June 11, 2021

Zacks Small-Cap Research Steven Ralston, CFA 312-265-9426 Sponsored – Impartial - Comprehensive [email protected]

scr.zacks.com Sponsored – Impartial - Comprehensive 10 S. Riverside Plaza, Chicago, IL 60606 Co. Ltd. (XIN-NYSE)

Xinyuan Real Estate Completes the OUTLOOK Construction of 5 Projects Xinyuan Real Estate develops and sells real estate properties, primarily large-scale, high quality, multi-family residential projects (multi-layer, sub- high-rise and high-rise apartment buildings) in select Tier 1 and Tier 2 cities in . Xinyuan has a Utilizing valuation analysis of comparative strong project pipeline. In China, the company property development companies operating in benefits from two macro-economic trends: a China, a target price for Xinyuan Real Estate is growing middle class and an increasing degree $7.16 per ADS, which is based on an expected of urbanization. Management has developed a price-to-book multiple of 0.49 successful standardized and scalable business model. The company has expanded internationally with a few projects in the area Current Price (12/08/20) $2.93 (Brooklyn, Manhattan and Queens) and London Valuation $7.16 (Canary Wharf).

SUMMARY DATA

52-Week High $4.12 Risk Level Average 52-Week Low $1.68 Type of Stock Small-Value One-Year Return (%) -28.51 Industry Real Estate Dev. Beta 1.54 Average Daily Volume (ADSs) 106,953 ZACKS ESTIMATES

ADSs Outstanding (million) 53.54 Market Capitalization ($mil.) $156.9 Revenue (in millions of $) Short Interest Ratio (days) 1.13 Q1 Q2 Q3 Q4 Year Institutional Ownership (%) 3.86 Insider Ownership (%) 55.0 (Mar) (Jun) (Sep) (Dec) (Dec) 2018 174 A 361 A 595 A 1,092 A 2,218 A Ann. Cash Dividend per ADS $0.10 2019 469 A 609 A 498 A 907 A 2,483 A Dividend Yield (%) 3.41 2020 126 A 284 A 655 A 925 E 1 ,990 E 2021 2,850 E 5-Yr. Historical Growth Rates Sales (%) 14.4 Earnings per ADS Earnings Per Share (%) N/M (EPADS is operating earnings before non-recurring items) Q1 Q2 Q3 Q4 Year Dividend (%) N/M (Mar) (Jun) (Sep) (Dec) (Dec)

2018 -$0.16 A -$0.11 A $0.31 A $1.09 A $1.13 A P/E using TTM EPS N/M 2019 $0.33 A $0.19 A $0.07 A $0.62 A $1.20 A P/E using 2020 Estimate N/M 2020 -$0.73 A -$0.49 A $0.44 A $0.84 E $0.04 E P/E using 2021 Estimate 2.0 2021 $1.45 E

Quarterly EPADS may not equal annual EPADS due to rounding.

© Copyright 2021, Zacks Investment Research. All Rights Reserved.

RECENT NEWS

Construction Completed of Five Residential Projects

On June 10, 2021, Xinyuan Real Estate announced that the construction of five (5) new properties has been completed, namely Xinyuan City, International New City III, Royal Spring , Zhengzhou Fancy City II and Spring Royal Palace. These projects offer high-quality accommodations that meet the needs of middle-class consumers.

Located in Shu Du New Town in the Pi Du District in Chengdu, Chengdu Xinyuan City is only 800 meters from Xinyuan City, which is served by numerous restaurants and shopping malls. The residential buildings equipped with smart home systems, which are connected to air floor heating, central air conditioning and water purification system. Chengdu Xinyuan City is also in close proximity to the Modi River, Municipal Park, Knowledge Park, Cuckoo Park, Rhododendron Park and Chuangzhi Park.

Located in the downtown city highlands of Zhengzhou, Zhengzhou International New City III provides high-quality property management services and the conveniences of a lively city. The project’s calming amenity is a courtyard.

Located in Zhangqiu, Jinan Royal Spring Palace is surrounded by the calm spaces of Baimai Springs, Yanming Springs and various parks. The property is also conveniently served by the public transportation facilities of Zhangqiu Railway Station and the public bus lines 3 and 11.The project is also close to various medical, commercial, and education facilities.

Located two kilometers east of the center of the Erqi Ecological New City, Zhengzhou Fancy City II is conveniently located to subway lines 7 and 9. Various educational and commercial facilities are nearby.

Located in Wuqing District of Tianjin, close to -Tianjin intercity railway and the six expressways, Tianjin Spring Royal Palace project covers a site area of 133,499 square meters. The 1,076-unit project is composed of 71,602 square meters in high-rise buildings, 1,291 square meters for retail stores and 71,688 square meters for multi-layer buildings. Pre-sales began in January 2018.

The staff of Xinyuan Real Estate is in the process of delivering the units to clients.

Zacks Investment Research Page 2 scr.zacks.com Report of 2020 Financial Results Delayed

Xinyuan Real Estate has not been able to file Form 20-F for 2020 by its due date (April 30th) since the company’s Audit Committee is still in the process of conducting an independent review of certain connected transactions with Xinyuan Property Management in order to ascertain if those transactions has any impact on the 2020 financial statements of Xinyuan Real Estate.

KEY POINTS

 Xinyuan Real Estate develops and sells real estate properties, primarily large-scale, high quality, multi-family residential projects in China (approximately 95% of revenues in 2019) . Benefits from two macro-economic trends  a growing middle class  an increasing degree of urbanization.  management targets select Tier 1 and Tier 2 cities  over 40% of revenues is generated from projects in Zhengzhou  potential to ramp up activity on other Tier 2 cities to Zhengzhou’s level . Developed successful standardized and scalable business model  land acquisition/plan & design/construction/pre-sales/delivery  specialize in multi-layer, sub-high-rise and high-rise apartment buildings  modern, sleek buildings; mid-sized units with contemporary interiors  contains at least one calming amenity, such as landscaped garden or courtyard  conveniently located near public transportation, shopping centers, cinemas, etc.  provides home-based smart technology services . Xinyuan Real Estate has a strong pipeline of projects  28 projects under construction and 10 in the planning stage  The company has expanded internationally . New York City area (Brooklyn, Manhattan and Queens) . London (Canary Wharf The Madison Project) . (project in land reclamation phase in a coastal city)  Xinyuan Property Management Service – majority owned subsidiary . Formed in 1998 by Xinyuan Real Estate . Listed on Hong Kong Exchange under ticker 1895 in 2019 . 30%+ top-line growth company providing:  property management services for Xinyuan Real Estate (~87% of revenues) and  property management services for third parties (~13% of revenues) . Xinyuan Real Estate holds 300,000,000 shares representing a 54% ownership position  Real estate leasing business (0.6% of revenues in 2019) . Sometimes, Xinyuan develops commercial properties (shopping malls, supermarkets, etc.) to provide ancillary community services for its large-scale residential projects . The company retains ownership of these facilities and leases out the space  Xinyuan Real Estate has an impressive history of developing and selling an increasing amount of residential projects, 60 over the last 20+ years. The company primarily operates in China, a growing country which is experiencing positive demographic trends and functions under a managed economy. Xinyuan has a strong project pipeline.

Zacks Investment Research Page 3 scr.zacks.com No. of Projects under Construction & Being Planned 50 42 40 40 28 30 22 23 24 16 20 13 12 12 12 13 14 10 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

OVERVIEW

Headquartered in Beijing, Xinyuan Real Estate develops and sells real estate properties, primarily large-scale, high quality, multi-family residential projects in strategically selected high growth cities (Tier 1 and Tier 2) in China. The company has expanded internationally with projects in the New York City area (Brooklyn, Manhattan and Queens) and London (Canary Wharf). In addition, the company acquires land for development, not only in China (primarily through public auctions of government land and negotiated land sales), but also in Malaysia (through the acquisition of 100% of a Malaysian company which owns offshore landfill development rights). Furthermore, Xinyuan develops and retains commercial properties (shopping malls, supermarkets, hotels etc.) and offers other real estate-related services, such as property management and technology-based platforms for financing, sales and smart home products.

Founded in 1997 by Yong Zhang, Xinyuan Real Estate commenced operations in Zhengzhou (pronounced jung jō), the provincial capital of Province. In late-2000, the company completed its first project, Zhengzhou Longhai Star Garden, a 239-unit residential community with multi-layer, sub- high-rise and high-rise buildings with a central garden. By 2003, the company had completed a total of three projects, which combined comprised of 1,327 units with gross floor area (GFA) of 142.6 square meters (m2). Having gained several years of operating experience, management had developed a standardized and scalable business model that provides high quality, multi-family residential properties to the burgeoning middle-class in growing urban areas of China.

