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- Evergrande Group, the real-estate giant that's $300 billion in debt, has a soccer team that's been dominating the standings for years.
- But the team, Guangzhou FC, has also been losing hundreds of millions of dollars every year.
- Earlier this month, Dan Wang and Daniel Fan, Bloomberg Intelligence analysts, valued the group's soccer business at zero.
- See more stories on Insider's business page.
For the last 10 years in Chinese soccer, the name "Evergrande" has meant victory.
Guangzhou FC, which is owned by real-estate giant Evergrande, has been dominating the Chinese Super League – China's highest tier of professional soccer. It's won the league eight times in the last decade, holding the championship title seven years in a row, while claiming first place in the Asian Football Champions League in 2013 and 2015.
Its meteoric rise to the top was fuelled by rivers of cash from Evergrande Group ever since the developer's chairman, Hui Ka Yan, acquired the team in 2010. He hired World Cup-winning manager Marcello Lippi in 2012 and later replaced him with Fabio Cannavaro, a retired Italian soccer legend who won the World Cup in 2006 under Lippi.
In 2016, Guangzhou FC made history for signing Jackson Martinez from Atlético Madrid for an Asian record of $48.6 million.
Before Hui bought the team in 2010, it was worth $16 million. Five years and five championships later, Guangzhou FC's valuation skyrocketed to $3 billion, and it made plans to be listed publicly.
But Evergrande's star team has also been incurring massive losses for the real-estate group.
Evergrande's soccer businesses operate at a loss of $155 million to $310 million a year, reported Bloomberg. Earlier this month, Dan Wang and Daniel Fan, Bloomberg Intelligence analysts, valued the group's soccer business at zero.
Last year, Evergrande announced plans to delist its soccer arm after four straight years of financial losses.
Hui is not the only Chinese property developer making major investments in soccer teams. Real-estate companies own or have stakes in at least nine Chinese Super League clubs, reported Shanghai-based Yicai Global. For example, Hebei FC has been owned by China Fortune Land Development since 2015.
The frenzy to get into soccer was largely driven by President Xi Jinping's 2015 announcement that he wanted to grow China's soccer scene and make its teams "among the world's best." Trying to curry favor with the government, companies injected hundreds of millions into clubs.
After the announcement, broadcasting rights for the Chinese Super League - which cost $13 million a year in 2015 - ballooned to a total $1.3 billion for the next five years, reported Forbes.
But pumping money into soccer hasn't paid off for investing companies, even if their teams are winning games. Jiangsu FC, owned by ecommerce giant Suning, collapsed in March just after ousting Guangzhou FC to be last year's Chinese Super League champions. It was the same team that offered Real Madrid's Gareth Bale a $1.35 million weekly salary in 2019.
Now, as the world watches Evergrande Group teeter on the brink of collapse with $300 billion in debt, Guangzhou FC, too, is cracking apart.
The club's general manager, Gao Han, issued a letter earlier this month asking municipal governments to take over some control of Guangzhou FC, saying Evergrande could not sustain the club financially. State authorities are considering the offer, reported Bloomberg.
Meanwhile, a $1.8 billion stadium, meant to be Guangzhou FC's home, is in shambles as Evergrande stalls construction projects, and club manager Cannavaro departed the team on Tuesday amid the real estate giant's liability woes.