Bill Zima - ICR, Investor Relations Lizhou Zhang - Chief Executive Officer Helen Zhang - Chief Financial Officer

Matthew Larson - Morgan Stanley Karen Kwan - Deutsche Bank

Good day, everyone. And welcome to the Xinyuan Real Estate Company Ltd First Quarter 2017 Earnings Conference Call. Please note that today’s call is being recorded. I would now like to turn the conference over to Mr. Bill Zima of ICR. Please go ahead, sir.

Hello, everyone. And welcome to Xinyuan’s first quarter 2017 earnings conference call. The Company’s first quarter earnings results were released earlier today and are available on the Company’s IR Web site as well as on Newswire services. Before we continue, please note that the discussion today will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, our results will be materially different from the views expressed today. Further information regarding these and other risks and uncertainties is included in our registration statement in our Form 20-F and other documents filed with the U.S. Securities and Exchange Commission. Xinyuan does not assume any obligation to update any forward-looking statements, except as required under applicable law. Today you will hear from Mr. Lizhou Zhang, the Company’s Chief Executive Officer, who will comment on our operating results. He will be followed by Ms. Helen Zhang, the company’s Chief Financial Officer, who will provide some additional color on Xinyuan’s performance, review the Company’s financial results, and discuss the financial outlook. Following management’s prepared remarks, we will open up the call to questions. With that said, I would now like to turn the call over to Xinyuan’s CEO, Mr. Zhang. Please go ahead.

Thank you, Bill. Good morning and thank you all for joining our first quarter 2017 earnings conference call. We are pleased to report the first quarter 2017, the financial results were in line with expectations. Despite ongoing government restriction policies, contract sales grew 9% compared with Q1 last year, and revenue increased 20% compared with the same quarter last year. This will derived by improved ASP and healthy sales from our New York based Oosten project, which contributed over 20% of our total sales this quarter. The majority of our divestment project in China performed in line with our budgets in the first quarter, and we maintained portion of this with respect to unit sales volume and operating expenses activities given the current environment. We were pleased to refinance some of our debt, which highlights our efforts to improve our debt structure and manage interest over the longer term. While China’s– the leasing rate environments has impacted the strength of our June sales, we are recovering with our longer term opportunities as we're executing important initiatives that will drive our financial performance as market condition improve. We were also pleased to pay our 21st consecutive quarterly in dividends and our recent 14 million shares repurchase announcement demonstrates our commitment to deliver value for our shareholders. Now, please allow me to turn the call over to our CFO, Mr. Helen Zhang. Helen, please go ahead.