Starting in 2004 and continuing to benefit from governmental policies that encouraged the development of mid-priced residential housing for middle-income consumers, Xinyuan embarked on an aggressive construction plan. Between 2004 and 2006, the company became the fastest growing residential property developer in Zhengzhou in terms of contracted sales by completing an additional eight projects, which were comprised of 3,898 units with 441.6 m2 GFA. Importantly, during this time, Xinyuan Real Estate began developing and gaining experience with larger projects (over 1,600 units with over 110,000 GFA), demonstrating the company’s ability to construct larger scale residential housing in China’s real estate development market.

Since 2006, Xinyuan Real Estate has expanded geographically into strategically-selected, high- growth Tier 2 cities within China, initially in Chengdu, Jinan and and later in Xi'an, , , Suzhou, , Beijing, Tianjin and , along with a few Tier 3 and Tier 4 cities (, Foshan, and Huzhou). Xinyuan also has projects in the Tier 1 cities of Beijing and .

Management continues to focus on multi-family residential real estate projects in the high growth cities in China. Each targeted city has relatively distinctive local regulations, market conditions and

Zacks Investment Research Page 4 scr.zacks.com customer requirements. In addition, Xinyuan Real Estate has been able to establish its brand in each of these new municipal markets.

Corporate Timeline

1997 Founded in Zhengzhou by Zhang Yong. 2006 Expanded into Jinan, Suzhou and other cities in China 2006 Selected as one of the top 100 real estate companies in China for the first time 2007 Listed on the NYSE through an IPO of ADSs 2008 Moved headquarters from Zhengzhou to Beijing 2012 Acquired three projects in the (Irvine, Reno & Brooklyn) 2014 Acquired Malaysian company which owns offshore landfill reclamation rights for 170 acres 2016 Acquired two projects in the United States (Manhattan & Queens) 2017 Launched smart technology program "Symbiosis, Win-Win, Cooperation and Sharing" 2018 Acquired 50% of ED Group (Madison Project located adjacent to Canary Wharf in London) 2018 Released new strategy "Xin Platform, Xin Ecology, and Xin Empowerment" and signed an agreement with Tencent to provide smart cloud, scene-based support applications, along with enhancements to the Xinyuan’s internet sales platform 2019 Listed Xinyuan Property Service Group (01895.HK) on .

Starting in 2012, Xinyuan has acquired and developed a series of boutique projects outside of China. In 2012, the company expanded into the U.S. market by acquiring a condominium project in Irvine, California; a project portfolio near Reno and land parcel of land in Brooklyn. Then, in 2016, Xinyuan acquired sites in Manhattan and Queens for the development of the Hudson Garden Project and Flushing Project, respectively.

In 2014, Xinyuan acquired 100% of a Malaysian company, which owns the offshore landfill development rights for 170 acres in Klebang, a coastal town in Malaysia. As of December 31, 2019, approximately 90.9 acres (or 53% of the land) has been reclaimed.

Cumulatively, Xinyuan Real Estate has an impressive project construction record.

Cumulative Number of Projects Completed 70 60 60 52 50 47 41 40 32 33 30 28 24 21 22 19 20 14 14 11 9 10 7

0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Zacks Investment Research Page 5 scr.zacks.com Real Estate Verticals

Over the years, Xinyuan has developed verticals in an array of ancillary real estate-related businesses. Complementing its core multi-family residential real estate development operations, the company has established real estate-related businesses in property management services, landscaping engineering and management, real estate consulting and marketing services, leasing management, industrial real estate operations, financing and construction services and especially technology services, particularly in home-based smart technology and the development of a blockchain-based real estate financial services platform.

In 2017, management transformed Xinyuan by establishing a new platform that integrated the company’s verticals to create a network. The formerly peripheral businesses were unified under a reframed corporate culture dubbed "Symbiosis, Win-Win, Cooperation and Sharing."

Xinyuan's Property Management Service

Considering the of the success and high growth characteristics of the company’s property management services business, management decided to list the subsidiary on the Hong Kong Stock Exchange. On October 11, 2019, 125,000,000 shares of Xinyuan Property Management Service (Cayman) Ltd. were issued to new investors at an initial public offering (IPO) price of HK$2.08 per share. The equity security is listed under code 1895.

On July 15, 2020, 50,000,000 new shares of Xinyuan Property Management Service were issued at a price of HK$2.60 per share.

Net proceeds of both offerings were used to support and expand the property management services business through operational enhancements, strategic investments and for general corporate purposes.

Xinyuan Real Estate remains the largest shareholder of Xinyuan Property Management Service, holding 300,000,000 shares (approximately 54.5% of the 550,000,000 shares outstanding).

Technology

In March 2018, Xinyuan and Tencent announced the signing of a cross-industry cooperation agreement. By both parties amalgamating their data, technology and internet efforts, the companies

Zacks Investment Research Page 6 scr.zacks.com plan to develop projects such as a smart sales platform that will enhance the self-service marketing attributes of the company’s website, along with smart home applications that will improve people's lifestyles, increase efficiencies of real estate operations and lower costs.

U.S. Equity Offering of Xinyuan Real Estate

Xinyuan Real Estate was listed on the NYSE on December 12, 2007 through an IPO (initial public offering) of 20,125,000 ADSs priced at $14.00 per ADS. Each ADS represents two common shares. Net proceeds were US$261,003,514, of which approximately 95% were utilized to acquire land use rights for property development projects with the balance used for working capital and other general corporate purposes. The offering was underwritten by Lynch, and Allen & Company.

STRATEGY - DEMOGRAPHIC

Since the company’s founding in 1997, Xinyuan Real Estate has operated in a benign economic environment in China. Until affected by the pandemic this year, China with its managed economy has benefited from 6%+ annual Gross Domestic Product (GDP) growth. As a result, the country has experienced two macro-economic trends from which Xinyuan Real Estate has benefited: a growing middle class and an increasing degree of urbanization. Even the economic anomaly caused by the pandemic (-6.8% in the first quarter of 2020) has been partially rectified through the initial rebound of 3.2% growth being reported for the second quarter.

China GDP Annual Growth Rate 16.0% 14.2% 14.0% 12.7% 12.0% 11.4% 10.6% 10.1% 10.0% 9.7% 9.6% 10.0% 9.2% 9.1% 9.4% 8.5% 8.3% 7.8% 7.7% 7.9% 7.8% 8.0% 7.3% 6.9% 6.7% 6.8% 6.6% 6.2% 6.0%

4.0%

2.0%

0.0% 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

The long-term fundamentals of a growing middle class in China and of the continuing trends toward greater urbanization remain tail winds for Xinyuan’s growth prospects. Management’s strategy is to provide high quality, multi-family residential properties to the growing middle class in the urban locations in China. In order to most benefit from the positive demographic trends, Xinyuan primarily targets Tier 1 and Tier 2 cities. However, the majority of the company’s projects are in Tier 2 cities where the cost of real estate development projects (land and construction costs) is more reasonable than in expensive Tier 1. In addition, management targets select Tier 2 cities where the growing middle-class and urbanization trends are strong. On occasions, management undertakes a few viable opportunities that appear in Tier 3 and Tier 4 cities, along with select international projects in major metropolitan cities (e.g. New York City and London).

Zacks Investment Research Page 7 scr.zacks.com In China, each city is classified by its GDP, political administration and population. In terms of GDP and population, a Tier 1 city has a GDP over US$300 billion and a population over 15 million residents; Tier 2: GDP between US$68 billion and US$299 billion and a population between 3 and 15 million; Tier 3: GDP between US$18 billion and US$67 billion and a population between 150,000 and 3 million. Comparable cities in the U.S. would be New York City and Los Angeles (Tier 1), Chicago and Houston (Tier 2), Phoenix and Dallas (Tier 3) and Oklahoma City and Oakland (Tier 4)

Urbanization

The long-standing urbanization trend in China has been well-documented back to 1950, predominately driven by industrialization and modernization. At one point (around 1987), the government attempted to control the rate of urban population growth. However, in the early 2000’s, the Chinese government began taking various measures to encourage the urbanization of the population. According to the National Academy of Economic Strategy, the percentage of the population living in urban areas is expected to reach 70% by 2035. On January 19, 2020, the Chinese National Bureau of Statistics released the data confirming that the rate of urbanization has reached 60.6% as of December 31, 2019.

