Wanda lights up China's great property firesale
HONG KONG, June 2 (Reuters Breakingviews) - China's great property firesale continues. Wang Jianlin, chair of Dalian Wanda and once the richest man in the People's Republic, is offloading 48 giant shopping malls known locally as Wanda Plazas to a consortium led by Asian buyout fund PAG. The acquirors appear to be picking up another bargain from one of the country's biggest operators of commercial real estate.
Details of the deal have dripped out over the past month. According to The Paper, a state-run news portal, PAG will set up a fund worth 50 billion yuan ($7 billion) for the acquisition comprising the busiest shopping landmarks in top cities including Beijing and Guangzhou. Internet giants Tencent (0700.HK), opens new tab and JD.com (9618.HK), opens new tab as well as insurer Sunshine Life also form part of the syndicate.
These are Wang's 'old friends'. PAG led a group last year to acquire a 60% stake in Wanda's property management arm for $8.3 billion. That purchase brought in Gulf sovereign funds, Abu Dhabi Investment Authority and Mubadala, as new investors. In 2018, Tencent and JD were among investors who paid $5.4 billion for a 14% stake in Wanda's mall unit. Like PAG did in its previous deal, the Chinese technology companies may be rolling some of their previous investment, opens new tab into the new one.
Wang has been selling dozens of malls, each for about 1.5 billion yuan, roughly $210 million, according, opens new tab to Bloomberg Intelligence. The latest sale values these properties, where young Chinese taste Starbucks (SBUX.O), opens new tab or go on their first date, at just 1 billion yuan each. Similarly, the implied enterprise value on PAG's previous deal with Wanda in late 2023 and early 2024 was around half the sum, opens new tab the business was valued at three years prior.
For its part, Wanda has sold more than $30 billion in assets since 2016 including hotels and movie theatres per Dealogic. The severity of the parent group's liquidity crunch is unclear but recent bond documents show that Wanda's commercial management unit alone had up to 40 billion yuan of debt maturing this year.
Its dealings spotlight the enduring weakness in commercial property despite government stimulus aimed at restoring confidence. The proportion of distressed deals remains high and activity continues to decline, MSCI warned in its 2024 review. Yet if the discount is large enough, investors like PAG, opens new tab are among a small group still willing to make large bets.
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