Thank you, Mr. Zhang. Hello everyone and welcome to Xinyuan's first quarter 2017 earnings conference call. I will take you through the financial results for this quarter, further discuss our latest operations initiatives and conclude by updating you on financial outlook for Q2 this year. Total revenue increased to 19% to $281 million from [technical difficulty] to $35 million in the first quarter of 2016. The revenue increase was driven by an increase commercial sale as well as revenues from U.S. based Oosten project. Contract sales increased 9% to $305 million from $280 million in the first quarter of 2016. Again, this is reflective of strong demand from commercial property, which is not affected by the government’s prior restrictions. Sales in the U.S. totaled $55 million in the first quarter of 2017. The average selling price per square meter sold in China was about RMB12,000 in the first quarter of 2017 compared to about RMB8,000 in the same period last year. The ASP increase was due to the product mix of units sold and the Company's strategic adjustment effort to maintain pricing stability. SG&A expenses, as a percentage of total revenue, decreased to 12.6% from 13.4% in the first quarter of 2016 due to an effort to decrease operating expenses. As a result of their box items, net income increased to $7.4 million from $6.9 million in the first quarter of 2016. Diluted net earnings per ADSs attributable to shareholders were $0.11 compared to $0.09 in the first quarter 2016. The Company repurchased about 1.4 million ADSs at a total cost of about $7.2 million in the first quarter of 2017. Balance sheet, as of March 31st, the Company's cash and cash equivalents, including restricted cash, increased to $1.2 billion from $900 million as of December 31, 2016. Total debt outstanding was $2.3 billion, an increase of $233 million compared to $2.1 billion at the end of first quarter of 2016. The balance of the Company's real estate property under development at the end of this first quarter was $1.8 billion compared to $1.7 billion at the end of the fourth quarter of 2016. On project update, during the first quarter of 2017, our Chinese projects continue to on track. We paid about RMB1.3 billion on land acquisition or as equity to property fund in the first quarter for a total of six projects old and new. We also made good progress on our New York based -- our Brooklyn based the Oosten project was past delivered 38 units with revenue of about $55 million. As of the end of this March, with total units sold and revenue of this project have reached 144 units and $217 million respectively, and a construction loan has been completely paid off. Most closed buyers have moved in. Our midtown Manhattan project completed demolition, escalation and foundation work has been done. We successfully closed 108 million construction loans from a major commercial bank. Where our Flushing Queens project, the Company has selected its general contractor and is in the planning stages and contract development. We’re also in close discussion with several financial institutions regarding construction financing in order to commence construction. Commercial properties, apart from our residential product, we’re also delighted to report that our two major commercial properties located in Zhengzhou and Xi'an was in total plot area of 60,000 square meters are both enjoying an occupancy rate of around 95%, and we are working on six more commercial projects with a total plot area of 85,000 square meter during course of 2017. Although, the accounting method of U.S. GAAP doesn’t allows us to book gain in fair value of investment and properties, these commercial properties would contribute stable cash flow and broader reputation for the Company. Debt refinancing and subsidiary leasing, since our last earnings call, we have made a contributed effort to improve our balance sheet. We completed our debt refinancing through an issuance of $300 million 7.75% senior notes due 2021 at the end of February to further optimize our financial structure. Later, our property management service entity, Xinyuan Technology Service Corporation Limited accelerated its listing on the National Equities Exchange and Quotations in China. The listing enhances the Company’s publicity and allows companies listed there to complete a private equity offering with institutions. By now, Xinyuan Technology Service has not created any of its shares listing institutional investors. And once such transactions occur in the future, the Company is planning to remain as its controlling shareholder. Now let’s move to dividend and share repurchase. During the first quarter, we repurchased about 1.5 million ADS’s at a total cost of about $11.2 million. We also announced the cash dividend for the first quarter of 2017 of $0.05 per common share or $0.10 per ADS, which will be paid to investors before June 14th to shareholders of record as of May 31st this year. We see our dividend policy as a long-term commitment for shareholders. Now, let me spend some time talking about the risk and opportunities brought by ongoing restricted policies. We’ve shift policy enforcement and tight credit controls is still taking place in key markets in China, especially Tier 1 cities, major Tier 2 cities and some of their ISPs used to benefit from up flat demand. Some latest restrictions were just published at the end of March, including presale price control, transaction restriction concession and higher threshold proposed by a mortgage and developer financing. While, we're paying due attention to our risk exposures, we're also actively seeking the best development opportunities in this round of challenge. Our inventory in top tier cities is comparatively smaller. Our products are mainly for our ready demand buyers rather than investors and speculators. We're more flexible on pricing. We have U.S. projects to ask as strong complement, and we have been enjoying the benefit of none auction none acquisitions at this moment by consolidating a smaller part of the companies with adequate cash and improved financing costs. And now, let's turn to financial forecast. As we look ahead, we continue to develop planning stage projects more cautiously given the current environment. Yet still our Q2 contract sale is expected to grow by 20% to 25% year-on-year and we expect 65% of total year sale to occur in the second half of the year. As from cities just impose restrictions this past month, so it's very possible government restrictions may announce throughout the year. We believe our financial position is strong to weather the challenges and are in position to fulfill pent up demand whereas the restrictions are lifted. For the remaining quarters of the year, our goal is to generate positive cash flow from operations, focus on optimized the pricing over China and in U.S. based unit sales, commence pre sales on four to five of our new planning stage projects, complete the land acquisition of merger and acquisitions and move forward with the next stages of development on our New York based project. And this concludes my prepared remarks for today's call. And operator, we're now ready for questions.

Thank you [Operator Instructions]. We'll take our first call from Matthew Larson from Morgan Stanley.

I guess the only question I have, I didn’t hear the whole conference call, was the most important announcement I think you put forth this quarter was that you initiated a new $40 million share buyback, which is a pretty substantial by any measure, particularly because the float is a lot less than your market cap. I see you bought 1.7 million or so last quarter. Have you been able to execute any thus far in the second quarter, particularly since the stock price is right at its low?

Yes, we have plan to continue our buyback shares program in Q2, that’s because on the management discretion and also the market acceptance.

Second of all, if you’ve touched on this on the call, I apologize. On the Hudson Yards project that you’re breaking ground on, am I correct in saying that I’ve read that your anchor tenant is Target and it represents perhaps the largest retail lease in all of Manhattan? Is that an accurate assessment?

We’ve talked about that in the previous quarters alright.

That’s certainly something that you should and can markets, it just further validates your strategy in diversifying here in Manhattan, because for the Houston project certainly very well, it's been -- my hats off to you very well. I am calling from New York and I’ve seen it, and I’m very familiar with how strong the sales have been, question about the Flushing project. Is that still on the drawing board, as that come after Hudson yards or you’re going to try and get that going simultaneously?

The Flushing Queens project actually is still developing on track. As we have talked about in the prepared remarks, we are talking with the -- we’re in the selection of a general contractor, and also talking with different financial institutions to lock on the construction loans.

Probably the last question, I’ve been invested in your company heavily for years. And frankly you’ve done, as a Company, pretty much everything one could expect; you’ve always bought back shares; you’ve raised the dividend; you’ve performed, frankly, the stock nonetheless trades at a big discount to what one would like to see. Over that time span, and particularly in the last couple of years, you’ve done a number of large underwritings in the bond area. I think our firm might have had a hand in a couple of the private placements. The point is that you, as a firm, are paying fees to investment banks. So I would assume you’d be the type of firm that might be able to get some research coverage. At some point, I know you’re small but just think if the stock price was two or three points higher, we’re clearly should be trading, I don’t think it should be a lot more than that, but at the current level makes no sense. And one of the reason is might be there is no sponsorship of your firm. Is there any chance you could get some research coverage from some firms because of the low valuation and your longer track record?