China Degree of Urbanization 70.0% 58.5% 59.6% 60.6% 56.1% 57.4% 60.0% 53.7% 54.8% 51.3% 52.6% 48.3% 50.0% 50.0% 46.0% 47.0% 43.0% 44.3% 40.3% 41.8% 37.8% 38.2% 40.0% 36.2%

30.0%

20.0%

10.0%

0.0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Growing Middle Class

The percentage of middle class urban households has grown dramatically in China over the two decades. As China has increasingly participated in the global economy, the country’s population has experienced increasing income levels, which, in turn, has dramatically improved living standards. As more families move into the middle class, the demand for large-scale residential communities has increased, particularly affordable residential housing that appeals to those middle-income customers, namely modern, mid-sized units which both provide comfortable living quarters and are conveniently located near public transportation, shopping centers, cinemas, etc.

Middle Class Share in China 60% 54.0% 50% 38.7% 40% 30% 19.9% 20% 9.0% 10% 1.4% 2.8% 0% 1995 2000 2005 2010 2015 2020E

Zacks Investment Research Page 8 scr.zacks.com Due to the macro-economic tailwinds of a growing middle class and increasing urbanization, Xinyuan’s management is not concerned about demand. Throughout the Xinyuan Real Estate’s history, solid demand has always existed for the company’s projects, particularly since management’s focus has been and is on high quality homes for the burgeoning middle class. Macro- economic trends and Chinese government policy support management’s experience and demographically driven outlook for demand.

The challenge has been acquiring a sufficient amount of land use rights that are in attractive locations for residential development projects. Management is frequently surveying the real estate market in its targeted cities for land use rights offered by local governments through competitive auction/bidding processes and also in the secondary markets. Historically, once Xinyuan obtains pre- sales permits, management’s sales goals have been achieved. For example, as of December 31, 2019, of Xinyuan’s completed projects, 97.2% of the units had been sold. Therefore, management concentrates on ensuring that the company has sufficient inventory to sell to its target customers.

BUSINESS STRATEGY

By 2003, management had developed a standardized and scalable business model that targets middle-income consumers in strategically-selected, high-growth Tier 2 cities in China. The company has developed a portfolio of architectural plans and designs for multi-family residential projects ranging from 1,000 to 5,000 units. In addition, the plans include ancillary community facilities, such as clubhouses, retail shops and schools, in order to offer residents a lifestyle replete with conveniences. Xinyuan’s standardized mid-sized units typically range from 80 to160 square meters in gross floor area (GFA) and are affordable for middle-income consumers.

Xinyuan also standardized the property development process so as to enable rapid asset turnover, efficient capital management and strict cost control. The development process is segmented into well-defined stages: land identification; pre-planning and budgeting; land acquisition; project design; construction management; marketing and sales; and post-sales service.

Zacks Investment Research Page 9 scr.zacks.com Management maintains strict cost control by closely monitoring expenditures during the development cycle, starting with the land’s cost. Initial planning and budgeting occurs prior to the acquisition of land in order to ensure that the cost of the land allows the company to achieve its pre- set targeted returns. Schedules of each stage of the design and construction process are drawn up, and the project is monitored on a real-time basis throughout the progression of the entire development cycle, which assists in avoiding unexpected delays and cost overruns.

The efficiencies generated by the company’s standardized practices help the company to resourcefully manage capital. Typically, the development of a project commences soon after the land is acquired due to the pre-planning process. Xinyuan has completed six-story projects within 13 to 17 months from the date of land acquisition. Working capital is actively managed by coordinating receivables and expenditures across various projects. The company strives to begin pre-sales within two to four months after construction begins, which generates cash flow that can be used to fund a portion of the company’s capital requirements.

Not only do these standardized practices allow Xinyuan to generate attractive returns, but also enable the company to systematically replicate the process in an increasing number of locations.

As a result of the company’s standardized the property development process, scalable business model, portfolio of architectural plans/designs and management’s operational acumen, Xinyuan Real Estate has received many awards, which is a testament to management’s approach and capabilities for developing and successfully completing and residential projects.

Zacks Investment Research Page 10 scr.zacks.com

HIGH QUALITY RESIDENTIAL REAL ESTATE PROJECTS

Management often describes its buildings as high quality residential projects. However, that portrayal does not sufficiently convey the attributes of each project or the careful selection of each location. The corporate mantra is to provide the four dimensions of quality: “construction quality, service quality, technology quality and life quality.”

The selected locations provide services and conveniences that give the residents “the comfort of living in the middle of the city and enjoying vacation life."i Generally, sites are centrally located in attractive urban neighborhoods with close and easy access to public transportation and often near high-end office buildings and financial institutions. Consideration is given to attractive school districts and medical facilities. In addition, shopping centers are often very nearby. On seven occasions, Xinyuan has constructed shopping centers in close proximity of the building in order to provide a supermarket, retail stores, restaurants, entertainment (e.g. a movie theater) and other ancillary services to the building’s residents. The exterior of the buildings tend to be striking with modern, sleek designs. Many of the company’s buildings have been honored with building awards.

Residents have access to an array of amenities in many common areas. Starting with the hotel-style lobby, not only is there an attractive lounge area, but almost all are serviced by a 24-hour/7-day concierge. An attentive customer service center organizes community activities, such as summer movies, children's programs and other activities for residents. A children’s playroom, fully equipped fitness center, screening room and business meeting rooms are common amenities, and often, there is a landscaped rooftop, sometimes with a swimming pool. There may also be a residents’ spa facility with a sauna and steam room.

Property services at many projects is provided by Xinyuan’s former Property Service subsidiary, which now trades on the Hong Kong exchange and in which Xinyuan holds a 54% equity interest. The services provided include maintenance, gardening, cleaning and sanitation, safety and security, internet & smart technology installation and support, among others. Xinyuan has a major corporate effort to offer leading smart technologies in their real estate projects.

Most, if not all, of the company’s projects feature an area to escape from the day-to-day routine in order to enrich the spiritual life of the owners with a serene environment. This amenity varies from a landscaped garden/interior courtyard to a residents’ lounge, from spa facility/swimming pool to an adjacent peaceful park with shade trees.

Xinyuan strives to provide refined, yet comfortable residential units to middle-class consumers. The interior design of the residences is contemporary. Typically, residential units feature floor-to- ceiling glass windows that provide impressive views and deliver plenty of natural light. Generally with high ceilings, subtle textures and quality fixtures & appliances, the modern interior design of the units instill a calm ambience and provide a refined living environment.

Zacks Investment Research Page 11 scr.zacks.com

NEAR-TERM PIPELINE OF PROJECTS IN CHINA

The company has a strong pipeline of residential construction projects. At least 10 are in the planning and design stage (see listing at the end of this section) and 28 were in the construction phase as of December 31, 2019. Under the company’s standardized development cycle, after construction commences certain milestones are usually reached within 3-to-4 months that enable Xinyuan to begin pre-selling units. During the 12-to-18 month construction period, the company generally pre-sells approximately 95% of the residential units.

Number of Projects under Construction 35

29 30 28

25 21 20 19 17 17

15 11 11 10 9 10 8 7 5 5 4 5 3

0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Zacks Investment Research Page 12 scr.zacks.com Recent Commencement of Construction

Sept. 2018 Zhengzhou International New City A04 (Henan Province) April 2019 Xingyang Splendid V (Zhengzhou – Henan Province) May 2019 Foshan Xinchuang AI Int’l Science & Technology Innovation Valley I () Aug. 2019 Huzhou Town (Zhejiang Province)

Recent Initiation of Pre-Sales

July 2019 Xingyang Splendid V (Zhengzhou – Henan Province) Oct. 2019 Foshan Xinchuang AI Int’l Science & Technology Innovation Valley I (Guangdong) Nov. 2019 Zhengzhou International New City A04 (Henan Province) Dec. 2019 Huzhou Silk Town (Zhejiang Province) July 2020 Qingdao Lingshan Bay Dragon Seal Project – plot C1 ( Province) August 2020 Chengdu Xinyuan City – plot 9 ( Province) Sept. 2020 Zhengzhou Xinyuan Palace I (Henan Province)

Qingdao Lingshan Bay Dragon Seal is a 600,000 square-meter project with 183-to-284 square meter villas facing the ocean and 112-to-188 square meter apartments in the high-rise towers that overlook the sea. The community is near to 6 km of pristine coastline and close to Eastern Film and Television Industrial Park, a world-class film and television production center.

Chengdu Xinyuan City covers 301 acres with approximately 610,000 square meters of planned residential buildings equipped with smart home systems, which are connected to air floor heating, central air conditioning and water purification system. There will be four large multi-dimensional landscaped atriums. In addition, there will be 87,000 square meters of office space, 49,000 square meters of shops and 180,000 square meters of commercial shopping. The complex is close to the future Hepingjie Station of Metro Line 6 and within 800 meters of the Modi River, a Municipal Park, Knowledge Park, Rhododendron Park and Chuangzhi Park.

