Dalian Wanda Group is selling stakes in nearly $4.5 billion in real estate projects across the UK, US, China and Australia to a privately held company controlled by its chairman Wang Jianlin, according to an announcement to the Hong Kong stock exchange on Thursday.
The asset sale is part of what the company says is a $1 billion restructuring after the property and entertainment conglomerate became a focal point for a Chinese government crackdown on cross-border deals and excessive leverage over the past few months.
Analysts believe that the restructuring is likely to be an intermediate step in the Wanda ultimately selling off its interests in property projects in London, Chicago, Sydney and other locations, that made it into one of China’s best known players during the country’s 2012 to 2016 “go global” spree.
Wanda Offloading Overseas Projects
While details of the restructuring remain in the works, Wanda’s announcement reveals a framework agreement, under which Wanda Hotel development is disposing of Wanda Properties Investment, which through its subsidiaries owns projects in Guilin, Chicago, London and Australia to Dalian Wanda Commercial Properties, a company majority-owned by Wang Jianlin and his family.
Among the assets being transferred are a 60 percent equity interest in its pair of landmark Aussie projects under development, the $1 billion One Circular Quay apartment and hotel tower in Sydney and the $1.6 billion Jewel resort on the Gold Coast.
On Tuesday, Wanda Hotel Development had said the Australian projects were not for sale, dismissing reports that it was seeking a buyer for the two assets totalling nearly $1.5 billion.
The hotel unit is also selling its interest in the $1 billion One Nine Elms project in London, slated to be a large-scale, mixed-use complex with an estimated price tag of $1.1 billion. Wanda Hotel Development is also offloading its stake in the ongoing Vista Tower project, a billion-dollar hotel and residential skyscraper in Chicago. The Guilin project is a Wanda Plaza shopping and housing complex in the southeastern Chinese city.
HK-Listed Entity to Buy Management Companies
As part of the same agreement, Wanda Hotel Development will purchase Wanda Culture Travel Innovation Group – the group’s theme park management arm – from the company’s mainland cultural division, Beijing Wanda Culture Industry Group for a price provisionally set at RMB 6.3 billion ($945.6 million).
Also changing hands is Wanda Hotel Management – which manages hospitality properties in China, with Wang’s Dalian Wanda Commercial is selling to Wanda Hotel Development for a price provisionally set at RMB 750 million ($112.6 million).
Following the news of the announcement, shares in Wanda Hotel Development rose 40.5 percent on the Hong Kong exchange.
Through the proposed restructuring, the offshore listed firm expects that, “Wanda Hotel Development will become a strategic platform as Wanda Group’s Hong Kong-listed company focusing on theme park and hotel operation and management,” according to an announcement on Wanda’s corporate website.
Dalian Wanda Commercial is the group’s main property development arm, which was delisted from the Hong Kong stock exchange last August.
Listed Unit Will Be Swimming in Cash
The disposal leaves Wanda’s Hong Kong-listed business to focus on operating and managing the hotels and theme parks that Wanda sold off to Sunac China and R&F Properties last month. In that mega-deal, Tianjin-based developer Sunac agreed to buy a 91 percent stake in Wanda’s 13 cultural tourism projects for RMB 43.8 billion ($6.5 billion), while Guangzhou’s R&F acquired a portfolio of 77 hotels from Wanda for RMB 19.9 billion ($2.9 billion).
Through the deal, Sunac agreed to pay a total of RMB 650 million ($98 million) per year in management fees for the cultural tourism projects – Chinese destinations combining theme parks with retail, hotel and residential elements. Wanda Hotel Development will now be able to collect those fees, a windfall after the company generated just HK$385 million ($49 million) in operating cash flow last year, according to an analysis in Bloomberg.
The proposed restructuring marks another step in Wanda’s efforts to downsize its asset portfolio and focus on cash generation amid a government crackdown on acquisitive Chinese firms. Wanda, China’s largest commercial property developer, has come under regulatory fire over a debt-fueled buying binge that transformed the company into a leading overseas investor, picking up trophy real estate, film studios and sports firms around the world.
In June, Chinese regulators reportedly banned Wanda from receiving new bank loans for six overseas entertainment projects. Wang late last month confirmed that Wanda would keep its major acquisitions within China in the future.
Similar scrutiny has been applied to high-profile deal makers Anbang Insurance Group, Fosun International and HNA Group in recent months.