Just we visit to the U.S., and I am happy to tell you that we have talked with some of the analysts and we’re going to have coverage from some of the U.S. firms. You are going to see the report recently.

Then I’ll just close out my questions now and let somebody else ask a few. Thanks again for your time, and I think it’s a strong quarter from what I can see so far.

[Operator Instructions] We’ll take our next question from Karen Kwan from Deutsche Bank. Please go ahead.

Hi management, thank you very much for your presentation. I've got a few questions. The first question is recently, you have seen some press reports mentioning the tightened stand from NDRC for offshore bonds issuance. I'm wondering given the fact that you have already issued $300 million bonds earlier this year, is there any quota left?

We have applied a quota after $300 million at the beginning of this year, and we're lucky enough to finish the use of them. So the quota has been used up. We have enough U.S. currency with our [19.27] level. We probably don't have further plan to use another bond this year.

Can you also let us know, what was the capitalized interest in first quarter of 2017? And also, given the present policy measures in some of the cities in China, what is management's latest view on the outlook for second half property sales for the sector?

Capitalized interest for Q1 2017 was around $43 million. And if you're asking about the Q2 guidance, we'll talk about 20% to 25% over the same period last year.

And do you think the property sales environment would be better in second half of this year, or stable or a bit worse -- second half this year compared to first half?

I wouldn't see that there is any signal of restriction policy lifting in Q2. As we just talked about in the prepared remarks, some of the restriction policies in some other major cities just issued in March, so I think, this restricted policy may last for the remainder of the year. But we’re hoping there might be some changes in Q3 or Q4 this year.

And we'll take our next question from John Sheehy, a Private Investor.

Can you share some comments about your expectations for land acquisitions in 2017?

Our total budget for land acquisition for the whole year would be around $10 billion.

In the restricted amount of?

$1 billion…

And you mentioned in an earlier call that you chose to delay presales from projects like in Tianjin where the market value is potentially higher than the price permitted for presale. Could you update those comments for the current situation?

I'm not sure which project you're talking about. I guess probably you're talking about project in Tianjin?

Well, earlier I think in the third quarter conference call, you said that you're going to delay presales because the price permitted for the presale was below the fair market value. So are you continuing to delay or what is the outlook for that type of situation?

If you are talking about the Tianjin project, the presales is scheduled sometime Q2.

And is there an option to complete development and then sell them as finished property that does not require presales permits and would not be subject to price limits?

According to the policy, yes we can do so. But if we’re waiting for the project to be completed and delivered to the customers that will be about 10 or 12 months later. So if we’re talking about cash inflow that might be given negative impact to the Company at the cash level. So we need to make a balance.

And can you share your plans for how to use the Company’s extremely large cash balance?

We’re going to make the operating cash positive and then start to establish a pool for land acquisitions. But of course we’ll be very cautious under the current circumstances to see whether there is good opportunity, especially from merger and acquisition for smaller size projects?

So do you expect the cash balance to remain around this level, or will you pay down some debt? Or would you use a substantial amount of the cash for the land acquisitions?

We’ve talked about the budget for land acquisitions for the year, RMB1 billion. I believe the cash balance was up and down depending on spending on land acquisition that we have our threshold and the line for the existing balance, cash balance.

So can you make any projection for what the cash balance might be around the end of the year?

I think it’s too early to talk about it. But my best expectation would be RMB2 million or RMB3 billion.

And in the first quarter, it looks like you did not booked any presales as the Zhengzhou International New City project. So can you share your expectations for the schedule of sale launches with that project?

We’ve already got the pre-sale permit for two parcels of land for that project and the second presales permit is going to be expected somewhere June. So they just started presales in Q2.

And we’ll take our next question from Richard Geronimo, a Private Investor. Richard, your line is open, please go ahead [Operator Instructions]. We’re hearing no response, we’ll move on to our next question from Craig Mary, a Private Investor. Please go ahead.

A couple of questions, I was wondering if you could explain your drop in interest income in first quarter of last year, it was $8.5 million last quarter’s $6.1 million, and this quarter is $2.6 million?

And last year, we had some land acquisition deposit for Shenzhen and Zhengzhou project, and then we didn’t acquire that land, we’re coming to the contract. That has been working with the local development and government according to the contract we'll have some interest income. So for Q1 already land acquisition deposit has been refunded. So there is no -- there is less interest income.

And second question is, has your subsidiaries been listed on the China exchanges or are they still waiting to be listed?

The credit we're talking about is just for private equity offering. We're still in the process of considering where we're going to have the Company listed in Chinese market -- in Chinese capital market or somewhere else.

And when do you expect that to occur?

It's still in discussion. There is nothing material to report.

There are no further questions. I'd like to turn the call back over to management for closing remarks.

Well thank you all for joining us on today's call, and appreciate your ongoing support. Look forward to updating you on our progress in the coming weeks and months. So thank you again.

This concludes today's presentation. Thank you for your participation. You may now disconnect.