Zacks Investment Research Page 13 scr.zacks.com Anticipated Commencement of Pre-Sales

Tongzhou Xinyuan Royal Palace (Beijing) Xi’an Xinyuan Chang’an Royal Palace (Shaanxi Province)

Located in Tongzhou District of Beijing, Tongzhou Xinyuan Royal Palace is an 110,000 square- meter urban project designed to be a gathering area for international organizations. The units will provide comfortable living with intelligent technology and excellent service.

Located in Xi’an, a city in Shaanxi Province, Xinyuan Chang’an Royal Palace is situated on a 330,000-square-meter site. Current development plans call for nine high-rise buildings, three bungalows, one office building and a kindergarten, along with commercial facilities. Nearby are three hospitals, four schools and five parks. The site was acquired in May 2017.

Recent Completions

June 2019 Xuzhou Colorful City ( Province) Sept. 2019 Xingyang Splendid III (Zhengzhou – Henan Province) Dec. 2019 Xingyang Splendid II (Zhengzhou – Henan Province) Dec. 2019 Tianjin Spring Royal Palace I (Tianjin Province) Dec. 2019 Zhengzhou International New City I (Henan Province) Dec. 2019 Henan Xin Central II (Zhengzhou – Henan Province) Dec. 2019 Changsha Mulian Royal Palace (Hunan Province) Dec. 2019 Zhengzhou International New City II (Henan Province)

Zacks Investment Research Page 14 scr.zacks.com Anticipated Timeline for Upcoming Completions

2021 Xingyang Splendid V (Zhengzhou – Henan Province) 2021 Zhengzhou International New City A04 (Henan Province) 2021 Huzhou Silk Town (Zhejiang Province) 2021 Foshan Xinchuang AI International Science and Technology Innovation Valley I (Guangdong)

Xingyang Splendid V is an 80,486 square-meter GFA project, which is comprised of 78,220 square meters devoted for 527 residential units in high-rise buildings and 2,266 square meters dedicated to retail stores. Construction commenced in April 2019; pre-sales began in July 2019. Xinyuan expects to deliver the first units in 2021.

Zhengzhou International New City A04 is a 104,949 square-meter GFA project with 102,919 square meters for 663 residential units in high-rise buildings and 2,030 square meters for retail stores. Construction commenced in September 2018; pre-sales began in November 2019.

Huzhou Silk Town is a 118,436 square-meter GFA project, in which 113,905 square meters is dedicated to 1,262 residential units in high-rise buildings and 2,266 square meters to retail stores. Pre-sales began in December 2019.

Foshan Xinchuang AI International Science and Technology Innovation Valley I. is a 194,404 square-meter GFA project with 190,514 square meters for 540 residential units in high-rise buildings and 3,890 square meters for retail stores. Construction commenced in May 2019; pre-sales began in October 2019.

Properties in Planning Stage

Tongzhou Xinyuan Royal Palace (Beijing) Site acquired in April 2016 Pre-sales anticipated to begin in 4Q 2020 Xinyuan Chang’an Royal Palace (Xi’an) Site acquired in May 2017 Pre-sales anticipated to begin in 4Q 2020 Zhengzhou International New City Site acquired in 2017 Zhengzhou Hangmei Project Site acquired in December 2017 Canglong Royal Palace Site acquired in May 2018 Dalian International Health Technology Town II Site acquired in August 2018 Taizhou Yihe Yayuan Site acquired in May 2019 Suzhou He‘an Garden Site acquired in May 2019 Foshan Xinchuang AI International Science and Technology Innovation Valley II Site acquired in June 2019

Zacks Investment Research Page 15 scr.zacks.com

FINANCIAL ANALYSIS

Historical Perspective of Operational Growth

Xinyuan Real Estate has been ranked in the Top 100 Chinese Real Estate Developers for 15 consecutive years. Between 2000 and 2019, Xinyuan has completed 60 projects comprised of 104,129 units with a GFA of approximately 9.07 million square meters.

Cumulative Number of Units Completed 120,000 104,129

100,000 91,786 82,971 80,000 67,824

60,000 49,26550,599 42,106 40,000 30,820 23,32424,303 20,000 16,404 9,430 9,430 5,225 1,711 2,872 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Revenues

Revenues have steadily grown with exceptions of 2009 and during the 2013-2014 timeframe when revenues flattened. Both these periods coincided with downward pressure on the company’s stock, after which the stock rallied over 300% when revenues once again began to increase.

Xinyuan Real Estate Revenues 3,000 U 2,483 S 2,500 2,218 $ 1,977 2,000 1,562 M 1,500 i 1,164 915 920 l 898 1,000 688 l 357 449 450 i 500 310 62 142 o 36 n 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 s -500

Zacks Investment Research Page 16 scr.zacks.com Management believes the epidemic has temporarily postponed housing demand. Management has reported that month-by-month noticeable improvement, particularly in the last two weeks of the second quarter. Management believes that contract sales will normalize during the third quarter as pent-up demand stimulates sales.

Quarterly sales also have demonstrated seasonality with very strong sales in the fourth quarter. Over the last three years, approximately 41% of annual sales were generated in the fourth quarter. Given the pick-up in sales and management’s indications of an acceleration of sales in the second quarter conference call, one can understand why management’s 2020 guidance is attainable.

Xinyuan Real Estate Quarterly Revenues U S 1,200 1,092 $ 1,000 907

m 726 800 655 i 595 609 l 600 488 482 469 498 l 356 400 i 281 284 174 o 200 126 n s 0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q

2017 2018 2019 2020

Segment Analysis

Xinyuan Real Estate has several sources of revenues, but the overwhelming driver of revenues is real estate sales of the multi-family residential projects that the company constructs or acquires. Though the Hong Kong-listed Xinyuan Property Service is a 30%+ top-line growth business, it only accounts for about 3% of consolidated sales. And the commercial leasing business represents less than 1% of revenues, though it is recognized that the lease properties complement and enhance the value of the company’s residential projects.

Xinyuan Real Estate Company Ltd. Segments Revenues 2015 2016 2017 2018 2019

Real estate sales 1,134,467 1,524,969 1,924,561 2,139,371 2,387,032 Real estate leasing 6,573 5,946 8,733 9,585 16,129 Real estate management services income 21,611 30,023 41,738 63,447 67,488 Other revenue 1,673 687 1,875 5,148 11,984

Total revenue 1,164,324 1,561,625 1,976,907 2,217,551 2,482,633 % of Revenues 2015 2016 2017 2018 2019

Real estate sales 97.4% 97.7% 97.4% 96.5% 96.1% Real estate leasing 0.6% 0.4% 0.4% 0.4% 0.6% Real estate management services income 1.9% 1.9% 2.1% 2.9% 2.7% Other revenue 0.1% 0.0% 0.1% 0.2% 0.5%

Zacks Investment Research Page 17 scr.zacks.com Geographic Analysis

In addition, many investors concentrate an inordinate amount of time on the company’s New York projects and the Madison project in London; these projects account for approximately 10.5% of Xinyuan’s total salable properties.

Xinyuan Real Estate has a strong land bank in China. Many projects in 16 Chinese cities are under construction or in the planning phase, which will account for approximately 98.8% of future real estate sales. The residential development in China is the engine of Xinyuan Real Estate.

The mix of Xinyuan’s residential development in China is heavily skewed to Zhengzhou, where 44% of GFA is being constructed or planned. Xinyuan Real Estate has strong brand name recognition in Zhengzhou, along with substantial supporting infrastructure, having been founded in that city 23 years ago. Since 2006, Xinyuan expanded geographically into many other Chinese cities and is building up brand name recognition and infrastructure. Ultimately, in the long-term, Xinyuan Real Estate has the potential to expand into other Tier 2 cities to the same extent as in Zhengzhou.

