Wanda’s US$9.3b sale becomes a threesome under the spotlight as it ropes in R&F with Sunac
Chinese magnate Wang Jianlin has roped in a business partner from Guangdong province to take 77 hotel assets off his hands, in a surprising 11th hour twist to the country’s largest real estate sale, as close regulatory scrutiny on the original buyer compelled initial plans to be scuttled.
Wanda Group, founded in 1988 by Wang, will sell the hotels for 19.9 billion yuan (US$3 billion) to Guangzhou R&F Properties, one of the biggest developers in Guangdong province. Sunac China, which has also been under the regulator’s spotlight, will pay 43.8 billion yuan to buy 13 tourism-related projects including theme parks from Wanda, scaling back a 63.7 billion yuan acquisition announced nine days earlier.
The signing ceremony and press conference was an exercise in spontaneity. The backdrop at the signing ceremony was changed from a tripartite event into just Wanda and Sunac, and then changed back to featuring the three companies, while the entire proceeding was delayed for more than an hour. Officials at the event did not explain the hasty changes.
Wanda and Sunac are among a handful of asset buyers in China that have been placed under the spotlight for their profligate deal making and acquisitions around the world, with the bank regulator last month instructing lenders to watch for their loan exposures.
Wanda is the biggest winner in the revised deal, as it now stands to receive 60 billion yuan in cash, double the amount it was slated for in the earlier plan as it will not need to provide any loans to any of the buyers, said DBS Vickers’ property analyst Danielle Wang.
An adjustment in the acquisition strategy “would release more liquidity for Sunac and help us reduce debt,” Sunac’s founder and chairman Sun Hongbin said, in explaining why his company dropped the plan to buy Wanda’s hotels.
Wang’s unit, Wanda Commercial Properties, has 100 billion yuan of cash on hand, with about 200 billion yuan in borrowings and outstanding bonds, he said. That adds to about 68 billion yuan of proceeds he has from selling hotels and tourism assets, which gives the company more than 170 billion yuan of cash in hand, Wang said.
“By the end of this year, Wanda Commercial will own 33 million square meters of commercial properties, with rent that will surpass 33 billion yuan in 2018,” the magnate said. “In terms of rent, Wanda Commercial will enjoy an average annual growth rate of approximately 20 per cent over the coming five years. Is Wanda Commercial running a good business? You can make your own judgement.”
Sunac has 90 billion yuan of cash as at the end of June, Sun said, adding that the company will be closely watching its debt level and cash flow to avert risks.
Meanwhile, R&F has paid 2 billion yuan as a deposit to Wanda and agreed to pay the rest of the money by the end of January 2018.
R&F, co-chaired by Zhang Li and Li Sze Lim, also owns dozens of luxury hotels in China. The company has already been building shopping complexes with Wanda since the end of 2016.
