 times and 9 times respectively,with applicants for execution including Xuhui Group and Nantong Fourth Construction.

Public information indicates that Huang Jinbo once held a position at the China representative office of Merrill Lynch Securities,and Hu Jiangang has worked at CapitaLand.At present,Jingrong Investment and Shanghai Jingrong Equity Investment Fund Management Co.,Ltd.,controlled by Hu Jiangang and Huang Jinbo,have also been included in the list of dishonest executors.The latter was a relatively active real estate fund around 2014,with a management scale of nearly 12 billion yuan at its peak.

The reporter tried to contact Hu Jiangang,but the other party's phone has been unanswered.

According to the judgment,Caitong Assets also stated that COFCO Real Estate has a long-term and profound cooperative relationship with Jingrun Company and Jingshi Company,controlled by Hu Jiangang and Huang Jinbo.

AMAC's filing information shows that there are more than 20 special private equity funds in which COFCO Real Estate and Jingrun Company and Jingshi Company have cooperated,with project cooperation in Nanjing,Chengdu,and Shenzhen.

Various signs indicate that the loan provided by Chengdu Hongyue to Jingshi Company is not only known to COFCO Real Estate but may also be related to the company.

A month before Chengdu Hongyue signed a loan agreement of 160 million yuan,COFCO Real Estate,which had not yet changed its name,announced that Chengdu Hongyue planned to provide financial assistance of no more than 220 million yuan to Jingshi Chengpan.

According to the announcement by COFCO Real Estate on April 27,2018,the sales of the Chengdu COFCO Hongyun project under the company were smooth,but the profit distribution conditions had not been met.According to the needs of business development,Chengdu Hongyue planned to provide financial assistance of no more than 220 million yuan to Jingshi Chengpan at an annual interest rate of 9.5%.

At that time,COFCO Real Estate stated that Jingshi Chengpan had a good asset status,normal financial status,excellent credit status,and the ability to repay,and the relevant risks were controllable.However,in the announcement,the company did not mention that the funds would be transferred to Jingrun Company's account.In addition,regarding the matters of Jingrun Company's dishonesty and financial assistance default,COFCO Real Estate has not disclosed any information since 2020.Journalists attempted to interview COFCO Property,but the phone at its securities affairs department has been continuously unanswered.

In addition to the aforementioned case,around the same time,COFCO Property's reverse financial assistance to minority shareholders of project companies was very frequent.The company disclosed in April 2019 that it planned to provide up to 36 financial assistances to minority shareholders of joint venture companies and holding subsidiaries,with a total amount of 34.6 billion yuan; in March 2020,it again provided financial assistance totaling 29.8 billion yuan to 32 joint venture companies and minority shareholders of holding subsidiaries.

Renowned finance and tax expert,and founder of Old Fish Finance and Tax,Yu Dongwen,explained that in the cooperation between real estate companies and private equity funds,it is common for project companies to provide "reverse loans" to fund companies with house pre-sale funds.However,risks must be controlled.First,to prevent the mixing of project funds and interest transfer,it is best to avoid a single manager operating multiple projects of private equity funds.Second,funds should be placed into escrow accounts to ensure "in through the original channel,out through the original channel." If funds are taken out of the escrow account of the private equity fund and transferred to the manager's account for "external circulation," they are detached from the control of the escrow account,"this is going to be a big problem," Yu Dongwen stated.

In January 2024,the website of the Central Commission for Discipline Inspection and the National Supervisory Commission released news that Cao Ronggen,the Party Committee Secretary and General Manager of COFCO Property,has voluntarily surrendered due to suspected serious violations of discipline and law.Cao Ronggen once served as the legal representative of COFCO Property,and he is also the legal representative of Chengdu Hongyue who signed the seal in the aforementioned 160 million yuan loan contract.

Whether Cao Ronggen's fall is related to the aforementioned reverse loan case,First Financial Daily was unable to obtain more information.

Disputes and Doubts

In the view of Chengdu Hongyue,the 160 million yuan loan was originally intended to obtain funds in advance to ensure the exit of the asset management plan of Caitong Assets.However,on the one hand,Caitong Assets does not recognize the purpose of this loan; on the other hand,the investment of Caitong Assets has not been repaid and exited through this loan.