Xinyuan Real Estate Company Ltd. Properties Under Construction and Under Planning Properties Properties under under Construction Planning Total City Tier GFA (sq. m.) GFA (sq. m.) GFA (sq. m.) %

Beijing 1 - 102,300 102,300 1.4% Chengdu 2 741,874 - 741,874 10.2% Zhengzhou 2 1,636,254 1,585,800 3,222,054 44.3% Jinan 2 566,431 - 566,431 7.8% Suzhou 2 165,388 156,653 322,041 4.4% Kunshan 2 107,935 - 107,935 1.5% Changsha 2 72,257 - 72,257 1.0% Xi’an 2 - 226,000 226,000 3.1% 3 - 70,000 70,000 1.0% Tianjin 1 144,581 - 144,581 2.0% Qingdao 2 156,531 380,000 536,531 7.4% Dalian 2 103,845 44,500 148,345 2.0% Wuhan 2 - 185,000 185,000 2.5% Huzhou 4 118,436 - 118,436 1.6% Foshan 3 194,404 262,400 456,804 6.3% Taizhou 2 - 158,354 158,354 2.2% London N/A 47,500 - 47,500 0.7% New York N/A 10,235 30,112 40,347 0.6% TOTAL 4,065,671 3,201,119 7,266,790 100.0%

Zacks Investment Research Page 18 scr.zacks.com

XINYUAN PROPERTY MANAGEMENT SERVICE

Xinyuan Property Management Service (Cayman) Ltd. (鑫苑物業服務集團有限公司) provides property management services, property operation services and pre-delivery services for many of Xinyuan Real Estate’s projects. Established in December 1998, Xinyuan Property Management Service was originally formed as Henan Xinyuan Property Management Co., Ltd. and served as the property management subsidiary of Xinyuan Real Estate. Subsequently, the subsidiary was renamed a few times (most notably to Xinyuan Technology Service Co., Ltd.in 2016 when its stock was listed on the National Equities Exchange and Quotations in China). Today, Xinyuan Property Management is listed on the Hong Kong Exchange and has over 30 branches including offices in Beijing, Shanghai, Tianjin, Suzhou, Zhengzhou, Sanya, Xi'an, Changsha, Jinan, , Chengdu, Kunshan, Xuzhou and Henan. Xinyuan Real Estate is Xinyuan Property Management Service’s largest shareholder with 300,000,000 shares representing a 54.5% ownership position.

Headquartered in Zhengzhou, Xinyuan Property Management Service (HKEX: 1895) provides property management services for residential properties, office buildings and other commercial complexes within China. These services include cleaning and sanitation, safety and security, gardening, parking space management, and maintenance services. Xinyuan Property Management Service also provides value-added property operation services, such as utility fee payment, common area resources management and delivery services to property developers. Furthermore, this company can offer pre-delivery services, including sales venue management, sales assistance, property decoration, event planning, engineering services etc. Today, it operates in five business segments (property, asset management, technology, finance and industry extension), providing a service ecosystem for the management of properties developed and under development by Xinyuan Real Estate.

After being formed in 1998, Xinyuan Property Management developed the “Six Heart Service” concept (Sincere, dedicated, attentive, attentive, caring and enthusiastic) and the “four-full” service model (all-weather, whole process, whole system, all-round) as the subsidiary was being developed to provide the property management functions of Xinyuan Real Estate. By late 2000, Xinyuan

Zacks Investment Research Page 19 scr.zacks.com Property Management passed the IS09002 quality system certification in Zhengzhou City, just in time to support Xinyuan Real Estate’s first completed project, the 239-unit residential community of Zhengzhou Longhai Star Garden. Xinyuan Property Management continued to provide traditional property management services for Xinyuan Real Estate in Zhengzhou through 2006.

Beginning 2007, Xinyuan Property Management began to expand geographically by opening a branch in Shandong. Over the following years, Xinyuan Property Management has received many awards, most recently, the “Unicorn Award for Property Service Enterprise Potential” and the “Top 50 Brand Value of Property Service Enterprises”, both in 2019. The entity has been ranked among the top 100 property service companies in China for last 11 consecutive years, ranking #14 in 2019.

In 2016, both Xinyuan Real Estate and Xinyuan Property Management began to heavily invest in advanced technologies, both for the residents and the management of the properties under the “Cloud PARK” of “Smart Property + Smart Community + Smart Home” program. An intelligent internet-based owner service platform was developed and implemented to improve the living experience for the residents, while an internal operation management system and a facility equipment management system were developed and employed to better manage and provide services to properties.

Xinyuan Property Management became a fast-growing property management service provider. The subsidiary benefitted from the robust real estate development business and actively sought contracts from independent third parties for a range of services from property management to sales assistance services. In addition, the company augmented its traditional service portfolio from traditional services with innovative technological advancements. Furthermore, the company expanded geographically, focusing on five regions (Central China, the Bohai Rim, the Yangtze River Delta, the and Southwest China). Consequently, Xinyuan Property Management Service became a national brand.

Over the last three years, revenues of Xinyuan Property Management Service have grown over 30% every year while GFA under contract has grown at a 23% CAGR. In 2019, revenues increased by 35.8%, and net income improved by 7.65%. However, an adjusted net profit (which

Zacks Investment Research Page 20 scr.zacks.com excludes the income tax effect arising from non-deductible listing expenses & share-based payments and dividends withholding tax) increased 56.5%.

As of December 31, 2019, Xinyuan Property Management Service managed approximately 37.03 million m2 GFA over 120 projects (see diagram below)ii, of which 65 properties (approximately 12.7 million m2) were developed by Xinyuan Real Estate.

On October 11, 2019, Xinyuan Property Management Service completed an initial public offering (IPO) of 125,000,000 shares priced at HK$2.08 per share. Net proceeds were HK$218,688,000 (RMB 197,228,000). The shares were simultaneously listed on the Hong Kong Exchange (HKEX) under ticker 1895. Orient Securities Co., Ltd. (a.k.a. DFZQ) and Guotai Junan International Securities acted as lead managers for the offering.

The IPO not only helped raise capital to fund Xinyuan Property Management’s rapid growth plans, but also should assist investors recognize the value of Xinyuan Real Estate’s property management service business.

On July 15, 2020, a follow-on offering (structured as a Placing Agreement) was completed resulting in the issuance of 50,000,000 shares at a price of HK$2.60 per share. Gross proceeds from the Placing were HK$130 million, and net proceeds are estimated to be approximately HK$127.2 million. Guotai Junan International Securities and Valuable Capital Ltd acted as lead managers for the offering.

Net Proceeds of both offerings were utilized to fund growth initiatives (business development, potential acquisitions and working capital) at Xinyuan Property Management Service.

Zacks Investment Research Page 21 scr.zacks.com

UNITED STATES

Xinyuan Real Estate entered into the U.S. real estate market in 2012. Initially acting opportunistically in two resale projects through off-market transactions, the company also began a property development project in Brooklyn. In 2016, two additional property development projects were begun, one in Manhattan (Hell’s Kitchen) and the other in Queens (Flushing). A specialized project team was formed in the U.S. during 2012, and today, it is comprised of seven people, who conduct project research, land valuation, contract verification etc., using local consultants and agents when necessary.

Irvine, California and Reno, Nevada

In second quarter of 2012, Xinyuan Real Estate expanded into the United States, with a resale project through a distressed sale of land parcels in Nevada. The company acquired a portfolio of land parcels for approximately US$7.4 million. The portfolio was comprised of 325 finished lots and 185 acres of undeveloped land located at eight different sites in the Northern Nevada near Reno. Then, in August 2012, Xinyuan acquired 15 finished condominium units (GFA 2,865 square meters) of a 72-unit project located in Irvine, California from a major United States developer for US$10.0 million. From 2013 to 2015, the 15 condo units were sold for approximately $11.1 million while only $2.0 million was realized from the disposition of the Nevada land parcels. By early 2015, all of the condominium and land parcels had been sold or released. Thereafter, management has only pursued developmental projects with significant multi-family residential components that are in the greater New York City area.

Oosten Project (Brooklyn)

In September 2012, Xinyuan Real Estate initiated the company’s first ground-up property development project in the United States through the acquisition of a land parcel encompassing an entire city block of raw land in Brooklyn for US$54.2 million. Dubbed the New York Oosten Project, the 8,094-square meter site is flanked by Kent Avenue and Wythe Avenue between S 8th Street and S 9th Street in the south Williamsburg waterfront neighborhood. Construction on the sub- high-rise building project commenced in November 2013. After receiving the relevant pre-sale permits from the state attorney general’s office, pre-sales began in June 2014. The $198 million Oosten Project was officially completed in December 2016 when the first 100 units were delivered. The multi-story building complex has 216 units (GFA of 30,855 square meters), including condos, townhouses, lofts, duplex-lofts and duplexes, mostly 1, 2 and 3-bedroom configurations, but also a luxury six-bedroom penthouse.

Units have sold from a low of $698,000 for a one-bedroom up to $6.5 million for the six-bedroom penthouse. As of December 31, 2019, 177 units (GFA of 21,657 square meters) had been sold for approximately US$260.1 million.

Zacks Investment Research Page 22 scr.zacks.com Hudson Garden Project (Manhattan)

In January 2016, Xinyuan Real Estate acquired a parcel of land situated over the entire length of 10th Avenue between 44th Street and 45th Street in midtown Manhattan (Hell’s Kitchen) for US$57.5 million. Dubbed the Hudson Garden Project aka BLOOM ON FORTY FIFTH, the project is comprised of 10,235 sellable and rentable square meters (110,169 square feet) for retail space, commercial space and residential units.

