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China’s property crisis: who and what will save the indebted developers in the world’s largest real-estate market?
- Sunac, which forked out 43.8 billion yuan in 2017 to help Wanda, defaulted on a US dollar bond last week, and had its rating cut twice by Fitch, deep into junk status
- R&F, which bought 77 Wanda hotels for 19.9 billion yuan in 2017, had to sell its London asset at a 42 per cent discount
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One day mid-July in 2017, one of China’s wealthiest men called a hastily organised media conference to announce what would turn out to be the largest corporate bailout in the country amid a regulatory crackdown on profligate deal making.
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At Dalian Wanda Group’s headquarters building in Beijing – its tenants included a five-star hotel run by Sofitel, an IMAX cinema and a New World department store – the media waited for the property magnate Wang Jianlin to appear.
Wang was ensconced in a conference room. Journalists outside heard shouting, furniture being overturned, and the sound of breaking glass. In an adjoining room, staff milled about, repeatedly tweaking the backdrop of what was billed as Wanda’s “strategic alliance”: a tripartite venture was hastily scrubbed to a two-party deal, before being reinstated into three parties.
An hour after the event was due to start, Wang emerged from his room, all smiles. Walking alongside him were Sunac China Holdings Limited’s chairman Sun Hongbin and Guangzhou R&F Properties’ chairman Li Sze-lim. The three executives declined to reveal their discussions behind closed doors.
Wang dropped a bombshell that day. He sold 77 hotels to R&F for 19.9 billion yuan (US$3 billion). Sunac, under the Chinese bank regulator’s spotlight for its leveraged buyouts, scaled back the commitment it made nine days earlier by 31 per cent, agreeing to pay Wanda 43.8 billion yuan for 13 tourism-related projects, including theme parks.
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The bailout gave Wanda 60 billion yuan cash, critical in helping to pay its 200 billion yuan of borrowings and outstanding bonds. Wanda continued disposing assets from its global portfolio since then, selling property in Sydney, London and Beverly Hills, a Spanish football club, control of the UK yacht maker Sunseeker Yachting Limited, a movie studio and a stake in the largest US cinema chain AMC.
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