Therefore,three cases have occurred simultaneously around the 160 million yuan loan and the 121 million yuan unpaid investment principal:

First: Chengdu Hongyue sued Jing Shi Cheng Pan and its four partners to repay the principal and interest of 160 million yuan;

Second,Caitong Assets sued Jing Shi Cheng Pan,Jing Run Company,and its affiliates,demanding the repayment of the principal and interest of 121 million yuan;Thirdly: Chengdu Hongyue's holding company,Joy City Holding Group (Chengdu) Co.,Ltd.(hereinafter referred to as "Joy City Chengdu",formerly known as COFCO Real Estate Chengdu Co.,Ltd.),counter-sued,claiming that the "Capital Supplement Contract" signed by Caithong Assets with Jingrun Company and its related parties is a typical case of implicit guarantee.Moreover,Jingrun Company and its related parties,under the guise of using the sole property of the partnership enterprise to allow specific partners to exit,requested the court to declare the capital supplement,the supplement agreement related to the principal of 138 million,and the "Equity Pledge Contract" in which Chengdu Hongyue's 49% equity was pledged to Caithong Assets as invalid.

In the latter two cases,Caithong Assets won both the first and second instance trials,and the court supported the company's claim for Jingrun Company and its related companies to supplement the principal of 121 million yuan,pay the corresponding period of interest,and the penalty for breach of contract.The first-instance court also ruled that if Jingrun Company failed to fulfill the payment obligations,Caithong Assets would have the right to dispose of 49% of the equity of Chengdu Hongyue.

Although Caithong Assets has secured the right to claim the principal and interest of 121 million yuan,as well as the equity pledge of the project company in the two cases where it has won,there is still a hidden concern that the victory may not be secure.

In the first-instance trial of the 160 million yuan loan dispute case,Caithong Assets argued that Chengdu Hongyue,Jingrun Company,and Jingshi Chengpan,which is controlled by the latter,worked together to use the form of "equity acquisition + loan agreement" to offset the equity acquisition payment with false fund loans,and maliciously reduced the equity acquisition price.The purpose was to bypass the unanimous decision-making process of all partners of the fund,with the aim of obtaining the sole property of the fund (49% equity of Chengdu Hongyue) without paying any consideration to the fund and its sole beneficiary,Caithong Assets.

The "equity acquisition + loan agreement" mentioned by Caithong Assets refers to the "Equity Transfer Agreement" signed by Jingshi Chengpan with COFCO Real Estate and Chengdu Hongyue in September 2018,which agreed that the former would transfer 49% of the latter's equity to COFCO Real Estate at a price of 286 million yuan.

According to the agreement,the transfer consideration of 286 million yuan needs to be deducted by the dividend payment of 58.8 million yuan and a loan of 160 million yuan.Based on this calculation,the payment required for Joy City Chengdu to acquire 49% of the equity of Chengdu Hongyue is only more than 67 million yuan.

This equity transfer agreement was ultimately not fulfilled.An informed person told the reporter: "Both the dividend payment and the 160 million yuan were paid into the account of Jingrun Company,not into the limited partnership account.If these two funds are deducted,it is definitely not enough to compensate for the principal of Caithong Assets,and the equity pledge cannot be lifted.The 'Equity Transfer Agreement' cannot be fulfilled." An informed person in the aforementioned case said.

The case of the real estate project cooperation between COFCO Real Estate and Jingrun Company,where a reverse loan occurred and the funds were paid into the account of the private fund manager,is not the only case of Jingshi Chengpan.In 2018,Chengdu Yiyue Real Estate Co.,Ltd.,the project company of COFCO Real Estate's Chengdu Jinniu Xiangyun,lent 100 million yuan to Shanghai Jingshi Binhua Investment Center (hereinafter referred to as "Jingshi Binhua") managed by Jingrun Company,but the funds were also paid into the account of the manager Jingshi Company by the wholly-owned subsidiary of COFCO Real Estate.

The difference is that the limited partners of Jingshi Binhua are also controlled by the actual controllers of Jingrun Company,Hu Jiangang and Huang Jinbo,and there are no other external investors.However,in the case of Jingshi Chengpan,there are two financial institutions as external investors.