Target Corp. (NYSE: TGT) leased (for a 20-year term) the entire cellar level and 60% of the ground level, which accounts for 28,090 square feet of the sellable 34,903 square feet of retail/commercial space.iii In addition, a dermatologist leased 1,910 square feet of office space for a 15-year term. Management anticipates that residential pre-sales will begin later in 2020.

The Hudson Garden Project will have 92 residential condominium units situated on floors two through seven. The composition of the residential section is for 17 studio, 45 one-bedroom, 24 two- bedroom, two three-bedroom duplex, two three-bedroom penthouse and two four-bedroom duplex units.

Construction commenced in July 2017. The latest information indicates that construction has been completed up to the 6th floor. As of December 31, 2019, $123.6 million has been allocated to the Hudson Garden Project.

The RKO Project (Queens, New York)

In August 2016, Xinyuan Real Estate acquired the historic RKO Keith’s Theater in downtown Flushing (at 135-35 Northern Boulevard) for $66 million. Located at the nexus of Northern Boulevard and Main Street (135-35 Northern Blvd), the former theater originally opened on December 25, 1928 hosting acts like Clara Bow, the Marx Brothers, Bob Hope, Judy Garland, etc. before being closed in 1986. For almost 35 years, the building has remained dormant.

Xinyuan plans to transform the theater into a mixed use building with residential, retail and community components. The architect firm of GKV Architects has been engaged to develop new architectural plans and complete the project’s schematic design.

Previously, the property had been approved for a 269-condo mixed-use building with 34,615 gross buildable square meters (372,598 square feet). Xinyuan’s proposal will include more square footage allocated to hotel mixed use space.

The company continues in the pre-development phase of the ground-up development process of planning, governmental approvals and pre-development activities. Xinyuan was awarded a Certificate of Appropriateness after the Landmark Protection Committee approved the company’s landmark protection plan.

Zacks Investment Research Page 23 scr.zacks.com

After approval of the company’s architectural plans by the community board, the proposal will proceed through the Borough President, the Board of Standards and Appeals and ultimately the City Council of Flushing. Management anticipates that the project will be completed in 2022/23 timeframe.

Overview of Timeline in the United States (ground-up development projects)

Commencement of Construction

Nov. 2013 Oosten Project (Brooklyn) July 2017 Hudson Garden Project (Manhattan)

Initiation of Pre-Sales

June 2014 Oosten Project (Brooklyn)

Anticipated Initiation of Pre-Sales

4Q 2020 Hudson Garden Project (Manhattan)

Completions

2016 Oosten Project (Brooklyn)

Anticipated Timeline for Upcoming Completions

4Q 2020 Hudson Garden Project (Manhattan) 2022/23 The RKO Project (Queens, New York)

THE MADISON PROJECT (LONDON)

On March 21, 2018, Xinyuan Real Estate acquired a 50% equity stake in Madison Developments Limited (MDL) from ED Group Holding Limited for £29.50 million (approximately 46% in equity and the remainder structured as a loan). MDL is the developer of the Madison Project, a 55-story residential tower located adjacent to Canary Wharf at 223 Marsh Wall. Also known as The Madison or Meridian Gate, the 47,500-square meter (511,000 ft²) building is comprised of 423 residential apartments (319 private apartments and 104 affordable apartments), along with 425 square meters of community facilities, including an amenity level (Highline Club) with a private lounge, gym, screening room and business facilities on the 16th floor. There is also a spa and private outdoor space. The composition of the residences includes studios (from 39.86 m² starting at £604,000) and one, two and three-bedroom apartments (the latter from 123.93 m² starting at £1,616,000).

Zacks Investment Research Page 24 scr.zacks.com Permission for the project was granted in March 2015, and construction began in October 2016. When Xinyuan acquired its stake in the project, approximately 40% of the private apartments and 100% of the affordable apartments had been pre-sold. The £150 million contract for the project’s construction was awarded to Balfour Beatty.

MALAYSIA

In 2014, Xinyuan Real Estate acquired 100% of the shares of a Malaysian company, which owns offshore landfill development rights for 170 acres (approximately 687,966 square meters) in Klebang, Melaka. The project is currently in the land reclamation stage.

The reclamation work commenced in July 2018, and as of December 31, 2019, approximately 90.9 acres (or 53% of the land) had been reclaimed. Management anticipates that the reclamation work will be completed in 2020. Once the land reclamation stage is completed, Xinyuan Real Estate would have a 170-acre site of sea-front land available for the development of a multi-use project in this coastal town located on the Strait of Malacca.

It should be noted that this is Xinyuan Real Estate’s first project in Malaysia and is also the company’s first landfill reclamation project.

SHARE REPURCHASE PROGRAMS

Since 2011, Xinyuan Real Estate has been very shareholder friendly in terms of both major forms of payouts to shareholders: cash dividends and share repurchases. These dividends and share repurchases are being funded by the company’s operations, which generate substantial excess cash that can be returned to shareholders.

After the company’s IPO of ADSs on the NYSE in December 2007, there were approximately 146.8 million shares outstanding. After a few years, the share count had risen to 153.2 million due to the exercise of option and the conversion of warrants. Then, in May 2011, the Board of Directors authorized the company’s first share repurchase program. Over the ensuing years, the Board of Directors authorized continuous share repurchase plans according to the chronological authorizations listed below.

May 26, 2011 US$10 million share repurchase plan valid through May 2012 June 19, 2012 US$20 million share repurchase plan valid through June 2014 July 12, 2013 US$60 million share repurchase program valid through July 5, 2015 December 28, 2015 US$40 million share repurchase program valid through December 2017 March 21, 2017 US$40 million share repurchase program valid through December 2019 August 14, 2018 US$50 million share repurchase program valid through December 2019 May 20, 2019 US$50 million share repurchase program valid through December 2021

Consequently, shares outstanding have decreased 29.6% since 2010 to only 107.9 million shares as of December 31, 2019.

Interestingly, in September 2013, the company had purchased a cumulative total of 14,264,896 treasury shares at an average price of US$1.36. Opportunistically, management sold 12,000,000 of the treasury shares to TPG Asia as part of a private placement priced at $2.75.

Zacks Investment Research Page 25 scr.zacks.com Shares Outstanding 180.0 156.0 160.0 151.5 153.2 145.9 141.9 147.0 142.8 M 140.0 131.4 129.6 119.8 i 120.0 107.9 l l 100.0 i 80.0 o 60.0 n s 40.0 20.0 0.0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

DIVIDENDS

The Board of Directors approved the company’s first cash dividend of US$0.10 per ADS on June 20, 2011. Subsequently, beginning in April 2012, the company has had a consistent record of quarterly dividends, starting at US$0.04 per ADS, then in 2013 being raised to US$0.05 per ADS and again to US$0.10 per ADS in mid-2016. In order to manage the company’s finances prudently, the Board reduced the quarterly dividend to US$0.025 per ADS until the recovery from the economic effects of the pandemic is firmly underway.

Dividends Paid $30.0 $26.1 $25.7 M $25.0 i $20.5 $19.6 l $20.0 $15.3 l $14.7 $14.8 $15.0 i $8.8 o $10.0 $7.7 n $5.0 s $0.0 $0.0 $0.0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Zacks Investment Research Page 26 scr.zacks.com Xinyuan Real Estate Company Ltd. Ex- Dividend Ex- Dividend Dividend Pay Dividend Pay Year Date Date Amount Year Date Date Amount

2011 6/8/2011 6/20/2011 $0.10 2017 2/23/2017 3/14/2017 $0.10 2012 4/26/2012 5/15/2012 $0.04 5/26/2017 6/14/2017 $0.10 8/1/2012 8/20/2012 $0.04 8/29/2017 9/15/2017 $0.10 10/23/2012 10/31/2012 $0.04 11/29/2017 12/15/2017 $0.10 2013 2/14/2013 2/28/2013 $0.05 2018 2/27/2018 3/15/2018 $0.10 5/17/2013 5/31/2013 $0.05 6/8/2018 6/22/2018 $0.10 8/14/2013 8/30/2013 $0.05 8/24/2018 9/12/2018 $0.10 11/14/2013 11/29/2013 $0.05 11/23/2018 12/12/2018 $0.10 2014 3/5/2014 3/20/2014 $0.05 2019 2/25/2019 3/12/2019 $0.10 5/28/2014 6/12/2014 $0.05 5/31/2019 6/20/2019 $0.10 8/28/2014 9/12/2014 $0.05 8/30/2019 9/17/2019 $0.10 11/28/2014 12/12/2014 $0.05 12/17/2019 1/16/2020 $0.10 2015 3/18/2015 3/31/2015 $0.05 2020 4/16/2020 5/8/2020 $0.10 6/23/2015 7/2/2015 $0.05 6/15/2020 7/8/2020 $0.025 8/20/2015 9/9/2015 $0.05 9/14/2020 9/28/2020 $0.025 11/23/2015 12/9/2015 $0.05 12/17/2020 1/8/2021 $0.025 2016 3/11/2016 3/29/2016 $0.05 2021 5/23/2016 6/8/2016 $0.05 8/23/2016 9/8/2016 $0.10 11/23/2016 12/15/2016 $0.10

VALUATION

Generally, the appropriate valuation methodology for a property development company is based on price-to-book (P/B) due the character of the real estate industry, which historically has exhibited cyclicality. Though real estate-related enterprises usually have growing sales profiles that increase over time, periodically these companies experience negative profitability when the industry is under pressure. When the macro-economic conditions improve, the companies once again generate growing revenue streams and the companies earn profits.

