The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Ka Sing Chan
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 and JD.com 9618.HK 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 into the new one.
Wang has been selling dozens of malls, each for about 1.5 billion yuan, roughly $210 million, according to Bloomberg Intelligence. The latest sale values these properties, where young Chinese taste Starbucks SBUX.O 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 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 are among a small group still willing to make large bets.
CONTEXT NEWS
Asian private equity group PAG will establish a fund worth 50 billion yuan to acquire 48 shopping malls from Chinese developer Wanda Group, The Paper reported on May 25, citing unidentified people familiar with the situation. The Paper is a Chinese state-run news platform.
A syndicate including state lenders will provide 30 billion yuan in loans for the buyers, which include internet giant Tencent and domestic insurer Sunshine Life, the report added.
A consortium led by PAG closed a separate $8.3 billion deal to acquire a 60% stake in Wanda Group’s property management unit in September 2024. The business operates nearly 500 malls across China, it said.
Dalian Wanda's large asset sales are picking up pace https://www.reuters.com/graphics/BRV-BRV/zjvqabxymvx/chart.png
(Editing by Una Galani; Production by Aditya Srivastav)
((For previous columns by the author, Reuters customers can click on CHAN/ KaSing.Chan@thomsonreuters.com))
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