Property development companies generate revenues by acquiring land, constructing structures and selling the developed property. Profits are earned when the realized selling prices exceed the land acquisition costs, basic construction costs and corporate overhead expenses. Often, property development companies have ancillary related businesses, most often property management services and leasing operations. Property development companies also tend to specialize in certain niches, differentiating themselves from commodity low-cost housing to luxurious upscale residences, from multi-family residential units to commercial buildings.

The operations of property development companies are primarily driven by the assets on the balance sheet, namely land held for development, projects under development and completed projects held for sale. Since the company’s book value is directly derived from the balance sheet, which is the engine for future earnings potential, valuation analysis based on the price-to-book ratio has traditionally been effective. Therefore, we have found that the use of price-to-book value to be a valid and appropriate valuation metric for a real estate-related company.

Zacks Investment Research Page 27 scr.zacks.com

Xinyuan Real Estate is residential real estate company operating primarily in China. Multiple public companies operate in the same space (see valuation table below), though each tends to specialize in a different sub-segment. Many offer property management services and have leasing operations, as does Xinyuan Real Estate. A couple even have hotel operations. Though Xinyuan appears unique in its specialized field of modern, multifamily residential buildings, which offer distinctive settings of refined, yet comfortable ambiance, along with technological amenities, all six companies appear to be valid comparables for valuation analysis.

Industry Comparables Pr Chg P/E Price/ Price/ EV/ YTD Ticker CFY Book Sales EBITDA

XINYUAN REAL ESTATE 33.2 XIN N/M 0.20 0.08 11.74

Industry Mean -9.2 4.7 0.49 0.73 15.25 Industry Median 0.9 2.5 0.43 0.46 5.95 S&P 500 12.9 SPX 21.0 4.57 3.11 N/A

AGILE PROPERTY HOLDINGS 5.1 3383.HK 3.6 0.53 0.43 4.62 CHINA AOYUAN PROPERTY GP. -72.2 3883.HK 2.6 0.90 0.25 6.31 GUANQZHOU R&F PROP. CO -3.3 2777.HK 2.8 0.33 0.33 8.60 K WALL INT'L HOLDINGS 5.4 0173.HK N/A 0.28 1.03 5.58 SHIMAO GROUP HOLDINGS -12.2 0813.HK 2.5 0.70 0.48 4.92 LIMITED 22.2 0272.HK 11.8 0.20 1.87 61.49

The P/B valuation range for comparable property development companies in China is between 0.20 and 0.90. Our target price for Xinyuan Real Estate is $7.16 per ADS, which is based on an expected industry average price-to-book multiple of 0.49.

It should be noted that accounting-based book value of Xinyuan Real Estate is understated. The company has a quality land bank in China, which management values in the CNY60 -70 billion range (US$ 8.9-10.4 billion)iv. Since the land bank is not a separate line item on the balance sheet, we are not able to calculate the effect, but clearly it would be additive since total assets are approximately $7.25 billion.

In addition, Xinyuan Real Estate owns 300,000,000 shares of Xinyuan Property Management Services, which is listed on the Hong Kong Exchange under the ticker 1895. Xinyuan Property Management Services last traded at 1.135 times tangible book value, we estimate that 1895’s stock appreciation would add approximately US $0.76 to Xinyuan Real Estate’s accounting-based book value for Xinyuan Property Management Services.

Zacks Investment Research Page 28 scr.zacks.com

RISKS

 Xinyuan Real Estate primarily operates in China, and therefore, the company is subject to measures taken by the PRC government to control that country’s economic growth. Some measures have been beneficial (general economic stimulus and the encouragement of urbanization) while others have adversely affected Xinyuan’s operation (such as the strict mortgage policy invoked by the PRC government to decelerate the rapid increase in housing prices in 2010). The PRC government is also able to change government policies by modifying laws, regulations and policies that could reduce the demand for consumer home purchases.  The residential property development business is capital intensive and requires access to capital (commercial bank financings, issuance of debt, etc.) for the financing of land acquisition and the property development process, particularly construction costs. Thus far, Xinyuan Real Estate has been very successful in funding its projects and repaying its loan and debt obligations. Management closely monitors the company’s leverage and proactively and continuously optimizes the structure of the company’s liabilities.  The company is in the early stages of expanding into markets outside of China, thus far, the United States, the U.K and Malaysia. Management has limited experience in markets outside of China, and there is a risk that these initial projects will be profitable.  The selling prices of the residential units have a tendency to change over time. If the projected selling price in a particular project declines significantly, the project is reviewed for a possible adjustment that, if confirmed, flows through the income statement.  Xinyuan Real Estate relies on third-party contractors to construct its projects, subjecting the company to risks associated with possible construction delays, poor work quality or uninsured events.  The current auditor review has delayed the reporting of 2020 year-end results. Based on the company’s filing, the inquiry appears to concern the accounting of inter-company revenues. The operations of the base construction business appear to be unaffected.

Zacks Investment Research Page 29 scr.zacks.com

BALANCE SHEET

Zacks Investment Research Page 30 scr.zacks.com

PROJECTED ANNUAL INCOME STATEMENTS

Xinyuan Real Estate Company Ltd. Income Statement 2016 2017 2018 2019 2020 E (in $US '000 except per share data) 12/31/2016 12/31/2017 12/31/2018 12/31/2019 12/31/2020

Real estate sales 1,524,969 1,924,561 2,139,371 2,387,032 1,862,357 Real estate management services inc. 5,946 41,738 63,447 67,488 87,735 Real estate lease income 30,023 8,733 9,585 16,129 25,000 Other revenue 687 1,875 5,148 11,984 15,000 Total Revenues 1,561,625 1,976,907 2,217,551 2,482,633 1,990,092

Costs of revenue 1,203,636 1,517,279 1,602,073 1,922,323 1,688,836 Gross profit 357,989 459,628 615,478 560,310 301,256

Expenses Selling and distribution expenses 58,214 75,724 83,592 86,761 69,422 General and administrative expenses 120,416 136,845 156,456 163,687 147,591 Total Operating Expenses 178,630 212,569 240,048 250,448 217,013

Operating income 179,359 247,059 375,430 309,862 84,243

Interest income 20,917 16,859 31,226 51,494 14,700 Interest (expense) (29,857) (66,153) (99,246) (113,775) (130,658) Exchange gain (loss) 459 757 (25,678) (7,376) (1,154) Other income 4,540 2,326 1,742 5,849 (1,152) Share of loss of equity investees (325) (1,710) (9,374) (5,416) 11,011 Gain (loss) on disposal of property - - - - 82,806 Gain (loss) on debt extinguishment (12,124) (15,880) (21,444) (8,581) (2,362) Gain (loss) on short-term investments 2,741 9,970 (2,257) 1,451 7,308 Total Other Income (Expenses) (13,649) (53,831) (125,031) (76,354) (19,501)

Income from operations before taxes 165,710 193,228 250,399 233,508 64,742 Income taxes 86,248 113,117 144,447 150,478 60,421 Net income 79,462 80,111 105,952 83,030 4,322 Net Income - Non-Controlling Interest 6,485 16,484 32,917 14,684 2,245 Net Inc. - Xinyuan R/E Stockholders 72,977 63,627 73,035 68,346 2,077

Diluted earning (loss) per share 0.53 0.48 0.57 0.60 0.02 Diluted earning (loss) per ADS 1.06 0.97 1.13 1.20 0.04

Wgted. Avg. Shares Out. - diluted 137,653 131,606 129,141 114,101 107,113 Wgted. Avg. ADS eq. Out. - diluted 68,827 65,803 64,570 57,050 53,556

Zacks Investment Research Page 31 scr.zacks.com

QUARTERLY INCOME STATEMENTS

Xinyuan Real Estate Company Ltd. Income Statement 1Q 2Q 3Q 4Q 2018 2019 2019 2019 2019 2019 (in $US '000 except per share data) 12/31/2018 3/31/2019 6/30/2019 9/30/2019 12/31/2019 12/31/2019

Real estate sales 2,139,371 N/A N/A N/A N/A 2,387,032 Real estate management services inc. 63,447 N/A N/A N/A N/A 67,488 Real estate lease income 9,585 N/A N/A N/A N/A 16,129 Other revenue 5,148 N/A N/A N/A N/A 11,984 Total Revenues 2,217,551 468,853 609,439 497,638 906,703 2,482,633

Costs of revenue 1,602,073 337,804 450,224 374,134 760,161 1,922,323 Gross profit 615,478 131,049 159,215 123,504 146,542 560,310

Expenses Selling and distribution expenses 83,592 19,406 20,633 21,067 25,655 86,761 General and administrative expenses 156,456 36,644 42,343 36,556 48,144 163,687 Total Operating Expenses 240,048 56,050 62,976 57,623 73,799 250,448

Operating income 375,430 74,999 96,239 65,881 72,743 309,862

Interest income 31,226 4,085 4,964 4,245 38,200 51,494 Interest (expense) (99,246) (24,306) (28,384) (31,338) (29,747) (113,775) Exchange gain (loss) (25,678) 3,545 (4,354) (7,655) 1,088 (7,376) Other income 1,742 94 (867) 6,493 129 5,849 Share of loss of equity investees (9,374) (1,600) (1,702) (2,142) 28 (5,416) Gain (loss) on debt extinguishment (21,444) (4,589) (1,955) (2,272) 235 (8,581) Gain (loss) on short-term investments (2,257) 1,171 505 2,486 (2,711) 1,451 Total Other Income (Expenses) (125,031) (21,600) (31,793) (30,183) 7,222 (76,354)

Income from operations before taxes 250,399 53,399 64,446 35,698 79,965 233,508 Income taxes 144,447 35,209 44,621 30,256 40,392 150,478 Net income 105,952 18,190 19,825 5,442 39,573 83,030 Net Income - Non-Controlling Interest 32,917 (1,419) 9,171 1,298 5,634 14,684 Net Inc. - Xinyuan R/E Stockholders 73,035 19,609 10,654 4,144 33,939 68,346

Diluted earning (loss) per share $0.57 0.17 0.09 0.04 0.31 $0.60 Diluted earning (loss) per ADS 1.13 $0.33 $0.19 $0.07 $0.62 1.20

Wgted. Avg. Shares Out. - diluted 129,141 118,650 114,742 113,248 109,764 114,101 Wgted. Avg. ADS eq. Out. - diluted 64,570 59,325 57,371 56,624 54,882 57,050

Zacks Investment Research Page 32 scr.zacks.com

PROJECTED QUARTERLY INCOME STATEMENTS

Xinyuan Real Estate Company Ltd. Income Statement 1Q 2Q 3Q 4Q E Estimate 2019 2020 2020 2020 2020 2020 (in $US '000 except per share data) 12/31/2019 3/31/2020 6/30/2020 9/30/20120 12/31/2020 12/31/2020

Real estate sales 2,387,032 N/A N/A N/A N/A 1,862,357 Real estate management services inc. 67,488 N/A N/A N/A N/A 87,735 Real estate lease income 16,129 N/A N/A N/A N/A 25,000 Other revenue 11,984 N/A N/A N/A N/A 15,000 Total Revenues 2,482,633 125,769 284,361 655,412 924,550 1,990,092

Costs of revenue 1,922,323 97,663 265,143 550,074 775,956 1,688,836 Gross profit 560,310 28,106 19,218 105,338 148,594 301,256

Expenses Selling and distribution expenses 86,761 6,340 15,943 20,327 26,812 69,422 General and administrative expenses 163,687 37,678 35,434 37,581 36,898 147,591 Total Operating Expenses 250,448 44,018 51,377 57,908 63,710 217,013

Operating income 309,862 (15,912) (32,159) 47,430 84,884 84,243

Interest income 51,494 4,169 4,322 3,409 2,800 14,700 Interest (expense) (113,775) (30,263) (30,434) (36,496) (33,465) (130,658) Exchange gain (loss) (7,376) (850) (1,960) 1,656 0 (1,154) Other income 5,849 (208) (1,114) (330) 500 (1,152) Share of loss of equity investees (5,416) (1,024) 473 8,851 2,711 11,011 Gain (loss) on disposal of property 0 0 0 82,806 0 82,806 Gain (loss) on debt extinguishment (8,581) (1,110) 332 (277) (1,307) (2,362) Gain (loss) on short-term investments 1,451 901 3,460 3,410 (463) 7,308 Total Other Income (Expenses) (76,354) (28,385) (24,921) 63,029 (29,224) (19,501)

Income from operations before taxes 233,508 (44,297) (57,080) 110,459 55,660 64,742 Income taxes (benefit) 150,478 (5,157) (27,021) 80,910 11,689 60,421 Net income 83,030 (39,140) (30,059) 29,549 43,972 4,322 Net Income - Non-Controlling Interest 14,684 383 (3,819) 6,181 (500) 2,245 Net Inc. - Xinyuan R/E Stockholders 68,346 (39,523) (26,240) 23,368 44,472 2,077

Diluted earning (loss) per share 0.60 (0.37) (0.24) 0.22 0.42 0.02 Diluted earning (loss) per ADS 1.20 (0.73) (0.49) 0.44 0.84 0.04

Wgted. Avg. Shares Out. - diluted 114,101 107,808 107,278 107,182 106,182 107,113 Wgted. Avg. ADS eq. Out. - diluted 57,050 53,904 53,639 53,591 53,091 53,556

Zacks Investment Research Page 33 scr.zacks.com

HISTORICAL STOCK PRICE

DISCLOSURES

The following disclosures relate to relationships between Zacks Small-Cap Research (“Zacks SCR”), a division of Zacks Investment Research (“ZIR”), and the issuers covered by the Zacks SCR Analysts in the Small-Cap Universe.

ANALYST DISCLOSURES

I, Steven Ralston, hereby certify that the view expressed in this research report accurately reflect my personal views about the subject securities and issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the recommendations or views expressed in this research report. I believe the information used for the creation of this report has been obtained from sources I considered to be reliable, but I can neither guarantee nor represent the completeness or accuracy of the information herewith. Such information and the opinions expressed are subject to change without notice.

INVESTMENT BANKING AND FEES FOR SERVICES

Zacks SCR does not provide investment banking services nor has it received compensation for investment banking services from the issuers of the securities covered in this report or article. Zacks SCR has received compensation from the issuer directly, from an investment manager, or from an investor relations consulting firm engaged by the issuer for providing non-investment banking services to this issuer and expects to receive additional compensation for such non- investment banking services provided to this issuer. The non-investment banking services provided to the issuer includes the preparation of this report, investor relations services, investment software, financial database analysis, organization of non-deal road shows, and attendance fees for conferences sponsored or co-sponsored by Zacks SCR. The fees for these services vary on a per-client basis and are subject to the number and types of services contracted. Fees typically range between ten thousand and fifty thousand dollars per annum. Details of fees paid by this issuer are available upon request.

POLICY DISCLOSURES

This report provides an objective valuation of the issuer today and expected valuations of the issuer at various future dates based on applying standard investment valuation methodologies to the revenue and EPS forecasts made by the SCR Analyst of the issuer’s business. SCR Analysts are restricted from holding or trading securities in the issuers that they cover. ZIR and Zacks SCR do not make a market in any security followed by SCR nor do they act as dealers in these securities. Each Zacks SCR Analyst has full discretion over the valuation of the issuer included in this report based on his or her own due diligence. SCR Analysts are paid based on the number of companies they cover. SCR Analyst compensation is not, was not, nor will be, directly or indirectly, related to the specific valuations or views expressed in any report or article.

Zacks Investment Research Page 34 scr.zacks.com ADDITIONAL INFORMATION

Additional information is available upon request. Zacks SCR reports and articles are based on data obtained from sources that it believes to be reliable, but are not guaranteed to be accurate nor do they purport to be complete. Because of individual financial or investment objectives and/or financial circumstances, this report or article should not be construed as advice designed to meet the particular investment needs of any investor. Investing involves risk. Any opinions expressed by Zacks SCR Analysts are subject to change without notice. Reports or articles or tweets are not to be construed as an offer or solicitation of an offer to buy or sell the securities herein mentioned.

i Xinyuan description of its Jinshuiguan City project ii Xinyuan Property Management Service Ltd. 2019 Annual Report, pages 11-12 iii Xinyuan Real Estate, 2019 Form 20-F, page 39 iv Fitch Affirms Xinyuan at 'B-'; Outlook Stable, September 30, 2020

Zacks Investment Research Page 35 scr.zacks.com